THE  LIBRARY 

OF 

THE  UNIVERSITY 

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SCHOOL  OF  LAW 


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A    TREATISE 


ON 


THE  LAW  OF  BANKS  AND  BANKING 


Vol.  I. 


TREATISE  ON  THE  LAW 

OF 

BANKS    AND    BANKING 


BY 


JOHN   T.   MORSE,  Jk. 


JTourtfj  IStiition 

REVISED,  REARRANGED,  AND  GREATLY  ENLARGED 

BY 

FRANK    PARSONS 


Vol.  I. 


BOSTON 

LITTLE,    BROWN,  AND   COMPANY 

1903 


r 

At  f  3'75   b 

Copyright,  1879,  1888,  1903, 
By  John  T.   Morse,  Jr. 


UNIVERSITY  PRESS   •    JOHN   WILSON 
AND    SON      •     CAMBRIDGE,   U.  S.  A. 


PREFACE. 


In  preparing  this  edition,  the  former  one  has  been  care- 
fully revised  throughout,  and  about  1,800  new  cases  have 
been  added.  A  brief  statement  of  fact,  decision,  and  reason 
being  made  in  each  case  where  additional  light  or  valuable 
illustration  could  be  secured  by  so  doing.  The  new  cases 
cluster  most  thickly  in  the  chapters  relating  to  checks,  insol- 
vency, cashier,  directors,  collection,  payment  of  deposit,  lien 
and  set-off,  stocks  and  stockholders,  title  to  deposit  by  gift, 
etc.  The  banking  laws  of  the  United  States  since  1887  up 
to  and  including  that  of  1902  have  been  inserted.  References 
to  the  Public  Statutes  of  Massachusetts  have  been  revised  so 
as  to  refer  to  the  Revised  Laws.  References  to  "  Conflict  of 
Laws  "  have  been  reinforced  by  references  to  and  citations 
from  Minor's  treatise  on  that  subject.  The  parallel  citations 
of  cases  in  the  National  Reporter  System  have  been  added 
to  the  ordinary  methods  of  citation. 

This  work  is  constantly  cited  by  the  courts  as  the  leading 
authority  on  the  law  of  banks  and  banking.  Many  cases 
specifically  approve  and  reaffirm  the  rules  and  principles  cited 
from  the  text,  and  in  only  one  case  that  has  come  under  our 
observation  did  the  court  reject  the  rule  stated  in  our  text. 

The  editor  wishes  to  acknowledge  the  valuable  assistance 
rendered  in  the  preparation  of  this  edition  by  A.  C.  Webber 
and  W.  H.  Buchanan,  both  members  of  the  Boston  Bar  and 
graduates  of  the  Boston  University  Law  School.     Under  the 


687087 


VI  PREFACE. 

editor's  supervision,  Mr.  Webber  assisted  largely  in  the  di- 
gesting and  distributing  of  cases,  and  Mr.  Buchanan  has 
condensed  and  inserted  the  new  matter  in  its  proper  place, 
and  has  taken  charge  of  putting  the  book  through  the  press. 
The  editor  examined  the  cases  for  the  most  part  in  person, 
and  has  carefully  revised  and  corrected  the  work  delegated 
to  his  assistants,  which  was  so  well  done  that  few  changes 
were  found  necessary,  and  some  of  these  related  to  matters 
about  which  individual  judgments  might  reasonably  differ. 

FRANK    PARSONS. 

January,  1903. 


CONTENTS. 


[All  references  are  to  Sections,  througliont  the  book.] 


Sect. 

CHAPTER  I.    Preliminary 0-12 

Scope  of  Book 1 

Definitions 2-5 

Sources  of  Banking  Law,  especially  of  Usage 6-9 

Conflict 

Between  State  and  Federal  Courts 10 

Between  the  Laws  of  Different  Sovereignties  .     .     .     .       11,  12 


PART  I. 

BANKS  AND  BANKING  IN  GENERAL. 

PREPARATION  FOR  BUSINESS. 

CHAPTER  II.    Organization  and  Location 12  A-16 

Proof  of  Existence 14 

Ancillary  Powers  of  a  Bank 15 

Appointment  and  Qualification  of  Officers 16 

CHAPTER    III.     Official  Bonds  and  the  Lubilitt  op 

Sureties 16  A-42 

Notes  on  Evidence,  Measure  of  Damages,  &c 42 

CHAPTER  IV.    By-Laws  and  their  Effect 42  A-43 

BUSINESS    OF   THE   BANK. 

CHAPTER  V.    Time  and  Place 43  A-46 


Viii  CONTENTS. 

Sect. 

CHAPTER  VI.    Business  Powers 46  A-71 

Express 47 

Implied 47 

Original 48-53 

Incidental 54-67 

Restrictions 68 

Statutory 69,  70 

Common  Law 71 


CHAPTER  VII.    Expansion  of  the  Poweks  of  a  Bank  in 

Reference  to 71  A-78 

Purchase  of  Negotiable  Paper 72,  73 

Dealing  in  Real  Estate 74-76 

Handling  Stocks 77 

Saving  Debts 78 


OFFICERS   AND    AGENTS. 

CHAPTER  VIII.     General  Principles 79-113 

When  the  Agent's  Act  is  that  of  the  Bank 83-86 

Contractual  Acts 87-101 

Authority  of  Agent 96 

Express 97 

Implied  or  Inferred 98 

Adverse  Interest 99 

Revocation        ....  100 

Ratification 101 

Tortious  Acts 102 

Representations 103 

Notice  to  the  Bank        104-113 

Competency  of  Bank  Officers  as  Witnesses  for  the  Bank  .     .  113 

Be  Fado  O&cevs        98* 


CHAPTER  IX.    Directors 114-141 

Authority 116-124 

Duty       125,  126 

Liability 128-131 

To  the  Bank 128,  129 

To  Third  Parties 130,  131 

When  the  Bank  is  made  Liable  by  Directors    .....  126-132 

Contract 127 

Tort 132 

Crime 132 


CONTENTS.  IX 

Sect. 
Notice 

To  the  Board 133 

To  a  Single  Director 134-137 

Rights  of  Directors 124,  125 

Qualifications 138 

Continuance  iu  Office 139 

Pay         140 

Records 141 


CHAPTER  X.    President 142-150 

Authority 143-145 

Duty 143 

Representations  and  Admissions 145 

Notice  to 146 

Liability 

Of  President  to  Bank 147 

Of  one  held  out  as  President 148 

Personal  Undertakings  for  the  Benefit  of  the  Bank       .     .  149 

Pay 150 

Taxation  of 150  A 


CHAPTER  XL    Cashier 151-176 

Inherent  Powers       -  .     .     .     .     153-164,  169 

Special  Authority 165 

Notice  to 166 

Declarations  and  Admissions 167 

Limitations  of  Time  and  Place 168 

Instruments  in  Form  to  or  from  the  Cashier       ....  170 

When  the  Cashier  binds  the  Bank 171 

Liability  of  Cashier  to  Bank        172 

Cashier's  Subordinates 174 

Cashier  after  Expiration  of  Charter 176 


DEPOSIT.  ♦ 

CHAPTER  XII.    Receiving  Deposits 177-180  A 


CHAPTER  XIIL    Kinds  op  Deposit 182-187 

Special 183,184 

Specific 185-187 

General 186,187 

Change  from  one  Kind  to  another 187 


X  CONTENTS. 

Sect. 

CHAPTER  XIV.     Special  Deposit 189-204; 

Definition 190 

Power  to  Receive 191-204 

Measure  of  Care  to  which  the  Bank  is  held 194r-201 


CHAPTER  XV.     Specific  Deposits 206-212 

Duty  of  Bank 207,208 

Liability  of  Bank 209-212 

Interest 205 


CHAPTER  XVI.    Collection 213-263 

Nature  of  the  Contract,  its   Duties   and  Liabilities   in 
General. 


CHAPTER  XVII.    Liability  of  a  Bank  for 264-287 

Default  of  Notary        265,266 

Also  of  Collection  Agencies 267 

Default  of  its  Correspondent 268-287 


CHAPTER  XVIII.     General  Deposit 288-295 

Relation  of  Bank  and  Depositor 289 

Insolvency 289 

Eorged  Paper  or  Base  Coin 289 

Bills  of  Insolvent  Bank 289 

Checks  on  the  Depositary 289 

Checks  on  other  Banks,  Bills,  Notes,  &c 289 

Writings  in  the  Course  of  Banking  Business      ....  290-295 

Right  to  Inspect  Books 294 

Depositor's  Rights 294 

Right  of  others 294 

Use  of  Bank  Books  as  Evidence 295 


CHAPTER  XIX.    Certificates  of  Deposit 296-309 

Form        297 

Signature 299 

Nature  and  Effect 298 

Negotiability 299 

Transfer 300 

Statute  of  Limitations       . 301 

Staleness 302 

Payment  by 304,305 

Lost  Certificate 306 


CONTENTS.  XI 

Sect. 

Interest  on  Certificate 307 

Alternate  Certificate 308 

Interest  Accounts 309 


CHAPTER  XX.    Payment  of  Deposit 310-321 

Duty  of  Bank       310 

Void  Paper 316 

Succession  of  ]5anks 320 


CHAPTER   XXI.     Statute    of    Limitations    on    General 

Deposit 321,322 


CHAPTER  XXII.    Lien  and  Set-off 323-340 

Comparison  of  Lien  and  Set-off 323 

Lien, 

Particular 323 

General 323 

On  what  and  for  what  the  Lien  attaches      ....  324 

Efifect        326 

Appropriation  of  Deposits 327 

Unmatured  Debt 329 

Loss  of  Lien 330 

Estoppel 331 

Creation 332 

Set-off 334 

Insolvency 337 

Of  Depositor 337 

Of  a  Commercial  Bank 338 

Of  a  Savings  Bank 339 

Death  of  Depositor 340 


CHAPTER  XXIII.    Adverse   Claim 341-344 

CHAPTER  XXIV.    Attachment  and  Injunction       .    .    .        346-348 


CHAPTER  XXV.    The  Clearing-House 348-355 

The  Routine 349 

Effect  of  Rules  on 350 

Third  Parties 350 

Members        352 

"Notes  sent  through  the  Clearing-House 353 


Xll     .  :     -  CONTENTS. 

Sect. 
CHAPTER  XXVI.    Overdrafts 356-360 


CHECKS. 

CHAPTER  XXVII.     Checks  in  General 362-395  A 

Definition 362 

Contrast  with  Bills 362 

Essentials 363-376 

MemoraucUun  Checks 388 

Antedated  and  Post-dated 389 

Issue 390 

Indorsement 391 

Checks  payable  to  Bearer 393 

Money  given  to  the  Drawer  of  a  "Worthless  Check    .     .     .  394 

Transfer  of  Check  by  Mail 395 

Lost  Checks 395  A 

Conversion  of  Checks 395  B 


CHAPTER  XXVIII.     Revocation  of  Checks 396-400  A 

By  Countermand  .    - 397 

By  Death 400 

By  Insolvency •. 400  A 

CHAPTER  XXIX.     Statute  of  Limitations 401, 402 


CHAPTER  XXX.     Acceptance  and  Certification     .     .     .  403-419 

Form 405-411 

Authority 413 

Object 414 

Effect 

After  Issue 414 

Before  Issue 415 

Statute  of  Limitations 418 

Mistake 419 


CHAPTER  XXXL    Presentment  for  Payment     ....  420-428 

Period  of  Presentment 421 

Special  Circumstances 421-424 

Holder  v.  Drawer 421-426 

Holder  v.  Indorser 421,  422 

Presentment  by  Mail 427 

Notice  of  Dishonor 428 


CONTENTS.  -'..^X'   ^ii 

Sect. 

CHAPTER  XXXII.     Payment  of  Checks 430-460  A 

Duty  of  Bank 430 

Signature 432-440  A 

Agent's 433 

Married  Woman 434 

Joint 435 

Joint  and  Several 435 

Co-Trustees 436 

Assignees 437 

Co-Executors 438 

Firm 439 

Corporation 440 

Successors  in  Office 440  A 

Suspicious  Circumstances 441-445 

Insufficient  Funds 446,  449 

Legal  Tender 447,  448 

Kecalling  Payments 449 

Order  of  Payment 450 

Payment  by  giving  Credit 451 

Payment  after  the  Bank  is  Insolvent      .     • 452 

Payment  by  Mistake 454 

Drawer's  Suit  for  Dishonor 458 

Defences 459 

Possession  of  Paid  Checks 460 

Payment  of  Checks  on  other  Banks 460  A 

CHAPTER  XXXIII.    Forgery  of  Checks 461-489 

Principles 461 

As  between  Bank  and  Drawer 

Forged  Signature 463-473 

Forged  Indorsement 474 

Fraudulent  Alteration 469,  480 

As  between  Bank  and  True  Owner 474 

As  between  Bauk  and  Person  receiving  the  Money  .     .    463,  466-489 
Time  within  which  Discovery  and  Notice  must  be  Con- 
summated     487-489 

CHAPTER  XXXIV.    Effect  of  a  Check 490-555 

As  Evidence 490 

As  an  Assignment, 

Between  the  Bank  and  the  Holder 490 

Between  one  Holder  and  Another 497 

Between  the  Holder  and  the  Creditors  of  the  Drawee 

Bank 498 

Between  the  Holder  and  the  Drawer  and  his  Cred- 
itors    539-541 

Conflict  of  Laws 542 


XIV  CONTENTS. 

Sect. 

As  Payment , 543 

As  a  Gift 548 

Donatio  Causa  Mortis 550 

Inter  Vivos 551 

As  a  Testamentary  Document       554 


CHAPTER  XXXV.    Payment  of  Notes  and  Acceptances  .  556-564 

Duty  to  Pay 557,  558 

Note  held  by  Bank 559,  560 

Rights  of  Indorsers 562 


CHAPTER  XXXVI.    Title  to  Deposits 565-606 

As  between  the  Bank  and  Depositor 566-589 

As  between  Parties,  neither  of  which  is  the  Bank     .     .     .  589 

As  between  the  Bank  and  Third  Persons 590-603 


CHAPTER  XXXVII.    Title  by  Gift 607-615 

Inter  Vivos        608-610 

Donatio  Causa  Mortis 611,  612 


CHAPTER  XXXVIII.    Savings  Banks 616-620 

Nature 617 

Rules       620 

Pass-book 619,  620 


CHAPTER  XXXIX.    Insolvency       621-632 

Definition 622 

Preferences        623-627 

Rights  of  Depositors       628-631 

Insolvency  of  Savings  Banks 632 


BILLS   AND    STOCK. 

CHAPTER  XL.    Bank  Bills 633-666 

Issue       634,  666 

Bill-holder's  Rights 637-658 

Transfer 659-662 

Porged  Bills        659 

Warranty  of  Solvency 663 


CONTENTS.  XV 

Sect. 

CHAPTER  XLI.     Stock  and  Stockholders 667-720 

Liabilities  of  Stockholders, 

As  Subscribers 668-674 

Beyond  Subscription 675-696 

Lien  of  a  Bank  on  its  Stock 697-705 

Shareholder's  Rights 706-717 

Transfer  of  Stock 709-714 

The  Bank  as  a  Shareholder 716 

Sovereign  States  as  Shareholders 718 

CHAPTER    XLII.      Informality,   Ultra  Vires,  and  For- 
feiture      722-764 

CHAPTER  XLIIL    Legislative  Continuance  of  the  Cor- 
poration         765 

CHAPTER  XLIV.    Dissolution 766 


PART   II. 

NATIONAL  BANKING  LAWS. 

National  Banking  Act,  June  5,  1864 1-63 

Act  of  31  May,  1878        64 

Act  of  14  February,  1880 65 

Act  of  26  February,  1881 66 

Act  of  12  July,  1882        67-79 

Act  of  3  March,  1883 80 

Act  of  1  May,  1886 81 

Acts  of  3  March,  1887 82,  83 

Act  of  13  August,  1888 83  A 

Act  of  14  July,  1890        83  B 

Act  of  28  July,  1892        83  C 

Actof  3  August,  1892 83  D 

Act  of  2  March,  1897 83  E 

Act  of  14  March,  1900 83  F 

Act  of  3  March,  1901 83  G 

Act  of  12  April,  1902      . 83  H 

Full  Text  of  the  Laws   of  the  United  States  relating  to 

Banking,  passed  in  1874,  1875,  and  1876 84 

Cases  upon  their  Construction 100-200 


TABLE  OF  CASES. 


[All  references  are  to  Sections,  througliout  the  book.] 


A. 

Abbers  v.  Commercial  Bank     ....     85  Mo.  173 398 

Abbott  y.  Agricultural  Bank    ....     11  Sm.  &  Mar.  405 642 

V.  Smith 4  Inch  452 275 

Abeles  v.  Cochran 22  Kans.  405 128,  n.  21 

Abrahams  v.  Southwestern  R.  R.  Bank  1  Ricli.  (S.  C.)  n.  s.  441  .     .      638,  663 

Abrams  v.  Union  National  Bank  ...     31  La.  An.  61 481 

Abt  V.  Amer.  Trust  &  Savings  Bank     .     15!)  111.  467 542 

Adams  v.  Bank 113  N.  C.  335 334 

V.  Daunis 29  La.  An.  315 II.  157 

V.  Darby 28  Mo.  162 421 

V.  Mayor,  &c.  of  Nashville     ,     .  16  Alb.  Law  Jour.  416  .     .      II.  141  c 

V.  Nashville 95  U.  S.  19 IL  141  y 

V.  Orange  Co.  Bank       ....     17  Wend.  514 322 

y.  Otterback 12  How.  (U.  S.)  539  .     .      9,  n.  5,  231 

V.  Railroad 6  H.  &  N.  404,  Eng.  Ex.  1860      .      46 

V.  Robinson 1  Pick.  461 496 

V.  Spokane  Drug  Store      ...     57  Fed.  888 338 

Adley  v.  White  Stable  Co 17  Ves.  323 43 

^tna  Ins.  Co.  v.  Alton  City  Bank   .     .     25  111.  243 236,  274,  287 

TEtna  Nat.  Bank  v.  Fourth  Nat.  Bank  .  46  N.  Y.  82  .      186,  289,  493,  511,  524, 

557,  568 

Agar  V.  Atlantic  Ins.  Co 3  C.  B.  n.  s.  725     .     .     .     .      98,  n.  32 

Agnew  V.  Bank  of  Gettysburg       ...     2  Har.  &  Gill,  478 14 

Agricultural  Bank  v.  Burr 23  Me.  256 669,  672 

V.  Commercial  Bank      .     .     .     .  7  Sm.  &  Mar.  592       .     .  265,  274,  285 

V.  Robinson 24  Me.  274 761 

Aiken  v.  Jones 93  Tenn.  364    ..     .     248,  248  a,  493 

Albany  City  National  Bank  v.  Malier  .     19  Blatohf.  175 IL  141  x 

Albert  I'.  Savings  Bank 2  Md.  160 125 

Albion  Nat.  Bank  v.  Montgomery     .     .     54  Neb.  681 II.  130  n 

Alderson  v.  Pope 1  Camp.  404 131 

Aldrich  v.  Dunham 16  111.  403 309 

V.  Jackson 5  R.  I.  218 477,  662 

w.  Yates 95  Fed.  78 678 

Alexander  v.  Burchfield 7  M.  &  G.  1061      .   231,  238,  243,  245, 

380,  421,  n.  9 
VOL.   I.  —  b 


xviii  TABLE   OF   CASES. 

[All  references  are  to  Sections.] 

Alexander  v.  Mackenzie 6  C.  B.  766 98,  n.  15 

Alexandria  Canal  Co.  v.  Swann     ...     5  How.  83 143 

Allaire  v.  Hartshorne 1  Zab.  665 665,  n.  16 

Allen  r.  American  National  Bank     .     .     3  Laws.  517 511 

V  Dundas 3  T.  R.  125 438 

V.  First  National  Bank      ...  23  Ohio  St.  97  .     750,  II.  128,  129,  144 

V.  Freedman's  Sav.  &  Trust  Co.      14  Fla.  418 755 

V.  Keeves 1  East,  435 389 

V.  Kramer 2  Brad.  209 421 

1-.  Merchants'  Bank 22  Wend.  215   .      102,  n.  19,  224,  250, 

265,  270,  272,  274,  278 

V.  Suydam 20  Wend.  321 252 

V.  Williamsburg  Savings  Bank  .     69  N.  Y.  314 620 

Alley  V.  Rogers 19  Gratt.  366 216 

Alliance  Bank  v.  Kearsly 6  L.  R.  C.  P.  433 439 

AUinson  v.  Hubbell 17  Ind.  559   ..     .      45,  726,  744,  750 

Allison  V.  Farmers'  Bank 6  Rand.  204 22,  25,  42 

Alpena  Nat.  Bank  v.  Greenbaum       .     .     74  Mich.  157 564 

Alston  i;.  State 92  Ala.  124   .     .   186,  186  a,  190,  289  a 

Alves  V.  Henderson  Nat.  Bank      ...     89  Ky.  130 IL  130h 

American  Bank  v.  Adams 12  Pick.  303 22,  24,  42 

V.  Wall 56  Me.  167 637,  641 

American    Exchange    Nat.     Bank    v. 

Loretta  Gold  &  Silver  Mining  Co.      .    46  N.  E.  202 208 

V.  Gregg 138  111.  596 451,  459 

V.  Mining  Co 165  111.  103 629 

American  Express  Co.  v.  Haire    ...     21  Ind.  4 265,  272 

American  Ins.  Co.  v.  Oakley    ....     9  Paige,  496 148,  159 

American  Nat.  Bank  v.  Presnall  ...  58  Kans.  69      ....   185,  210,  290 

Amer.  Nat.  Bank  of  Detroit  v.  Bushley    45  Mich.  135 472 

Amer.  Trust  &  Banking  Co.  V.  Boone     102  Ga.  202 317,317  a 

Ames  V.  Meriara 98  Mass.  294 441,  442 

V.  York  National  Bank      .     .     .     103  Mass.  326 395 

Amherst  Bank  v.  Root 2  Met.  522     .     .     16,  20,  21,  27,  37,  42 

Amicable  Ins.  Co.  r.  Sedgwick    ...     10  Mass.  163 31 

Amis  V.  Witt 33  Beav.  619 550 

Ancona  v.  Marks 7  Hurl.  &  N.  686  .     .     .     .      494,  529 

Anderried  v.  Betteley 8  Allen,  302 217,  696 

Anderson  v.  Bank 5  N.  D.  421 727 

V.  De  Soer 6  Gratt.  364 496 

V.  Gill 79  Md.  313 421 

V.  Rodgers 53  Kans.  542 236  6 

V. 114  Ala.  264 421  rf 

V.  Pacific  Bank 112  Cal.  598 205,  567  b 

V.  State 65  Ala.  553 289 

V.  Thompson 38  Hun,  394 610 

V.  Thornton 3  Q.  B.  271 30 

Anderson,    Receiver,    v.    Philadelphia 

Warehouse  Co Ill  U.  S.  479 684 

Anderton  v.  Shoup 17  Ohio  St.  125 433 

Andover  Bank  v.  Grafton 7  N.  H.  298 665 

Andrews  v.  Blackley 11  Ohio  St.  89 381 

V.  Bond 13  Peters,  65 542 


TABLE   OF   CASES.  XIX 
[All  references  are  to  Sections.] 

Andrews  v,  German  National  Bank  .     .     9  Heisk.  211 416 

V.  Kneeland 6  Cow.  354 98,  n.  30 

V.  President,  &c.  of  Suffolk  Bank    12  Gray,  461 102,  n.  22 

Angle  V.  N.  W.,  &c.  Ins.  Co 92  U.  S.  342 565,  n.  17 

Anglo-California  Bank  v.  Ames    ...    27  Fed.  Rep.  727 392 

Anketel  v.  Converse 17  Ohio  St.  11 109,  134 

Appeal  of  Bank  of  Commerce      ...     44  Pa.  St.  423 325 

Appeal  of  Farmers  &  Mechanics'  Bank    48  Pa   St.  57 561 

Appleby  v.  Erie  Co.  Savings  Bank  .     ,     62  N.  Y.  12 620 

Archer  v.  Bokenham 11  Modern,  161 9,  n.  7 

Arlington  v.  Merrick 2  Saunders,  414 27 

Armat  v.  Union  Bank 2  N.  &  M.  471 650 

Armour  v.  Bank 69  Miss.  706 313,  317  a 

V.  McMichael .    36  N.  J.  L.  92 600 

Arms  V.  Conant 36  Vt.  745 46 

Armstrong  v.  Gibson 31  Wise.  61 49 

V.  Nat.  Bank 46  Ohio  St.  412 474  a 

V. 90  Ky.  436 223,  573 

V.  . 41  Fed.  234 325 

--  V.  Temperon 24  Law  T.  n.  s.  275 610 


Armswortli  v.  Scotten 29  Ind.  495 637 

Arnold  V.  Hart 176  111.  442 291,  622  A 

V.  Lyman 17  Mass.  400 499 

V.  Macungie  Savings  Bank    .     .     71  Pa.  287 342 

V.  Niess 36  Leg.  Int.  437 338 

V.  Suffolk  Bank 27  Barb.  424 698 

Arthur  v.  Com.  &  R.  R.  Bank  .     .     .     .    9  Sm.  &  Mar.  430 672 

Ashbrook  v.  Ryan 2  Bush,  228 615 

Aspinwall  v.  Torrance 1  Lans.  381 128,  n.  22 

Atchafalaya  Bank  v.  Dawson  ....     13  La.  495 760 

Atkin  V.  Barswick 1  Strange,  165 689 

Atkins  V.  Cobb 56  Ga.  86 593 

Atkinson  v.  Brooks 26  Vt.  574     .     .     .     .      565,  n.  16,  600 

y.  Rochester  Printing  Co.  .     .     .     114  N.  Y.  168 623 

Atlanta  Nat.  Bank  v.  Davis      .     .     .     .     96  Ga.  336 458 

Atlantic  Bank  v.  Merchants'  Bank    .     .  10  Gray,  532      .     80,  89,  103,  413,  590 

Atlantic  National  Bank  v.  Franklin  .     .     55  N.  Y.  238 565,  n.  15 

V.  Harris 118  Mass.  147    ..     .    83,  147,  II.  144 

Atlantic  State  Bank  v.  Savery      ...     18  Hun,  36 72,  136 

Atlas  Bank  v.  Brownell 9  R.  I.  168 33 

V.  Nahant  Bank 3  Met.  581 161 

Attorney-General  v.  Bank  of  Niagara    .     1  Hopk.  354 13,  760 

V.  Utica  Ins.  Co 2  Johns.  Ch.  371 13 

V.  Wilson 1  Craig  &  Ph.  1 128 

Atwood  V.  Bank  of  Chillicotlie      ...     10  Ohio,  526 645 

V.  Rliode  Island  Agricult.  Bank     1  R.  I.  376 693,  694,  696 

Aubert  v.  Wa'sh 4  Taunt.  293     ....  391,  393,  552 

Augusta  Bank  v.  Hamblet 35  Me.  491 144,  n.  24 

Aurora  v.  West 22  Ind.  88 565 

Auten  V.  United  States  Nat.  Bank    .     .     174  U.  S.  125 IL  150 

Austin  y.  Aldermen 7  Wall.  694 IL141/,  Z 

r.  Board  of  Aldermen  of  Boston  14  Allen,  359     »*    .     .     .    .      II.  141  t 

V.  Daniels 4  Den.  299 172 


jX  TABLE    OF    CASES. 

[All  references  are  to  Sections.] 

Austin  t;.  Miller 5  McLean,  154 ,  "     ,1J 

Averell  *;.  Second  Nat.  Bank    ....     6  Mack.  358 1,9,450 

Ayers  v.  Dorsey  Produce  Co 101  Iowa,  141 728 

Aymar  v.  Beers 7  Conn.  705 422 

Ayrault  ..  Pacific  Bank 47  N.  Y.  570      .     .     249,250,265,272 

Ayres  v.  Farmers  &  Merchants'  Bank  .     79  Mo.  421 5/3 


B. 

Babcock  v.  Benliam 4  Hill,  129 233 

Backhouse  ..  Charlton 8  Ch.  D.  444 317,439 

Bacon  v.  Brown 3  Bibb,  3a 103 

. V.Robertson 18  How.  (U.  S.)  480 706 

Bacon's  Administrators  v.  Bacon's  Trus- 
tees      94  Va.  686 325 

Badger  y.  Bank  of  Cumberland     .     .     .    26  Me.  428 159,171 

Bao-fey  v.  Robertson 57  Ga.  145  ' 295 

Bailey  r.  Bacon 26  Miss.  455 637 

,.  Bodenham 12  W.  R.  865    .     .     .     .  231,  427,  428 

r.  Bunker 2  Hill,  190 696 

,.  Burgess 5  Ohio  St.  15 494,534 

,.  Partridge 134  III.  188 546 

y   Sawyer               9  Leg.  News,  191,  Thomp.  Nat. 

Bank  Case,  356      .     IL  112  6,150c/ 

V.  Taber 5  Mass.  286 .565 

Bailie  v.  Augusta  Savings  Bank  .     .     .     95  Ga.  281 252,  583 

Bain  ..  Brown 56  N.  Y.  285 125 

Baird  z;.  Bank  of  Washington  .     .     .     .  11  Serg.  &  R.411     48,98,119,125,127 

Baker  v.  Atlas  Bank 9  Met.  182 677,  678,  693 

y  Beach       86  Fed  836 686 

I,.  Hedrich 85Md.  645 604  6 

r.  Moody 1  Ala.  315 346 

V   New  York  Nat.  Excli.  Bank  .     100  N.  Y.  31 326 

r  Old  Nat.  Bank 86  Fed.  1006 680 

»;.  State 54  Wise.  368 178 

Balbach  v.  Frelinghuysen 15  Fed.  Rep.  675   .    .     .  573,  586,  589 

Balch  V.  Wilson 25  Minn.  299 H.  152 

Baldwin  v.  Bank  of  Louisiana  .     .     .     .  1  La  An.  13  .     .     102,  n.  15  &  17,  2.36, 

265,  274,  287 

V.  Bank  of  Newbury      ....  1  Wall.  234    ..     .    152,  157,  170,  171 

V.  Canfield 26  Minn.  43 II.  128 

I,.  Proctor 82  Ind.  370 137 

Ballard  v.  Fuller 32  Barb.  68 358 

Ballou  V.  Boland 14  Hun,  355       ....  495,  511,  541 

Ballston  Spa  Bank  v.  Marine  Bank  .     .  IG  Wise.  120      ....  160,  171,  666 

Baltimore  v.  Wrightstown 03  Md.  81 308 

Bandel  v.  Isaac 13  Md.  202 750 

Bank  i>.  Bailev 12  Blatchf.  480 11.146 

r   Bank 118  N.  C.  786 219,  493 

V.  Baxter 31  Vt.  101 419,  464 

V.  Brewing  Company     ....  50  Ohio  St.  151      .     .     289  a,  324,  439 


TABLE   OP   CASES.  XXI 
[All  references  are  to  Sections.] 

Bank  v.  Butler 41  Ohio  St.  519     ...     .      215,  265 

V.  Chambers 11  llich.  657 600 

V.  Clapp  .     .• 70  N.  C.  482 317 

i.  County  Court 30  W.  Va.  341 II.  141 A 

1-.  Durfee 118  Mo.  431 713 

V.  Elmore 7  Bep.  110  (Iowa) 755 

V.  Griffin 168  111.  314 143,  144 

V.  Kennedy 17  Wall.  22 II.  150  a 

y.  Lanier 11  Wall.  369      .     .     .709,711,11.112 

V.  Latimeer 64  Mo.  Ap.  321     .     .     .   427,  428,  458 

V.  Lindeman 161  Pa.  199 407 

V.  Little 17  Gr.  Ch.  R.  685 306 

V.  Merchants'  National  Bank  .     .     91  N.  Y.  106 322 

V.  Nebeker 3  D.  C.  Ap.  C.  190    .     .     .     .II.  141 

V.  Ober 81  Kans.  599 265,  274 

r.  Oxford 70  Miss.  513 II.  141  6 

V.  Peltz 176  Pa.  St.  513 562 

V.  Pettel 41  111.  492 407 

V.  Pinson 58  Miss.  421 698 

V.  Russell 2  Dill.  215 248 

V.  Slayden 8  Tex.  Civ.  App.  63 331 

V.  Strauss     ........    66  Miss.  484 630 

V.  Union  Trust  Co.    .  ^  .     .    .     .     149  111.  343 247 

V.  Western  Union  Tel.  Co.     .     .    52  Cal.  280 457 

Bank  Commissioners  v.  Bank  of  Brest  Harr.  Ch.  (Mich.)  106    120,  761,  n,  12 
V.  Bank  of  Buffalo 6  Paige,  497     117,  125,  126,  128,  n.  11, 

761,  n.  11 

V.  Lafayette  Bank 4  Edw.  Ch.  287 645 

V.  Rhode  Island  Central  Bank    .     5  R.  I.  12 761,  n.  13 

V.  St.  Lawrence  Bank    ....     3  Seld.  513 51,  149,  298 

Bank  of  Albia  v.  City  Council      ...     86  Iowa,  28 II.  141  ni 

Bank  of  America  v.  McNeil      ....     10  Bush,  54 714 

Bank  of  Attica  v.  Manuf.  &  Traders' 

Bank 20  N.  Y.  501 698 

Bank  of  Augusta  v.  Earle 13  Pet.  519 46,  63 

Bank  of  Australasia  i-.  Breillat     ...  6  Moore  P.  C.  173       ....   47,  127 

Bank  of  Bengal  v.  Radakissen  Mitter    .     4  Moore  P.  C.  140 562 

Bank  of  Bethel  v.  Pahquioque  Bank     .  14  Wall.  383      .     .    IL  146,  150  a,  157 

Bank  of  Brighton  v.  Smith 5  Allen,  413 19 

Bank  of  British  N.  America  v.  Cohn     .     79  Cal.  463 747 

V.  Hooper 5  Pick.  567 365 

V.  Merchants'  National  Bank     .     91  N.  Y.  106 344 

Bank  of  Carlyle  v.  Hopkins       ....     1  Monr.  245 19 

Bank  of  Charlotte  v.  Hart 67  N.  C.  264 637 

Bank    of     Chattanooga     v.     Bank     of 

Memphis 9  Heisk.  408 749 

Bank  of  Chillicothe  v.  Dodge   ....     8  Barb.  233       51,  298 

V.  Swayne 8  Ohio,  257 746 

Bank  of  Columbia  v.  Fitzhugh      ...     7  Cranch,  299 220 

V.  Lawrence 1  Pet.  578 233 

V.  Magruder 6  Har.  &  J.  172     .      9,  n.  19,  220,  229 

V.  Patterson's  Adm'r     ....     7  Cranch,  299 89,  205 

Bank  of  Commerce  v.  Bogy     ....    44  Mo.  15 499 


Xxii  TABLE   OF   CASES. 

[All  references  are  to  Sections.] 
Bank  of  Commerce  y.  Bright    ....    77  Fed.  949  ........      165  c 

V.  Goos 39  Neb.  437 458 

V.  Hart 37  Neb.  149 159/ 

V.  Union  Bank 3  N.  Y.  230 463,  466,  480 

Bank  of  Commonwealth  of  Ky.v.Wister    2  Pet.  318 312,653,718 

Bank  of  Delaware  Co.  v.  Broomhall      .     38  Pa.  St.  135 226,  255 

Bank  of  England  v.  Anderson      ...     4  Scott,  50 408 

Bank  of  Genesee  v.  Patchin  Bank    .     .     3  Kern.  309       .     .14  a,  98,  n.  34,  154, 

158,  745 

Bank  of  Georgia  v.  Harrison    ....     66  Ga.  696 720 

Bank  of  Greensboro  v.  Clapp   ....     76  N.  C.  482 421,  n.  18 

Bank  of  Ireland  v.  Trustees      .     .     .     .     5  H.  L.  C.  410 480 

Bank  of  Kentucky  v.   Adams  Express 

Company 93  U.  S.  174 275 

y  Hickey  4  Litt.  225 644 

V.  Schuylkill  Bank 1  Pars.  Sel.  Cas.  236      .     .      122,  127 

V.  Thornsberry 3  B.  Mon.  519 645 

Bank  of  La  Grange  v.  Cotter  ....     101  Ga.  134 326 

Bank  of  Leavenworth  v.  Hunt  ....     11  Wall.  391 II.  108  e 

Bank  of  Louisville  v.  Bank  of  Newark      7  Chic.  Leg.  News,  76    .     .     .   II.  112 

V.  First  Nat.  Bank  of  Knoxville     8  Baxter,  101 265,  274 

r.  Summers 14  B.  Monr.  306 648 

Bank  of  Marietta  v.  Pindall      ....    2  Rand.  465 46,  n.  13 

Bank  of  Metropolis  i;.  First  Nat.  Bank      22  Blatchf.  58 326,  593 

I,.  Jones 8  Pet.  12 167 

V.  New  England  Bank  ....     1  How.  234 332,  591 

Bank  of  Middlebury  v.  Bingham      .    .     33  Vt.  621 750 

V.  Rutland  &  Wash.  R.  R.  Co.    .     30  Vt.  159 124 

Bank  of  Missouri  v.  Benoist      ....     10  Mo.  519 322 

Bank  of  Mobile  v.  Brunn 42  Ala.  108 374 

„  Huggins  3  Ala.  n.  s.  206      ....      232,  265 

V.  Meagher 33  Ala.  622 '648 

Bank  of  Monroe  v.  Field 2  Hill,  445 103,  167 

Bank  of  New  Hanover  v.  Keenan     .    .     76  N.  C.  340 240,  252 

Bank  of  New  London  v.  Ketchum     .     .    64  Wise.  7 101 

Bank  of  Niagara  v.  Johnson      ....    8  Wend.  645 129 

V.  McCracken 18  Johns.  495 644 

Bank  of  Northern  Liberties  v.  Cresson      12  Serg.  &  R.  306 17,  19 

^  Jones 42  Pa.  St.  536 289,  568 

Bank  of  Orleans  U.Merrill 2  Hill,  295 51,298 

..Smith 3Hill,560 249.250 

Bank  of  Pennsylvania  v.  Farns worth    .     18  111.  563 51,  298,  299 

I_ ^.  Reed 1  Watts  &  S.  101       .     .  159,  165,  171 

Bank  of  Pittsburg  y.  Neal 22  How.  96 "     ^^^ 

V.  Whitehead 10  Watts,  397 133,  134 

Bank  of  Poughkeepsie  v.  Ibbotson    .     .    24  Wend.  473 693 


Bank  of  Republic  v.  Carrington 


5R.  L515 600 


Bank  of  Rochester  V.  Jones      ....  4  Comst.  497     .     .     .     •    •••    ^H 

Bank  of  St.  Albans  v.  Farmers'  Bank    .  10  Vt.  141 462,  463,  488 

Bank  of  St.  Mary's  v.  Calder   ....  3  Strobh.  Law,  408   ...     .    37,  357 

,.  St.  John  >■ 25  Ala.  n.  s.  566    .    128,  651,  670,  687 

Bank  of  State  of  N.  Y.  v.  Muskingum 

Branch  of  Bank  of  State  of  Ohio  .    .  29  N.  Y.  632 158,  391 


TABLE   OF   CASES.  XXlll 
[All  references  are  to  Sections.] 

Bank  of  the  State  v.  Burton     ....    27  Ind.  426 193 

V.  Comegys 12  Ala.  772 172 

Bank  of  U.  States  v.  Bank  of  Georgia  9  Wheat.  907, 10  Wheat.  333   167, 171, 

289,463,480,637,360,  718 

V.  Carneal 2  Pet.  543 230,  563 

I'.  Dandridge 12  Wheat.  64 98 

i;.  Davis 2  Hill,  451  49,  52,108,112,134,156,232 

,;.  Dunn 6  Pet.  51        117,  167 

V.  Goddard 5  Mason,  366 232 

V.  Macalester 9  Pa.  St.  475    ...     .  324,  343,  360 

U.Owens 2  Pet.  538 747 

V.  Sill 5  Conn.  106      .     9,  n.  9,  649,  650,  651 

i;.  Stearns 15  Wend.  314    .     .     .  14  a,  113,  180  A 

V.  Waggoner 9  Pet.  399 750 

Bank  of  Utica  v.  City  of  Utica     ...    4  Paige,  399 66 

V.  Magher 18  Johns.  341 14,  158 

V.  Smalley 2  Cow.  770 699,  713 

V.  Smedes 3  Cow.  684 46 

V.  Smith 18  Johns.  230    .    .     .     .    9  E,  9,  n.  19 

Bank  of  Vergennes  v.  Ward     ....     6  Munf.  166 650 

„.  Warren 7  Hill,  91       .     .     .      98,  159,  165,  171 

Bank  of  Washington  v.  Barrington  .     .    2  Pa.  27 27,  37,  42 

V.  Triplett 1  Pet.  25  .   9,  n.  21,  221,  232,  252,  274, 

281,  599 

Bank  of  Washtenaw  v.  Montgomery     .    2  Scam.  428 46 

Bank  of  Wilmington  &  Brandy  wine  v. 

WoUaston 3  Harr.  90 32,  35 

Bank  of  Wooster  v.  Stevens     ....     1  Ohio  St.  233 746 

Banks  v.  Darden 30  Ga.  580 128 

V.  Poitiaux 3  Rand.  136 74,  763 

Barber  v.  Gingell 3  Esp.  60 440,  463,  468 

Barbour  v.  National  Exchange  Bank    .  12  N.  E.  5  (Ohio)       .     .   II.  130,  n.  59 

V.  Bank 50  Ohio  St.  90       .     .     II.  130  i,  130  n. 

Barclay  v.  Lucas 3  Dougl.  321 29 

Barke  v.  Bishop 27  La.  An.  465 400 

Barker  v.  Bradley 42  N.  Y.  316 499 

V.  Frye 75  Me.  29 610 

V.  Parker 1  T.  R.  295 27,  29 

Barnard  v.  Kellogg 10  Wall.  383 9,  n.  9 

Barnes  v.  Ontario  Bank 19  N.  Y.  152      .     .    9,  n.  1,  51,  63,  70, 

98,n.36,  70,  155, 160,  171. 
297,  298,  414,  n.  14,  743 

V.  Ringgold 80  Ky.  289 217 

Barnet   v.  Second  Nat.  Bank  of  Cin- 
cinnati     98  U.  S.  555 II.  130 1 

V.  Smith 10  Foster  (N.  H.),  256 


Barnett  y.  Brandao 12  CI.  &F.  787,6  M.&  G 

Barney  v.  Newcomb 9  Cush.  46    .     .     . 

Barough  v.  White 4  Barn.  &  Cr.  325 

Barrick  v.  Austin 21  Barb.  241     .     , 

Barrington  v.  Bank  of  Washington  .     .  14  Serg.  &  R.  405 

V.  Warden 12  Cal.  311  .     . 

Barston  v.  People 35  111.  Ap.  673  .  . 


...  408 
630  325,  326 
.  170 
.  442 
.  158 
24,  25 
.  499 
.  373 


Xxiv  TABLE    OF    CASES. 

[All  references  are  to  Sections.] 

Barter  v.  Commonwealth 3  Penn.  &  W.  253 43 

Bartholomew  r.  Bentlev 1  Ohio  St.  37 139 

V.  Henley 3  Phil.  817 554 

Bartlett  v.  Hamilton 46  Me.  435 590 

V.  isbell 31  Conn.  296 255 

V.  Remington 59  N.  H.  864 610 

u.  Woodbine  Savings  Bank    .     .     57  111.  App.  425 146  c 

Bartley  y.  State 53  Neb.  311       451 

Basket  V.  Hassell 107  U.  S.  002    . 611 

Bass  V.  Cline 4  Maule  &  S.  13 463 

Bassett  v.  Lederer 1  Hun,  274 9 

Batchelor  v.  Planters'  National  Bank  of 

Louisville 78  Ky.  435 38,  172 

Bates  V.  State  Bank 2  Ala.  451 750 

Baven  v.  Needles  National  Bank  ...     87  Fed.  430 65 

Baxendale  v.  Bennet 3  Q.  B.  D.  525 658 

Baxter  v.  Coughlin 70  Minn.  1 628  6 

V.  Ellis 57  Me.  180 565 

Bay  V.  Coddington       5  Johns.  Ch.  54 652 

Bayard  v.  Shunk 1  Watts  &  S.  92 662 

Bayor  v.  Amer.  Trust  &  Savings  Bank     157  111.  62 188 

Beale  v.  Parrish 20  N.  Y.  407 252 

Beals  V.  Olmstead 24  Vt.  115 103 

Bean  v.  Briggs 1  Iowa,  488 299 

Beard  i;.  Kirk 11  N.  H.  397 100 

V.  Milmine 88  Fed.  868 144 

Beauregard  v.  Knowlton 156  Mass.  395 421  r/ 

Beck  V.  Gillis 9  Barb.  35 606 

Becker  f.  Seymore 71  Minn.  394 325  a 

Beckwith  v.  Union  Bank 4  Sandf.  604 324,  329 

Bedell  v.  Hoffman 2  Paige,  199 342 

Bedford  Railroad  Co.  v.  Bowser    ...    48  Pa.  St.  29 127 

Beeching  v.  Gower 1  Holt,  313 421 

Beemanr.  Duck 11  M.  &  W.  251 468 

Beers  v.  Maynard 1  Bail.  Eq.  168 641 

V.  Phoenix  Glass  Co 14  Barb.  358 98,  n.  27 

V.  Robinson 9  Pa.  St.  229 499 

Begbie  V.  Levy 1  C.  &  J.  180 368 

Belcher  v.  Wilcox 40  Ga.  396 687 

Belden  v.  Lamb 17  Conn.  44 255 

I..  Meeker 47  N.  Y.  307 625 

Belknap  v.  National  Bank  of  N.  America    100  Mass.  376 480 

Belli'.  Alexander 21  Gratt.  1    ....     423,  421, n.  13 

?;.  Dagg 60N.  Y.  528 565 

V.  Hanover  National  Bank     .     .     57  Fed.  821 144 

V.  Hunt 3  Barb.  Ch.  391 342 

Bellamy  r.  Marjoribanks 8  Eng.L.  &  Eq.  517     289,480,493,568 

Bcllasis  V.  Hester 1  Ld.  Raym.  280 409 

Bellemire  v.  United  States  Bank  ...  1  Miles,  173,  4  Whart.  105      236,  265, 

274,  283 

Bellmont  Branch  Bank  v.  Hoge    ...     35  N.  Y.  65 565 

Bellows  V.  Hallowell  &  Augusta  Bank  .     2  Mason,  31 765 

Bellows  Falls  Bank  v.  Rutland  Co.  Bank    40  Vt.  377    .     .    .    298,299,302,322 


TABLE    OF   CASES.  XXV 
[All  references  are  to  Sections.] 

Ben  Roy  Irvine  v.  Dean 93  Tenn.  350 335 

Bensinger  v.  Wren 100  Pa.  St.  500 29 

Benson  v.  Heathorn 1  You.  &  C.  Ch.  326 125 

Benton  County  Bank  i'.  Boddicker    .     .     105  Iowa,  548 734  a 

Berkshire  Woollen  Co.  u.  Proctor     .     .     7  Cash.  417 9,  n.  16 

Bernheimer  v.  Marshall 2  Minn.  78 463 

Bernstein  v.  Coburn 49  Neb.  734 338 

Bertles  v.  Nunian 92  N.  Y.  152 604 

Bickerdike  v.  Bollraan 1  Tenn.  405 421 

Bickford  v.  First  Nat.  Bank  of  Chicago  42  111.  238     .  414,  n.  14  &  15,  421,  432. 

440,  451,  494,  530 

Biftcley  v.  Bank 39  S.  C.  281 143,  179 

Bigelow,  Clerk,  &c.  v.  Bridge   ....     8  Mass.  275 27 

Billing  V.  Devaux 3  M.  &  G.  571 380 

Billings  I'.  Collins 44  Me.  271 565,  n.  14 

Billingsley  v.  Pollock 69  Miss.  761 248  a 

Bills  I'.  National  Park  Bank     .     .     .     .  47  N.  Y.  Sup.  Ct.  302     ...     .    417 

Binney's  Case 2  Bland  Ch.  142    ...     .        62,  721 

Birch  V.  Fisher 51  Mich.  39 302,  303 

Birchall  v.  Third  National  Bank  ...  15  Wk.  Notes  of  Cas.  174  .     .     .     458 

Bird  V.  Lanius 7  Ind  615 499 

V.  Louisiana  State  Bank    ...     93  U.  S.  96 253 

Bird's  Executors  v.  Cochran     ....     2  Woods,  32 II.  157  c 

Birdsall  V.  Russell 29  N.  Y.  220 650 

Birmingham  Trust  Co.  v.  Louisiana  Nat. 

Bank       99  Ala.  379 166 

Bishop  V.  Countess  of  Jersey    ....     2  Drew.  143 289,  568 

y.  Seaman's  Bank  foV  Savings    .  83  Ap.  D.  (Hun)  181      ....     610 

Bissell  V.  First  National  Bank  .     .     .     .     69  Pa.  St.  415 46,  168 

V.  Heath 98  Mich.  472 679 

V.  Michigan  Southern  R.  R.  Co.     22  N.  Y.  258 756 

Black  V.  Ottoman  Bank 10  W.  R.  871 33 

Blaffer  v.  Louisiana  National  Bank  .     .     35  La.  An.  251 352 

Blaine  v.  Bourne 11  R.  I.  119 326,  593 

Blair  v.  First  Nat.  Bank  of  Mansfield     .    2  Flippin,  111  U.  S 158 

V.  Wilson .     28  Gratt.  165 544,  546 

Blake  v.  National  Banks 23  Wall.  307 IL  141  s 

V.  State  Savings  Bank  ....     12  Wash.  619 568 

Blanchard  v.  Commercial  Bank    ...     75  Fed.  249 750 

V.  IliUiard 11  Mass.  88 220 

V.  Stevens 3  Cush.  168 565,  n.  16 

Blasdel  v.  Locke 52  N.  H.  280 609,  610 

Bleaseby  v.  Crossley 3  Bing.  430       552 

Bletz  V.  Columbia  National  Bank      .     .     87  Pa.  St.  87 IL  130  m 

Bliss  ('.  Couch 46  Kans.  400 219 

Blodgett  V.  Morrell "  .     .     .     20  Vt.  509 669 

Blood  v.  Northrup 1  Kans.  28 299 

Bloodgood  V.  Mohawk  Railroad  Co.  .     .     10  Wend.  9 102,  n.  10 

Bloomer  v.  Bloomer 2  Bradf.  339  (N.  Y.)      ....    611 

Blount  V.  Windley 68  N.  C.  2 637 

Blumentlial  v.  Brainard 38  Vt.  410 109,  134 

Board  of  Commissioners  v.  Citizens'  Na- 
tional Bank  of  Faribault 23  Minn.  280 II.  141  a,  o 


XXvi  TABLE   OF    CASES. 

[All  references  are  to  Sections.] 

Board  of  Commissioners  i;.  Elston     .    .    32  Ind.  27 II.  141 

Board  of  Missions  v.  Mechanics'  Savings 

Bank 40  Hun,  120 611 

Boatman's   Savings    Inst.   v.   Bank   of 

Missouri 3  Mo.  497 646 

V.  Holland 38  Mo.  49 600 

Bobbett  V.  Pinkett 1  Ex.  D.  368 245 

Bobo  V.  People's  Nat.  Bank       ....  92  Tenn.  440    .     .    .     .11.130,130^ 

Boddington  v.  Schleucker 1  Nev.  &  M.  540,  4  B.  &  Ad.  752       238, 

243,  421 

Bodenham  v.  Hoskins 13  Eng.  L.  &  Eq.  222     ...     .     326 

V.  Purchas 3  Barn.  &  Aid  39      .     .  289,  355,  568 

Boehm  v.  Stirling 7  T.  R.  430 380,  443 

Boettcher  v.  Colorado  Nat.  Bank  ...     15  Col.  16 493 

Bohanan  v.  Pope 42  Me.  93 499 

Bohl  V.  Carson 63  Fed.  26 195 

Boisgerard  i-.  New  York  Banking  Co.    .    2  Sandf.  Ch.  23 743 

Bolton  V.  Puller 1  B.  &  P.  539 324 

V.  Richard 6  T.  R.  139 569 

Bonar  v.  MacDonald 3  H.  L.  Cas.  226 31 

Bond  V.  Bank  of  Georgia 2  Kelly,  92 750 

V.  Farnhara 5  Mass.  120 421,  n.  14 

Boody  V.  Lincoln  Nat.  Bank     ....     70  Hun,  392 604  ^ 

Boom  V.  City  of  Utica 2  Barb.  104 89 

Boone  v.  Citizens'  Savings  Bank  ...     84  N.  Y.  83        604 

Borie  v.  Commissioners  of  Fayetteville     75  N.  C.  267 II.  141  s 

Born  ?;.  Bank 123  Ind.  78   .     .     414  6,  414  c,  415,  543 

Borneman  v.  Siddinger 15  Me.  429 608,  611 

Borup  V.  Nininger 6  Minn.  523  ...      9,  n.  10,  224,  255 

Boston  Bank  v.  Hodges 9  Pick.  420 9  a,  n.  19 

Boston  Hat  Manufactory  v.  Messinger  .     2  Pick.  223       27 

Bostwick  V.  Van  Voorhees 91  N.  Y.  353 20,  21,  36 

Boswell  V.  Smith 6  Car.  &  P.  60 552 

Boughton  V.  Flint 74  N.  Y.  476 302 

Bouts  V.  Ellis 17  Beav.  121 549,  550 

Bowdell  V.  Farmers  &  Mechanics'  Na- 
tional Bank  of  Baltimore 14  Bank.  Mag.  387 680 

Bowden  v.  Johnson 107  U.  S.  251 683 

i;.  Morris 1  Hughes,  378 IL  150d 

y.  Santos 1  Hughes,  158 IL  150  c? 

Bowen  t'.  Needles  Nat.  Bank     ....  87  Fed.  430       .     .     .  408  c,  419,  421  d 

;;.  Newell 5  Sandf.  326      ....  220,  381,  387 

Bowers  i\  Industrial  Bank 64  111.  App.  300 421  <f 

Bowling  V.  Arthur 34  Miss.  41  .      236,265,266,274,285 

Bowman  v.  Cecil  Bank 3  Grant,  33 666 

V.  National  Bank 9  Wash.  614 248 

V.  Van  Kuren 29  Wise.  220 565,  n.  15 

Boyce  i-.  Brockway 31  N.  Y.  490 248 

V.  Edwards 4  Pet.  Ill 408 

Boyd  V.  Emmerson       2  Ad.  &  E.  184      ....      409,  572 

V.  Nasmith 17  Ont.  R.  40 426 

V.  Redd 120  N.  C.  335 679,  702 

Boyeri;.  Boyer 113  U.  S.  689    ...    .     II.  141m;, y 


TABLE   OF   CASES.  XXVU 
[All  references  are  to  Sections.] 

Boyer's  Appeal 103  Pa.  St.  387      ...  II.  141,  n.  97 

Boylston  National  Bank  c.   Richardson     101  Mass.  287 449 

Brabrook  i'.  Boston  Five  Cents  Savings 

Bank 104  Mass.  228 610 

Bradford  r.  Fox        39  Barb.  203 453 

Bradford  Banking  Co.  r.  Briggs    ...     31  Cli.  D.  19 699 

Bradley  v.  Bank  of  ilie  State    ....     20  Ind.  528 .750 

V.  Delaplaine 5  Harring.  305       ....      381,  383 

V.  Hunt 5  Gill  &  Johns.  58 637 

V.  Root 5  Paige,  G32 511 

('.  Tlie  People 4  Wall.  459 II.  141  t 

Bradstreet  v.  Everson 72  Pa.  St.  124 267,  285 

Brady  v.  Evans 78  Fed.  558 132 

Bragg  V.  Meyer 1  McAll.  411 10 

Brahm  v.  Adkins 77  111.  263     .      186,  322,  567,  568,  574 

Branch  v  Baker 63  Ga.  502 694 

V.  Dawson 33  Minn.  399 322 

V.  Roberts 50  Barb.  435 657 

V.  United  States 12  Bank  Mag.  61 11.  145 

Branch  Bank  v.  Collins 7  Ala.  95 140 

i;.  Knox lAla.  n.  s.  118      ....      232,265 

r.  Poe 1  Ala.  396 159 

r.  Scott 7  Ala.  107 140 

V.  Steele 10  Ala.  915 162 

V.  United  States  Bank  ....     50  Neb.  470       250 

Brandao  v.  Barnett 12  CI.  &  F.  787      ....      324,  325 

Brandon  v.  Scott 7  El.  &  Bl.  234 435 

Brandywine  Bank's  Assignment  ...  1  Chester  Co.  431  (Pa.)      .     .     .    630 

Bremer  Co.  Bank  v.  Moses 73  Iowa,  289 353 

Brent  v.  Bank  of  Washington  ....     10  Pet.  616  ' 699 

Brewer  v.  Dyer 7  Cush.  340       499 

V.  Knapp 1  Pick.  3.32 562 

Bridenbecker  v.  Lowell 32  Barb.  9 158,  159 

Bridgeport  Bank  v.  Dyer 19  Conn.  136     ...     .    9,  n.  19,  9  A 

y.  N.  York  &  N.  Haven  R.  R.  Co.     30  Conn.  231 709 

V.  Schuyler 34  N.  Y.  30 709 

Bridges  v.  Hawkesworth 16  Jur.  1079 654 

Bridgman  v.  Gill 24  Beav.  302 322,  343 

Briggs  V.  Central  National  Bank  ...     89  N.  Y.  182 574 

V.  Merrill 58  Barb.  379 565,  n.  14 

V.  Penniman 6  Cow.  387 698 

V.  Spaulding 141  U.  S.  133 139 

Brind  v.  Hampshire 1  M.  &  W.  372 398 

Brine  v.  Ferrier 7  Sim.  549 554 

Brinkerhoff  i;.  Bostwick 23  Hun,  2.37  .     .     .    717,  II.  150  a,  153 

Briscoe  y.  Kentucky  Bank 11  Pet.  267 51,664 

Bristol  V.  Barker 14  Johns.  205 13 

Bristol  Bank  v.  Keavy 128  Mass.  298 159 

Bristol  Knife  Co.  v.  First  Nat.  Bank  of 

Hartford 41  Conn.  421      ....      457,  460  A 

British   &  American   Mortgage  Co.   v. 

Tibballs 63  Iowa,  468     ..     .  9,  n.  19,  47,  305 

Brittain  v.  Bank  of  London      .    .    .    .     11  W.  &  R.  569 467 


XX;viii  TABLE   OF    CASES. 

[All  references  are  to  Sections.] 

Britton  r.  Nicolls 104  U.  S.  757    102,  n.  16, 265,  n.  10,  n.  13 

Brixen..  Nat.  Bank 5  Utah.  504 473,487 

Broad wav  Bank  v.  McElrath    ....     2  Beas.  26 71u 

Broderick  v.  Waltliam  Savings  Bank    .     109  Mass.  149 610 

Bromley  v.  Brunton 6  L.  R,  Eq.  275 550 

V  Commercial  National  Bank    .     9  Phila.  522 446 

Brook  ..Hook L.  T.  R.  24  Exch.  34      .     .     .     .464 

Brooke  v.  King 104  Iowa,  713 bQOd 

V.  Tradesmen's  Nat.  Bank      .     .     69  Hun,  202 557 

Brooklyn  City,  &c.  R.  R.  Co.  i'.  National 

Bank  of  Republic 22  Alb.  Law  Jour.  189  .     .     .    10,  758 

Brooklyn  Trust  Co.  f.  Toler 65  Hun,  187 419 

Brooks  I'.  Bigelow 142  Mass.  6 574,581 

Brothers  v.  Bank 84  Wise.  381 166 

Brouwer  v.  Appleby 1  Sandf.  158 144 

r.  Harbeck '  .     .     .     9  N.  Y.  589 625 

Brown  v.  Adams 4  Ch.  App.  764 355 

r.  Brown 18  Conn.  410 608 

V.  Citizens'  National  Bank     .     .     38  Bank  Mag.  135 306 

v.Davies 3  T.  R.  80 443 

t'.  Foster 4  Cush.  214 346 

;;.  Hitchcock 36  Ohio,  667 682 

y  Hull  33Gratt.  23 217 

,/.  Jackson 1  Wash.  Cir.  Ct.  512      ....     593 

,.  Leckie  ....     43  111.  497     .     .  3-36,  414,  451,  494,  530 

..'Lusk 4Yerger,210 381,538 

V.  Marion  Nat.  Bank      ....     169  U.  S.  416     .     .     .     II.  130  d,  130  n 

a.  McElroy 52  Ind.  404 302 

r.  Merrimac  River  Savings  Bank    67  N.  H.  549 620  c 

r.  Mott 7. Johns.  361 651 

V.  New  Bedford  Savings  Inst.     .     137  Mass.  262 325 

V.  O'Brien 1  Rich.  268 499 

t..  People 173  111.34 628  6 

V.  Second  National  Bank  of  Erie     72  Pa.  St.  209 II.  130 

V.  Spofford 95  U.  S.  481 665 

y.  Winnisimmet  Co 11  Allen,  326 61 

Bruce  «.  Bruce 5  Taunt.  495 480 

V.  Buler 2  M.  &  R.  3 21 

Bruen  v.  Howe 2  Barb.  586 290 

Brummagin  y.  Tallent 29  Cal.  503 299,302 

Brust  ..  Barrett 82  N.  Y.  400 .402 

Bruyn  v.  Receiver 9  Cow.  413 338,  641 

Bryant  v.  Bank  of  Commerce  ....     95  Wise.  476 144  m 

V.  Damariscotta  Bank    ....     18  Me.  240 644 

Bryden  I'.  Bryden 11  Johns.  187 443 

Buchlin  v.  Chaplin 1  Lans.  443 290 

Buckingham's  Appeal 60  Conn.  143 610 

Buckwalter  y.  United  States     ....     11  Serg.  &  R.  193  .     .     .     .     IL  130  m 

Buell  V.  Warner       33  Vt.  570 717 

Buenzi;.Cook 15  Cal.  38 675a 

Bufe  V.  Turner 6  Taunt.  338 21 

Buffalo  City  Bank  v.  Codd 25  N.  Y.  163 666 

Buffalo  County  Bank  v.  Hanson  ...     34  Neb.  455 324 


TABLE   OF   CASES. 


XXIX 


[All  references 
Bull  V.  First  National  Bank      .     .     .     . 

Bullard  V.  Bank 

V.  Bell 


V.  Randall 


Bullett  V.  Bank  of  Pennsylvania  . 

Bullock  V.  Boyd 

Bult  V.  Morrell 

Bundy  v.  Town  of  Monticello  .     . 

Bunn  V.  Markham 

f.  Wintlirop 


Bunnell  v.  Collinsville  Savings  Society 

Burdock  v.  Taylor 

Burgess  v.  Northern  Bank  of  Kentucky 

Burk  V.  Bishop 

Burke  v.  State 

Burkhalter  v.  Second  National  Bank     . 

Burley  v.  Bovven 

Burn  V.  Carvalho 

Barnes  t- .  Pennell 

Burnham  v.  Webster 

Burns  v.  Kohn 

Burr  V.  Sickles 

Burress  v.  Blair 

Burridge  v.  Geauga  Bank 

Burrill  v.  Dollar  Savings  Bank     .     .     .' 

17.  Nahant 

IK  Smith 

Burroughs  v.  Bank  of  Charlotte  .     .     . 

V.  Lowder 

Burrows  v.  Bangs 

V.  Smith 


Burtnett  v.  First  National  Bank    . 
Burton  v.  Bridgeport  Savings  Bank 
V.  Burley 


are  to  Sections.] 
123  U.  S. 105     . 

18  Wall.  589      . 
1  Mason,  243     . 

1  Gray,  605    .     46 

41 

2  Wash.  C.  C.  172 
2  Edw.  Ch.  293 
12  Ad.  &  El.  745 
84  Ind. 119  . 
7  Taunt.  224 

1  Johns.  Ch.  329 
38  Conn. 203 

16  Pick.  335 
4  Bush,  600  . 
27  La.  An.  465 
66  Ga.  157  . 
42  N.  Y.  538 
MS.   .  .  . 
4  My.  &  Cr.  690 

2  H.  L.  C.  497 

19  Me.  232  . 
47  Mo.  App.  214 

17  Ark.  428  . 
61  Mo.  183  . 
Wright  (Ohio), 
92  Pa.  St.  134 
2  Met.  163  . 

7  Pick.  291  . 
70  N.  C.  284 

8  Mass.  373  . 
34  Mich.  304 
10  N.  Y.  550 
38  Mich.  630 
52  Conn.  398 
12  Leg.  News,  178, 


240 


,247; 


V.  Paj-ne 

Bury  V,  Woods 

Bush  V.  Brown 

Bushnell  v.  Chautauqua  National  Bank 

Butterworth  v.  Peck 

Butts  V.  Wood 

Buxen  v.  National  Bank 


2  Car.  &  P.  520 
17  Mo.  App.  245 
49  Ind.  573  .     . 
10  Hun,  387       . 

5  Bosw.  341      . 
38  Barb.  181      . 

6  Utah,  504  .    . 


374 

.    .    713,  IL  112 

.     .     .      640,  653 

168,  289,  346,  379, 

2,  414,  451,  493,  568 

650 

290 

440 

326 

.     611 

.    610 

566,  617 

.       12 

.     477 

400,  550 

.     298 

454,  544 

.      77 

495,  541 

.     132 

171,  232 

.    389 

.    395 

.    606 

.    648 

617,  620 

.     116 

.     487 

.     652 

.       19 

.     304 

II.  106 

326,  590 

.    614 

9Biss.  253  46,101, 

IL  108.9 

460 

592 

565 

...      II.  108  c 

493 

125 

473 


19 


566 


Cabot  Bank  w.  Morton 4  Gray,  156 463,  659 

Cadle  V.  Baker 20  Wall.  650      ....     11.  101,  150 

V.  Tracy 11  Blatchf.  101 II.  157 

Cady  V.  So.  Omaha  Nat.  Bank     ...    46  Neb.  756 590 

Cahill  V.  Kalamazoo  Ins.  Co 2  Dougl.  (Mich.)  124      ...  43,  758 


XXX  TABLE   OF   CASES. 

[All  references  are  to  Sections.] 

Cake  V.  First  National  Bank  of  Lebanon  Tliomp.  Nat.  Bank  Cas.  890    .   IL  130 

Caldwell  v.  Nat.  Mohawk  Valley  Bank  64  Barb.  333    52, 164, 165, 191,  II.  103  6 

California  National  Bank  v.  Ginity  .     .     108  Cal.  148 II.  130 

Calisher  v.  Forbes 41  L.  J.  Cli.  56 45 

Callender  v.  Dinsmore 55  N.  Y.  200,  208  .     .     .      9,  n.  0  &  10 

Camden  v.  Doremus 3  How.  515 9,  n.  19 

Camidge  v.  Allenby 6  B.  &  C.  373 425,  448 

Camp  V.  Laud 122  Cal.  167 108/ 

Camp's  Appeal 86  Conn.  88 608 

Campbell  v.  Mississippi  Union  Bank     .     6  How.  625 636 

Can  V.  Head 3  Atk.  095 438,  440  B 

Canal  Bank  ;;.  Bank  of  Albany    ...  1  Hill,  287     .    .     .    474,  476,  480,  489 

Canfield  v.  State  National  Bank    .     .     .  1  N.  W.  Rep.  173  .     .    .     .      II.  108  a 
Cannonsburg  Iron  Co.  v.  Union  National 

Bank 34  Pitts.  L.  J.  93 834 

Capital  Nat.  Bank  v.  Coldwater  Nat. 

Bank 69  N.  W.  115 630 

Capitol  State  Bank  v.  Lane      ....     52  Miss.  677 252 

Caponigri  v.  Altieri 29  A  p.  D.  304 11130/ 

Care w  y.  Duckworth 4  L.  R.  Exch.  313      .     .     .    .380,425 

Carey  v.  Greene 7  Ga.  79 648 

V.  McDougald 7  Ga.  84 744 

Carleyy.  Tod 83  Hun,  53 ILlSOn 

Carman  v.  Franklin  Bank 61  Md.  467 440  A 

Carncross  v.  Lorimer 3  Macq.  830 472 

Carnegie  v.  Morrison 2  Met.  402 499 

Carolina  National  Bank  v.  Wallace  .     .     13  S.  C.  347 233 

Carpenter  )\  Butterfield 3  Johns.  Cas.  145 640 

V.  Farnsworth 106  Mass.  561    ...     .  365,  432,  440 

y.  National  Bank 50  N.  J.  L.  6 U.lBOg 

V.  Northborough  National  Bank     123  Mass.  69 464 

V.  Northfield  Bank 39  Vt.  46 312,  447 

Carpy  v.  Dowdell 115  Cal.  677 171 .7 

Carr  v.  Carr 1  Mer.  541 289,  568 

V.  National  Security  Bank     .     .  107  Mass.  45     .     .    289,  407  493,  499, 

520,  568 

Carradine  v.  Carradine 58  Miss.  286 608 

Carrol   Exchange   Bank    v.   First  Na- 
tional Bank 58  Mo.  Ap  17 543 

Carruthers  v.  West 11  Q.  B.  143 565 

Carson's  Adm.  v.  Phelps 40  Md.  73 610 

Carter  v.  Philadelphia  Coal  Co.     .     .     .  77  Pa.  St.  286   .     .     .     .9,  n.  12,  n.  19 

V.  Wiialley 1  B.  &  Ad.  11 131 

Casco  Bank  v.  Keene 53  Me.  103 478 

Casco  National  Bank  v.  Clark  ....     139  N.  Y.  307 134 

Case  V.  Bank 100  U.  S.  446 II.  150 

V.  Beauregard 1  Woods,  126 590 

V.  Berwin 22  La.  An.  321 II.  150 

V.  Burt 15  Mich.  82 409 

V.  Citizens'  Bank  of  Louisiana   .  2  Woods,  23      ....     IL  146,  152 

V.  Dennison 7  R.  I.  88 611,  612,  615 

V.  Hawkins 53  Ala.  702 143 

r.  Henderson 23  La.  An.  49 493,  518 


TABLE   OF    CASES.  XXXI 

[All  references  are  to  Sections.] 

Case  y.  Mechanics' Banking  Association    4  Comst.  166 393 

V.  Morris 31  Pa.  100,  104       ....    421,  n.  14 

V.  Small 4  Woods,  78 II.  112  a 

y.  Terrell 11  Wall.  199      .     .     .     .II.  101,  150  a 

Caseyy.  Galli 94  U.  S.  673      14,  II.  112  6,  144,  150  rf 

V.    La    Socie'te   de   Credit   Mo- 

bilier 2  Woods,  77  II.  150  A,  150  c,  152 

Cassedy  v.  First  National  Bank    ...     80  Minn.  86 300,  302 

Cate  V.  Patterson 25  Mich.  191 51,  298 

Cawein  v.  Browinski 6  Gush.  457 421 

Cay  Co.  Bank  v.  Daniels 47  N.  Y.  631 599 

Cecil  Bank  i'.  Farmers'  Bank  ....     22  Md.  148    ..     .     583,  591,  592,  593 

Cecil  Nat.  Bank  r.  Watsontown  Bank    105  U.  S.  217 701 

Central  Bank  v.  Davis 19  Pick.  373 9,  n.  17 

V.  Empire  Stone  Dressing  Co.    .     26  Barb.  23 757 

V.  Hammett 50  N.  Y.  159 565 

Central  Georgia  Bank  v.  Cleveland  Nat. 

Bank       .    ^ 59  Ga.  667 224 

Central  Nat.  Bank   v.  Connecticut  Mu- 
tual Life  Ins.  Co 104  U.  S.  54      ....  817,  326,  343 

V.  Levin 6  Mo.  App.  543 146 

r.  North  River  Nat.  Bank      .     .     44  Hun,  115       .......     477 

V.  Pratt 115  Mass.  539 130 

V.  Richland  Nat.  Bank  ....     52  How.  136 IL  157  a 

V.  Valentine 18  Hun,  417 599 

Central  R.  R.  Banking  Co.  v.  First  Nat. 

Bank  of  Lynchburg 73  Ga.  383 593 

Chaffee  v.  First  Nat.  Bank  of  Ravenna    40  Ohio  St.  10  .     .     .     .  494,  511,  634 

V.  Fort 2  Lans.  81 589 

Chambers  v.  Miller 13  C.  B.  n.  s.  125  .     .     .     .      449,  569 

V.  Union  Nat.  Bank 78  Pa.  St.  205 489 

Champion  v.  Gordon 70  Pa.  St.  476  ...     .  373,  384,  389 

Chandler  v.  Monmouth  Bank  ....     1  Green,  255 140 

Chapman  v.  Allen 15  Tex.  278 324  c 

V.  Beckington 3  Q.  B.  722 29 

V.  Hart 1  Ves.  Sr.  271 637,  654 

V.  Union  Bank 32  How.  Pr.  95 254 

V  White 2  Seld.  412    .     .  54,  289,  380,  493,  568, 

674 

Charles  v.  Blackwell 1  Com.  P.  D.  548 475 

V.  Carter 96  Tenn.  617 214 

Charleston  v.  People's  Nat.  Bank      .     .     5  S.  C.  Rich.  L.  103  .     .  II.  113,  141  s 
Charlotte  Iron  Works  v.  American  Ex- 
change Nat.  Bank 34  Hun,  26   .     .     .     248,  565,  567,  699 

Charnley  v.  Dallas 8  Watts  &  S.  353 299 

Chase  v.  Petroleum  Bank 66  Pa.  169 188 

t;.  Redding 13  Gray,  418 549,  611 

Chatham  Bank  v.  Brobston 99  Ga.  801 680 

Chatham  Nat.  Bank  v.  Merchants'  Nat. 

Bank 4  Thomp.  &  C.  196    .     .     II.  106,  157 

Chattahoochee  Nat.  Bank  v.  Schley      .     68  Ga.  369 196,  204 

Chautauqua  Bank  v.  Risley      ....     19  N.  Y.  369 48 

Check  V.  Merchants'  Nat.  Bank    ...    10  Heisk.  (Tenn.)  618   .     .    IL  130  d 


XXxii  TABLE   OF   CASES. 

[All  references  are  to  Sections.] 

Chemical  Bank  v.  Deposit  Co.       ...     161  U.  S.  1 II.  146,  152 

,.  156  111.  522 625  A 


Chemical  Nat.  Bank  w.  Bailey  .     .     .     .  12  Blatchf.  480      .     289,  II.  146,  150  c 

J..  Kohner 58  How.  Pr.  R.  267 159 

Chesapeake  Bank  v.   First  Nat.  Bank 

of  Baltimore 40  Md.  269 II.  157  a 

f.  Swain 29  Md.  483 184,  295 

Chester  Glass  Co.  v.  Dewee      ....     16  Mass.  94 752 

Chetwood  v.  California  Nat.  Bank     .     .     113  Cal.  649 717  rf 

Chew  V.  Ellingwood 86  Mo.  260 37,  38 

Chicago  Bank  v.  Farwell 10  Biss.  270 II.  141  v 

Chicago,  &c.  Ry.  Company  v.  Ayers      .    39  111.  Ap.  607 360 

Chicago    Marine    &    Fire    Ins.    Co.    v. 

Carpenter 28  111.360 312 

V.  Stanford 28  111.  168 178,  315,  494 

i-  25  111.  21 530 

Chicopee  Bank  i;.  Eager 9  Met.  584   .     .     9,  n.  9  &  19,  220,  233 

V.  Philadelphia  Bank    ....     8  Wall.  641 230,  252 

Child  i;.  Hudson's  Bay  Co 2  P.  Wms.  207  .     ...      9,  n.  11,43 

Chiles  V.  Garrison 32  Mo.  475 188 

Chipman  v.  McClellan 159  Mass,  363 146  c 

Chism,  Churchill,  &  Co.  y.  Bank  .     .     .    96  Tenn.  651 466  A 

Chouteau  v.  Rowse 56  Mo.  65 421 

Chowne  v.  Baylis 31  Beav.  351 II-  42 

Cliristmas  i;.  Russell 14  Wall.  69 493,513 

Christy..  Sill 131  Pa.  St.  492 694 

Chrystie  i-.  Foster 61  Fed.  551 144,  144  t 

Church  V.  Ayer 80  Fed.  543 696 

V.  Farnham 1  Sheld.  393 421 

V.  Johnson 93  Iowa,  544 750 

Chute  V.  Warner 8  Ap.  D.  40 330 

Cincinnati,  &c.  R.  R.  Co.  v.  Bank     .     .    54  Ohio  St.  60 493 

Citizens'  Bank  v.  Bowen 21  Kans.  354 334 

V.  Carson 32  Mo.  191 557 

t'.  Grafflin     .     ; 31  Md.  507 454 

r.  Houston 98  Ky.  141 252a 

y.  Howell 8  Md.  530 265,  274,  287 

„.  Importers  &  Traders' Bank    .     119  N.  Y.  195 474 

V.  Jones 121  Cal.  30 297 

y.  Kalamazoo  Co.  Bank     .     .     .     Ill  Mich.  313 1^,1^11^ 

Citizens'  Nat.  Bank  v.  Alexander      .     .     120  Pa.  476 326 

y  Brown 11  N.  E.  799  (Ohio)   .     .     .      299,300 

r.  Elliott 65  Iowa,  104 101 

y   Leming               8  Inter.  Rev.  Rec.  132    .     .     II.  130  d 

t..  Lofton 85Ind.  341 "•  ^t^  ^ 

Citizens'  Savings  Bank  v.  Blakesley      .     42  Ohio  St.  645 89,  320 

r.  Mitchell 18R.L739 612 

I,.  Vaughn 115  Mich.  156 329 

City  and    County  of  San  Francisco  v. 

Crocker- Woolworth  Nat.  Bank      .     .     92  Fed.  273 II.  141  u 

City  Bank  t;.  Cutter 3  Pick.  414    .     .     .     .  9,  n.  19,9  A,  220 

V.  First  Nat.  Bank 45  Tex.  203       ....  477,  479,  489 

V  Perkins 29  N.  Y.  554 158,  165 


TABLE    OF  CASES.                                        XXXIU 
[All  references  are  to  Sections.] 

City  Bank  v.  Weiss 3  S.  W.  299  (Tex.) 217 

City  Bank  of  Columbus  r.  Beach      .     .  1  Blatchf.  C.  C.  425  .     .     .     .     46,  63 

City  Bank  of  Macon  v.  Kent     ....     57  Ga.  283 471 

City  Nat.  Bank  v.  Burns 68  Ala.  267 569 

V.  Chemical  Nat.  Bank  ....    80  Fed.  859 160 

v,  Paducah 5  Cent.  Law  Jour.  347   .     .  II.  141  a,  k 

,;.  Stout 61  Tex.  567 483 

City  Nat.    Bank    of    Poughkeepsie   v. 

Phelps 86N.  Y.  484 IL  144 

City  of  Carthage  v.  First  Nat.  Bank      .     10  Rep.  469 II.  141  o 

City  of  Elizabeth  v.  Force 29  N.  J.  Eq.  591 650 

City  of  Richmond  y.  Scott 48  Ind.  568 IL  141  c 

City  Savings  Bank  v.  Hopson  ....     53  Conn.  453 234 

Clafflin  V.  Bank 25  N.  Y.  293 144,  n.  14 

Claflin  V.  Farmers  &  Citizens'  Bank  .    .  36  Barb.  540     .     .     .    .     .      155,  413 

V.  Wilson 51  Iowa,  15 326 

Claghorn  v.  CuUen 13  Pa.  St.  133 6 

Clancarty  v.  Latouche 1  Ball  &  B.  420 309 

Claridge  v.  Hoare 14  Ves.  Jr.  59 42 

Clark  V.  Clark 108  Mass.  522 610 

y.  Desraoines 19  Iowa,  199 43 

V.  First  Nat.  Bank 57  Mo.  Ap.  277      ....  317,  817  a 

y.  Hawkins 5  R.  L  219 641 

V.  Merchants'  Bank 2  N.  Y.  380 ,    .     .     574 

V.  Metropolitan  Bank     ....     3  Duer,  241 762 

V.  National  Bank  of  City  of  New 

York 11  Daly,  237 290 

V.  National  Shoe    and    Leather 


Bank 32  Ap.  D.  (Hun,  N.  Y.)  316    .     .     472 

V.  National  Metropolitan  Bank  .  2  MacArthur,  249      .     .     .    421,  n.  19 

V.  School  District 3  R.  I.  199 54 

y.  Stackhouse 2  Mart.  (La.)  319 442 


Clarke  v.  Man.  Ins.  Co." 8  How.  235 21 

Clarke  Nat.  Bank  v.  Bank  of  Albion     .  52  Barb.  592     .     .      98,  n.  3,  155,  413 

Claseny.  City 46  La.  An.  1 289a 

Clayton's  Case 1  Mer.  608 355 

Clemmer  v.  Drovers'  Nat.  Bank    ...  157  III.  206 326/ 

Cleveland  v.  Burnham 55  Wise.  598,  64  Wise.  347     .     .     685 

Cleveland,  &c.  R.  R.  Co.  v.  Reary     .     .  3  Ohio  St.  201 102 

Clews  V.  Bank 114  N.  Y.  70 478 

V.  Bank  of  New  York  National 

Banking  Association 105  N.  Y.  398    ..     .     414,  n.  21,  482 

Clough  t).  Clough 117  Mass.  83 611 

Coates  V.  First  Nat.  Bank 91  N.  Y.  20 495 

V.  Preston 105  111.  470 446 

Coats  V.  Donnell 94  N.  Y.  176 160,  624 

Cobb  V.  Beeke 6  Q.  B.  930 185 

Cocheco  Nat.  Bank  I'.  Haskell 51  N.  H.  116     .     .     .     .158,167,169 

Cochituate  Bank  v.  Colt  ......  1  Gray,  382 655,  687 

Cochran  v.  United  States 157  U.  S.  286 IL  134 

CockriU  V.  Joyce 62  Ark.  216 324,  701 

Cocks  V.  Masterman 1  B.  &  C.  902,  17  E.  Cr.  L.  R.     .    487, 

488,  558 

VOL.  I.  —  C      ' 


XXXiv  TABLE    OF   CASES. 

[All  references  are  to  Sections.] 

Codd  V.  Rathbone 19  N.  Y.  37 13 

Coddington  v.  Bay 20  Johns.  637 599 

Codman  v.  Lubbock 5  DowL  &  R.  289 637 

Cody  V.  City  Nat.  Bank 55  Mich.  379 595 

Coffey  y.  Nat.  Biink  of  Missouri   ...    46  Mo.  140 11144 

Coffin  V.  Hensliaw 10  Ind.  277 313 

Coggill  V.  American  Exchange  Bank     .  1  N.  Y.  (Comst.)  113     .     .     370,  474, 

476,  477,  480 
Cogswell    V.   Rockingham    Ten    Cents 

Savings  Bank 59  N.  H.  43 421,  617,  757 

Coliea  V.  Hunt 2  Sm.  &  Mar.  227      ...    9  a,  n.  19 

Cohen  v.  Hule 3  Q.  B.  D.  371  . 398 

Coite  I'.  Soc.  for  Savings 32  Conn.  173 617 

Cole  V.  Ryan 52  Barb.  168 673,  674 

Coleman  u.  Parker 114  Mass.  30 611 

V.  White 14  Wise.  700 693 

Coles  V.  Bank  of  England 10  Ad.  &  El.  449 480 

Collier  v.  Neville 3  Dev.  31 49 

Collins  V.  Central  Bank 1  Kelly,  435 6-39 

V.  Chicago 4  Biss.  472 II.  141 

V.  Emett 1  H.  Bl.  313 370 

V.  Gilbert 94  U.  S.  757 565 

Colt  V.  Ives 31  Conn.  25 496 

V.  Lasnier 9  Cow.  320 317 

V.  Noble 5  Mass.  167 232 

Columbia   Nat.   Bank  v.  German  Nat. 

Bank 56  Neb.  804 329 

Columbian  Bank's  Estate     .....     147  Pa.  St.  422 716 

Combs  V.  Scott 12  Allen,  493 101 

Comer  v.  Dufour 95  Ga.  378 421  d.  422 

Commercial  &  Farmers'  Nat.  Bank  of 

Bait.  V.  First  Nat.  Bank  of  Bait.    .     .    30  Md.  11 463 

Commercial  Bank  v.  Armstrong  .     .     .     148  U.  S.  50 248 

V.  Benedict 18  B.  Monr.  307 650 

i;.  Bonner 13  Sm.  &  Mar.  649     .     .  98,  n.  23,  141 

I'.  Chilberg 14  Wash.  247 493 

V.  Cunningham 24  Pick.  270      .     .         .     .      108,  136 

V.  French 21  Pick.  486 95 

V.  Hughes 17  Wend.  100    ...     .  289,  324,  355, 

414,  568 

r.  Jones 18  Tex.  811 317 

,;.  Kortright 22  Wend.  348    .     .     98,  163,  165,  171, 

713 

V.  Marine  Bank 3  Keyes,  337 599 

V.  Rhind 1  Macq.  H.  L.  Cas.  643       ...    291 

V-  Simmons 10  Alb.  Law  Jour.  155  ,     .    .    II.  157 

V.  Slocomb 14  Pet.  60 46 

V.  State 6  Sm.  &  Mar.  599.  622   .     .      761,  764 

V.  Thompson 7  Sm.  &  Mar.  443 637 

V.  Union  Bank 19  Barb.  391,  1  Kern.  203        246,  252, 

278,  299 
Commercial  Exch.  Nat.  Bank  v.  Nat. 

Bank  of  Rep 9  Phila.  133 466 


Oh 


Wnrj, 


% 


TABLE    OF    CASES.  XXXV- 
[All  references  are  to  Sections.] 

Commercial    Mut.    Mar.    Ins.    Co.    v. 

Union  Mut.  Ins.  Co 19  How.  318      .....      98,  n.  1.3 

Commercial  Nat.  Bank  v.  Henninger    .  105  Pa.  St.  496,  500     ..     .     188,  662 

V.  Lincoln  County 67  III.  Ap.  166 391 

V.  Proctor 98  111.  558 329,  561 

Commercial  Press  v.  Crescent  City  Nat. 

Bank 26  La.  An.  744 391 

Commissioners  v.  BoUes        4  Otto,  104 758 

Commonwealtli  v.  Alleghany  Co.      .     .  20  Pa.  St.  185   ......     .     760 

V,  Barry       116  Mass.  1        II.  159 

r.  Cain 5  Serg.  &  R.  510 43 

V.  Chestnut  Street  Nat  Bank     .     189  Pa.  St.  606 II.  152 

V.  Cochituate  Bank 3  Allen,  42 677,  678 

V.  Commercial  Bank     .     .     .     .    28  Pa.  St.  383 761 

V.  CuUen 13  Pa.  St.  133 758 

V.  Essex  Co 13  Gray,  253 766 

V.  Felton       101  Mass.  204 II.  159 

V.  Fisher 17  Mass.  46       298 

V.  Ketner 92  Pa.  St.  372 II.  159 

V.  McAllister 28  Pa.  480    .     .     .' 604 

V.  Manufac.  &  Mech.  Bank   .     .  2  Pearson  (Pa.),  386  .     .     .      II.  141  s 

V.  Savings  Bank 98  Mass.  12        650 

V.  Scituate  Savings  Bank       .     .     137  Mass.  301 604 

V.  Stone 4  Met.  43      . 662 

V.  Tenney 97  Mass.  50 II.  159 

V.  Worcester 3  Pick.  462        43 

Comp  I'.  Carlisle  Deposit  Bank    ...     94  Pa.  St.  409 203,  209 

Compton  V.  Oilman 19  W.  Va.  316 425 

Comstock  V.  Willoughby Hill  &  Den.  271 77 

Conant  v.  Schuyler 1  Paige,  316 550 

V.  Seneca  Co.  Bank 1  Ohio  St.  298  .     .     128,  699,  717,  761 

Concord  v.  Concord  Bank 16  N.  H.  26  .     .     .     159,  289,  295,  355 

Condon  ;;.  Pearce    ■     ■    ^ 43  Md.  83 565 

Conklin  r.  Second  Nat.  Bank  ....  63  Barb.  512  .  .  .  698  A,  II.  112 
Connecticut  &  Passumpsic  River  R.  R. 

Co.  V.  Bailey 24  Vt.  465 669 

Connelly  v.  McKean 64  Pa.  St.  113 409 

Conner  v.  Henderson 15  Mass.  320 103 

Conroy  v.  Warren 3  Jolms.  Cas.  269      393,  421,  n.  9,  425 

Continental  Bank  i;.  Elliott  Bank      .     .     7  Fed.  Rep.  373 711 

Continental  Nat.  Bank  v.  Cornhanser    .  37  III.  Ap.  475    .     .    414  b,  414  k,  415 

V.  Nat.  Bank  of  Commonwealth     50  N.  Y.  575 478 

V.  Tradesmen's  Nat.  Bank      .     .     36  Ap.  D.  112 454,  480 

Converse  v.  Norwich,  &c.  R.  R.  Co.       .     33  Conn.  166 56 

Conway  v.  Halsey 44  N.  J.  Law,  462 717 

Conwell  V.  Hill 14  Ind.  131 644 

Conyngham's  Appeal 57  Pa.  St.  474 125,  173 

Cook  V.  Moffat 5  How.  295 12,  n.  18 

V.  State 13  Ind.  154 27 

V.  State  Nat.  Bank 52  N.  Y.  96,  50  Barb.  339    .     .    46,  98, 

165,  414,  II.  106,  157 

V.  Tullis       18  Wall.  332 326,  590 

V.  Wagster 1  Sm.  &  G.  296 606 


124 

146  t 


307 
366 


xxxvi  TABLE    OP    CASES. 

[All  references  are  to  Sections.] 

Cooke  t;.  Seely 2  Exch.  749 439 

r.  United  States 91  U.  S.  389 489 

Cookeiidorfer  v.  Preston       4  How.  U.  S.  317 9,  113 

Cooper  V.  Burr 45  Barb.  9 611 

!_„   Curtis       30  Me.  488 98,158,176 

V.  Frederick 9  Ala.  738 43 

V.  Kane 19  Wend.  386 9,  n.^12 

V.  Mowry 16  Mass.  7 322 

Cooter.  Bank 3  Cranch  C.  C.  50 4o9 

Coots  w.  McConnell 39  Mich.  742 589 

Cope  V.  Dodd 13  Pa.  St.  33 9,  n.  5 

CoppelU.  Hall 7  Wall.  558 -     •     747 

Corbet  ..  Bank  of  Smyrna       ....  2  Harr.  235  .     .     .     289,312,637,662 

Corbett  y.  Woodward 5  Sawyer,  403 

Corcoran  u.  Snow  Cattle  Co 151  Mass.  74 

Cordell  v.  First  National  Bank  of  Kan- 
sas City 64  Mo.  600 

Corgan  v.  Frew 39  111.  31       

Cork  V.  Bacon 45  Wise.  192 367 

Corlett  V.  Conway       5  M.  &  W.  656 418 

Corn  Exchange  Bank  v.  Blye  ....     2  N.  Y.  112 217 

„   Blye 101  N.  Y.  303 H-  152 

V.  Nassau  Bank 91  N.  Y.  74 476 

Corn  Exch.  Nat.  Bank  v.  Nat.  Bank  of 

Republic 78  Pa.  St.  233 466,489 

Corser  v.  Craig 1  Wash.  C.  C.  424      .     .  493,  494,  538 

V.  Paul 41  N.  H.  24 158 

Cotter  V.  Doty 5  Ohio,  395 43 

Coulter  V.  Robertson 24  Miss.  278 706 

County  Commiss.  of    Frederick  Co.  v. 

Farm.  &  Mech.  Nat.  Bank     ....     48  Md.  117 H-  141  n 

County  of  Des  Moines  v.  Hiukley      .     •     62  Iowa,  637 495,  541 

Covert  V.  Rhodes 48  Ohio  St.  66 493 

Covington  City  Nat.  Bank   v.  City  of 

Covington 21  Fed.  Rep.  484  ...     .      H-  141  v 

Cowell  V.  Simpson       16  Ves.  Jr.  278 330 

Cowing  r.  Altman 71  N.  Y.  435 442 

Cowles  V.  Cromwell 25  Barb.  413 673 

i;.  Gridley 24  Barb.  301 669 

Cowperthwaite  v.  Slieffield 3  Comstock,  243   ...     •      493,  502 

Cox  ..  Bank        119  N.  C.  305 714 

V.Boone 8  W.  Va.  500 423 

r.  Buck 83  Fed.  269   II.  130  n 

V.  Elmendorf 97  Tenn.  526 679 

V.  Hill 6  Md.  274 615 

V.  Montague 78  Fed.  845 683 

Coxe  y.  State  Bank 3  Halst.  172 •     •     637 

Cragie  ..  Hadley 99  N.  Y.  133     ....    109,574.589 

Craig  V.  Libbett 15  Pa.  238 •     225 

I.Missouri 4  Pet.  410,  432       .     •     .    51,298,665 

Crain  y.  First  Nat.  Bank  of  Jacksonville     114  111.516 160 

Crandall  v.  Schroeppel 1  Hun,  557 248 

Crawford  v.  Royal  Bank Ross,  Lead.  Cas.  229      .     .     .     .     boJ 


TABLE    OF   CASES.  XXXYU 

[All  references  are  to  Sections.] 

Crawford  v.  West  Side  Bank    ....     100  N.  Y.  50 456 

Crease  v.  Babcock 10  Met.  525 689,  693 

V. 23  Pick.  334 138 

Credit  Co.  v.  Howe  Co 54  Conn.  357 167,  746 

Creed  v.  Commercial  Bank       ....     11  Oliio,  489 50 

Crescent  City  Nat.  Bank  v.  Case  ...     99  U.  S.  628 683 

Creveling  v.  Bloomsburg  Nat.  Bank      .  46  N.  J.  Law,  255       ...      493,  525 

Crews  V.  Farmers'  Bank 31  Gratt.  384 230 

Cripper,  Lawrence,  &  Co.  v.  American 

Nat.  Bank 51  Mo.  A  p.  508 474 

Crocker    v.    First    National    Bank    of 

Chetopa       11  Am.  Law  Rev.  169    ..     .    II.  130 

V.  Higgins 7  Conn.  347       '    .     499 

V.  Marine  Nat.  Bank      ....     101  Mass.  240       II.  157 

V.  Whitney 71  N.  Y.  161 75,  II.  128 

Crocket  v.  Young 1  Sm.  &  Mar.  241 158 

Cromwell  v.  Lovett 1  Hall  (N.  Y.),  5(>       .     .  421,  425,  544 

Crosskill  i:  Bower 32  Beav.  86       ....  289,  309,  568 

Crossly  v.  Ham 13  East,  498 565,  n.  10 

Crout  V.  De  Wolf 1  R.  I.  393 468 

Crow  V.  Mechanics  &  Traders'  Bank      .     12  La.  An.  692 9,46 

Cruger  v.  Armstrong 3  Johns.  Cas.  5       393,  402,  421,  n.  10, 

442 

Crumb  v.  Treiber 4  Bull.  616 342 

Crystal  Plate  Glass  Co.  v.  First  National 

Bank 6  Mont.  303       170 

Cullcn  ('.  Thompson 9  Jur.  n.  s.  85 102,  132 

Culver  V.  Marks       122  Ind.  554      ....     367  c,  421  g 

Gumming  v.  Sliand 29  L.  J.  Ex.  129 9,  n.  1 

Cummings  v.  Boyd 83  Pa.  St.  372       ....    565,  n.  15 

V.  Winn 89  Mo.  51 628 

Cummins  v.  Heald 24  Kans.  600 267 

Cundy  v.  Marriott 1  Barn.  &  Ad.  696 743 

Cunningham  v.  Davenport 147  N.  Y.  43 610 

Curcier  v.  Pennock 14  Serg.  &  R.  51 113 

Curran  z'.  State  of  Arkansas     ....     15  How.  304 718 

V.  Whittier 66  Wis.  16 298 

V.  Witter 31  N.  W.  705 302 

Curriev.  Misa L.  R.  10  Exch.  163 546 

Currier  i;.  Davis Ill  Mass.  480 425 

Curry  v.  Powers 70  N.  Y.  212 615 

Curry  v.  Scott .     .     64  Pa.  St.  270 707 

Curtis  V.  Leavitt 15  N.  Y.  19       13,  51,  63,  77,  98,  n.  36, 

137,  232,  289,  297,  298,  568,  743 

V.  Portland  Savings  Bank       .     .     77  Me.  151 611,612 

V.  Swartwout 1  N.  Y.  Leg.  Obs.  406    ...     .       74 

Gushing  v.  Gore       15  Mass.  69       388 

Custer  V.  Tomkins  Co.  Bank    ....     9  Barr,  27 134 

Cutting  V.  Gilman 41  N.  H.  147 608 

V.  Marlor 78  N.  Y.  454 212 

Cutts  V.  Perkins 12  Mass.  206 400,  549 


XXXviii  TABLE   OF    CASES. 

[All  references  are  to  Sections.  1 

D. 

Da  Silva  v.  Fuller Chitty  on  Bills,  180 389 

Dabney  y.  Stevens       40  How.  (N.  Y.)  341      ....      43 

Dacy  V.  N.  Y.  Chemical  Manuf.  Co.      .     2  Hall,  550 434,  440 

Daggett  V.  Whiting 35  Conn.  372 565 

Dale  V.  Sollet 4  Burr.  2133 328 

Daly  V.  Butchers  &  Drovers'  Bank  of 

St.  Louis 56  Mo.  94 214,  274,  287 

Dana  v.  Bank  of  United  States     ...     5  Watts  &  S.  228 120 

V.  National  Bank 132  Mass.  156 290,  472 

V.  Third  National  Bank     ...     13  Allen,  445 446,  493 

Daniel  v.  Smith       75  Cal.  548 611,  614 

Daniels  v.  Empire  State  Bank       ...     92  Hun,  450 480 

v.  Kyle 1  Kelley  (Ga.),  304    .     381,  421  d,  425 

Dann  v.  City  of  London  Brewery  Co.    .     L.  R.  8  Eq.  155 9,  n.  11 

Danvers  Bank  v.  Salem  Bank       ...     151  Mass.  280 466  d 

Darling  v.  Stanwood U  Allen,  504 274,  286 

Darrington  I'.  Bank  of  State  of  Alabama     13  How.  U.  S.  12 664 

Davenport  v.  Citv  Bank  of  Buffalo  .     .     9  Paige,  12 663 

r.  Stone 104  Mich.  521 158  e 

Davenport  Bank  v.  Board  of  Equaliza- 
tion 


123  U.  S.  83 II.  141  V 


Davey  v.  Jones 42  N.  J.  Law,  30   ...     .      252,  265 

Davies  i'.  Dodd 1  VVils.  Ex.  110 649 

r.  Watson 2  Nev.  &  M.  709 487 

Davies  Co.  Savings  Ass.  v.  Sailor     .     .     63  Mo.  24 169 

Davis  V.  Adae 4  Bull.  (Cin.)  295 542 

r.  Bangor 42  Me.  522 102 

,-.  Bartlett 12  Ohio  St.  537 565 

r.  Benton 2  West.  L.  Mo.  423 424 

r  Bowsher 5  T.  R.  488 324,  325,  567 

V.  Cook 9  Nev.  134 II.  157 

r.  First  Baptist  Society  of  Essex    44  Conn.  582 11.112  6 

r.  Industrial  Mfg.  Co 114  N.  C.  334 338 

V.  Knapp 92  Hun,  297 338 

r.  Lenawee  Co.  Savings  Bank    .     53  Mich.  163 290,  619 

I,.  Meeker 5  Johns.  354 103 

t."  Ney 125  Mass.  590 612 

r.  Randall 115  Mass.  547  .     .  144,  n.  18,  XL  130  c 

V.  Smith 29  Minn.  201 289 

V.Stevens 17  Blatchf.  259 683 

Davison  v.  City  Bank 57  N.  Y.  82 546 

Dawson  v.  Laws Kay,  280 33 

t'.  Real  Estate  Bank      ....  5  Ark.  299    .     18-3,  186,  190,  192,  324, 

326,  562,  568 

Day  V.  Thompson 65  Ala.  269 546 

Dayton  v.  Brost 7  Bosw.  115 674 

Dayton  Nat.  Bank  v.  Merchants'  Nat. 

Bank 37  Ohio  St.  208 714 

De  Barnales  v.  Fuller 14  East.  590 564 

De  Feriet  v.  Bank  of  America      ...     23  La.  An.  310 469 


TABLE    OF   CASES.  XXXIX 
[All  references  are  to  Sections.] 

De  Haven  v.  Kensington  Nat.  Bank      .     81  Pa.  St.  95 194 

V.  Williams 80  Pa.  St.  480 438 


De  la  Chaumette  v.  Bank  of  England  .     9  Barn.  &  Cr.  208 652 

De  Mayer  v.  State  Nat.  Bank  ....     8  Neb.  104 454 

De  Peau  v.  Humphreys 20  Mart.  (La.)  1     .     .     .     .      12,  n.  15 

Dean  v.  Allen 8  Johns.  390 335 

Dearborn  v.  Union  Nat.  Bank  ....     58  Me.  273 59,  211 

Debolt  V.  Ohio  Life  Ins.  &  Trust  Co.     .     1  Ohio  St.  563 6 

Decatur  Nat.  Bank  r.  Murphy      ...     9  111.  App.  112 587 

Dedham  Bank  v.  Chickering    ....     3  Pick.  335 20,  27 

Deener  v.  Brown 1  MacArthur,  350      .     .     .    421,  n.  15 

Delafield  v.  Kinney 24  Wend.  345 144,  n.  19 

Delano  t'.  Butler 118  U.  S.  634 IL  113 

V.  Case 12  N.  E.  676 130 

Delaware  &  Hudson  Canal  Co.  v.  Penn- 
sylvania Coal  Co 21  Pa.  St.  131 98 

— '- —  V.  Westchester  Co.  Bank  ...    4  Den.  97 499 

Delaware,  L.,  &  W.  R.  R.  Co.  v.  Oxford 

Iron  Co 38  N.  J.  Eq.  340 II.  135 

Delmotte  I'.  Taylor 1  Redf.  417  (N.  Y.) 611 

Denmon  v.  Boylston  Bank 5  Cush.  194 336 

Dent  V.  Matteson 70  Minn.  519 686 

Dern  v.  Kellogg 54  Neb.  560 219 

Descombes  r.  Wood 91  Mo.  196 120 

Desha  v.  Holland 12  Ala.  513 9,  n.  6 

Des  Moines  Nat.  Bank  v.  Chisholm  .     .     33  N.  W.  234 600 

Desmond  v.  Merchants'  Nat.  Bank  .     .    33  111.  Ap.  95 208 

Deters  v.  Harriot 1  Show.  164 443 

Detroit  Motor  Co.  u.  Third  Nat.  Bank     111  Mich.  407 212 

Detroit  Savings  Bank  i'.  Ziegler  ...    49  Mich.  157 26 

Devaynes  v.  Noble 1  Mer.  541    ..     .    289,  291,  355,  568 

Devendorf  v.  W.  Va.  Oil  &  Land  Co.     .     17  W.  Va.  135 425 

Devol  V.  Mcintosh 23  Ind.  529 499 

Dewary.  Bank 115  111.22 471 

Dewey  v.  St.  Albans  Trust  Co.     ...    56  Vt.  476 627 

Dick  I'.  Leverick 11  La.  573 476 

Dickerson  v.  Wason 47  N.  Y.  4.39 599 

Dickey  &  Company  v.  Leonard     ...     77  Ga.  154 628  b 

Dickinson  v.  Central  Nat.  Bank    ...     129  Mass.  279 710 

f.  Coates 79  Mo.  250 493,522 

V.  Valpy 10  B.  &  C.  140 131 

Dickson  v.  Evans 6  T.  R.  57 640 

Dill  V.  Wareliam 7  Met.  438 161 

Dingley  v.  McDonald 124  Cal.  682 159  (/ 

Dinley  v.  McCullagh 29  Hun,  454 551 

Ditty  I'.  Dominion  Nat.  Bank  ....     75  Fed.  769 146  c 

Diven  v.  Lee 36  N.  Y.  302 686,  693 

V.  Phelps 34  Barb.  224 641 

Dixon  V.  Dunham 14  111.  324 9,  n.  7 

V.  Nuttall 1  C.  M.  &  R.  307 380 

V.  Rankin 1  Am.  R.  R.  Cas.  569     ...     .     102 

Dixon's  Case 2  Lewin  Cr.  Cas.  178     ...     .    435 

Dobinson  v.  Emmons 158  Mass.  592 611 


xl 


TABLE    OF    CASES. 


[All  references  are  to  Sections.] 

Docter  v.  Riedel 9G  Wis.  158  . 

Dodd  V.  Wilkinson 9  Atl.  R.  685 

Dodge  V.  Mastin 5  McCrary,  404 

I.  Nat.  Exchange  Bank     .    .     .  20  Ohio  St.  234  .   463, 474, 494 

y_ 30  Ohio  St.  1 

V.  Perkins 9  Pick.  368   . 

Dodwell  V.  Oxford 2  Vent.  34    . 

Dole  V.  Lincoln 31  Me.  422   . 

Donlan  t'.  Provident  Institution    ...  127  Mass.  183 

Donnell  v.  Lewis  Co.  Savings  Bank      .  80  Mo.  165    . 

Donogli  V.  Gillispie 21  Ont.  Ap.  299 

Doran  v.  Doran 99  Cal.  311   . 

Dorchester  &  Milton  Bank  v.  New  Eng- 
land Bank  1  Gush.  177     9,  n.  5,  217,  221, 222,  231, 

274,  286 

Dorsey  w.  Abrahams 5  Rep.  53  (Penn.)      .     .     .      155,413 

Doty  V.  Wilson 47  N.  Y.  580      . 

Doufdierty  v.  Hunter 54  Pa-  St.  380   . 

V.  ReiUy 71  Md.  248   .     . 

V.  Western  Bank 13  Ga.  287 


.     559 

.     130 

622,  628 

511, 534 

457 

309 

43 

608 

620 

63 

247 

611 


,     .    612 

98,  n.  26 

615  c 

.     .    644 


Do^.  ..  Sperry 29  Mo.  390 .468 

V.  United  States 82  Fed.  904 II.  159 

Down  r.  Hailing 4  Barn.  &  Cr.  330  .     .     .580,441,442 

Downer  u,  Madison  City  Bank     .     .     .     G  Hill,  648 250,  265,  278 

Downes  «.  PhcBnix  Bank 6  Hill,  297    .     .289,311,322,458,568 

Drake  v.  Markle 21  Ind.  433 299 

Dresser  v.  Dresser 46  Me.  48 611 

„  Norwood 17  C.  B.  N.  5.  466  .     .     .  109,  134,  166 

Drew«.Hagerty 81  Me.  231 611,612 

"  '"   '■  542 


Dreyfuss  v.  Adae 4  Bull.  671    ...     . 

Drieshach    v.    Second    Nat.    Bank    of 

Wilkesbarre 104  U.  S.  52      ... 

DriscoU  V.  West  Bradley 59  N.  Y.  96    .     .     .    . 

Drovers'  Nat.  Bank  v.  Anglo-American 

p.  &  P.  Co in  111.  100  ...    . 

J,  Blue  110  Mich.  31      .     .     . 

O'Hare 10  N.  E.  Rep.  360  (111.) 


IL  1301- 
.    .      43 


.  .  236 
.  .  596 
9  G,  208 


Druid's  Case 1  Wra.  Rob.  405 102 

Dryr.Davey 10  Ad.  &  El.  30 29 

Ducat  r.  Chicago 48  111.172 46 

Duckett  V.  Nat.  Mechanics'  Bank      .     .  86  Md.  400 317  a 

Dufaur  v.  Oxenden 1  M.  &  Rob.  90      .... 

Duff  V.  East  India  Co 15  Ves.  Jr.  198      .... 

Duffy  V.  Byrne 7  Mo.  App.  417      .... 

Dunbar  v.  Dunbar 80  Md.  152 

Duncan  v.  Berlin 60  N.  Y.  151 

. V.  Brennan 83  N.  Y.  487 

V.  First  National  Bank  of  Mount 

Pleasant 11  Bank.  Mag.  787    .     .     .    .11.130 

..  Jaudon .  15  Wall.  165 166,  317 

..  Magette 25  Tex.  245 248 

Dundee  Nat.  Bank  «.  Huntington      .     .  20  Hun,  104 144; 

Dunham  f.  Gould 16  Johns.  367 9,  n.  9,  50 


418 
,  439 
.  628 
615  d 
.  346 
.    326 


TABLE   OP   CASES.  xli 
[All  references  are  to  Sections.] 

Dunkle  v.  Rennick 6  Ohio  St.  534 73 

Dunlap  V.  Smith 12  111.  399 637 

Uunston  v.  Imperial  Gas  Co 3  B.  &  Ad.  125 140 

Durham  v.  Eiscliuff 47  Ind.  211 490 

Durkin  v.  Exchange  Bank 2  Fatt.  &  H.  277 30,  176 

Dutcher  v.  Importers  &  Traders'  Nat. 

Bank 59  N.  Y.  6 452,  625 

Dutton  V.  Nat.  Bank 53  Kans.  440 II.  141  x 

Button  V.  Pool    .     • 1  Vent.  818 499 

Duval  V.  Farmers'  Bank 9  Gill  &  J.  31 9,  n.  5 

Dyer  v.  Walker 40  Pa.  St.  157 763 

Dykers  y.  Leather  Manuf.  Co.       .     .     .  11  Paige,  612     .     .    388,398,414,450 

Dykman  v.  Northbridge 80  Hun,  258 599 


E. 

Eagle  Bank  y.  Chapin 3  Pick.  180 232 

V.  Hathaway 5  Met.  212 233 

V.  Smith 5  Conu.  71 464,  659 

Eans  V.  Exchange  Bank  of  Jefferson 

City 79  Mo.  182 320,  IL  143 

Earl  of  Strathmore  I'.  Vane      ....     33  Ch.  D.  586 324 

Earle  v.  Coyle 95  Fed.  99 679 

East  Haddam  Bank  v.  ScoviU  ....  12  Conn.  303     .     .     249,  265,  274,  287 

East  Kiver  Nat.  Bank  r.  Gove     ...  57  N.  Y.  597      ...     .  98,  n.  18,  179 

Eastern  Bank  v.  Capron 22  Conn.  639 641 

Eastern  Railroad  v.  Benedict    ....     5  Gray,  561 95 

Eastman  v.  Commonwealth       ....     4  Gray,  416 635 

V.  Coos  Bank 1  N.  H.  23 98,  n.  22,  159 

Easton  y.  Pratchett 1  C.  M.  &  R.  808 551 

Eaton  V.  Pacific  Bank 144  Mass.  260 II.  113 

Eaves  v.  People's  Savings  Bank  ...     27  Conn.  234 620 

Ecker  y.  First  Nat.  Bank  of  N.  Windsor    69  Md.  291 101 

Edgerly  v.  Emerson 3  Fost.  555 124 

Edie  V.  East  India  Co 2  Burr.  1216 593 

Edmunds  v.  Digges 1  G<-att.  359 662 

Edson  V.  Angell 58  Mich.  336      . ' 596 

Edwards  v.  Jones 1  My.  &  Cr.  233 611 

V.  Morris 1  Ham.  524 639 

V.  Thomas 66  Mo.  486    ...     .    565,  n.  12  &  13 

V.  Union  Bank  of  Florida  ...     1  Fla.  136 102,  n.  10 

Egbert  i-.  Payne 99  Pa.  St.  239 604 

Egerton  v.  Fulton  Bank 43  How.  Pr.  216 186 

Egg  V.  Barnett 3  Esp.  196 552 

Ehlerman  v.  St.  Louis  National  Bank    .     14  Mo.  App.  591 559 

Eichelberger  v.  Finley 7  Har.  &  J.  381 357 

Eichner  v.  Bowery  Bank 24  Ap.  D.  63 458 

Eidman  v.  Bowman 58  111.  444 127,  707 

Elder  v.  First  Nat.  Bank  of  Ottawa  .     .  12  Kans.  238      ....    750,  II.  129 

EUerbe  v.  Nat.  Exchange  Bank     ...     109  Mo.  445 161 

Ellicott  V.  Barnes 31  Kans.  170 667 


xlii  TABLE    OP   CASES. 

[All  references  are  to  Sections.] 

Elliott  >;.  Abbott 12N.  H.  540 124,158 

Ellis  V  Amazon        2  Dev.  Eq.  273       576 

(•.  First  Nat.  Bank  of  Olney  .     .  11  111.  App.  275      ....     II.  130  / 

V.  Little         27  Kans.  707 IL  150  c 

V.  Ohio  Life  Ins.  &  Trust  Co.     .     4  Ohio  St.  628 9,  n.  9 

i-.  Secor        31  Mich.  185 611 

V.  Turner 8  T.  R.  531 275 

V.  Wheeler 3  Pick.  18 393 

&  Morton   v.   Ohio   Life   Ins.  & 

Trust  Co 4  Ohio  St.  628 466 

Elting  V.  Brinkerhoff 2  Hall,  459 425 

Elwell  V.  Dodge        33  Barb.  336      .     .  98,  n.  26,  158,  165 

Emery  v.  Hobson 62  Me.  578 391,  425 

Emly  V.  Lye        15  East,  7 439 

Equitable     Nat.     Bank     v.     G.     &    S. 

Company         113  Cal.  692 546 

Erisman  v.  Delaware  Co.  Bank     ...     1  Pa.  144       604  o 

Ernst  V.  Nicholls 6  H.  L.  Cas.  401 440 

Erwin  v.  Branch  Bank  at  Mobile       .     .     14  Ala.  307 170 

V.  Downs 15  N.  Y.  575 565 

Eshleman  v.  Bolenius       144  Pa.  St.  269       289  a 

Espy  1-.  Bank  of  Cincinnati  .     .     •     .     .  18  WalL  604      .       10.3,155,167,367, 

378,  408,  414,  n.  16,  482 
Essex    County  Nat.  Bank   v.  Bank   of 

Montreal               7  Biss.  198        247,  414,  n.  23,  415,  493 

Estate  of  Davis  r.  Watkins      ....  56  Neb.  288  .     .     .    .  II.  112  6,  150  rf 

Estes  V.  Lovering  Shoe  Company      .     .     59  Minn.  504 442 

Evans  v.  Anderson        78  111.  558 12,  n.  13 

r.  Hallam 6  L.  R.  Q.  B.  713 400  A 

Evansville  Bank  v.  German  Nat.  Bank      155  U.  S.  556 217 

Evansville  Nat.  Bank   v.   Metropolitan 

Nat.  Bank        6  Amer.  Law  Rev.  574        .     .  IL  112 

Everett  v.  Collins 2  Camp.  515 644 

V.  United  States 6  Port.  166 158,  171 

Everly  v.  Rice 8  Harris,  297 562 

Ex  parte  Barratt 1  Gl.  &  J.  327 337 

Bennett 18  Beav.  339 125 

Bignold 1  Deac.  735        390 

Blagden 17  Ves.  Jr.  466 329 

Bond        1  M.  D.  &  DeG.  10     .     .     .  102,  n.  27 

Brown 2  Story,  503        380 

Buckley 14  M.  &  W.  469 439 

Burn         2  Rose,  55 337 

Clutton 1  Fond.  166    ...     .      289,  589,  629 

Collins 2  Cox,  427 437 

De  Baun 4  Mon.  L.  R.  Q.  B.  145       ...    485 

Eyre        1  P'"!-  227     ....    102,  n.  25,  325 

Flint         1  Swanst.  30 329 

Frowde 9  W.  R.  328 132 

Hornby DeGex,  69 337 

Howard  National  Bank     ...     2  Low,  487 337 

Hunter 2  Rose,  363 437 

. Johnson 6  L.  R.  Ch.  212       ....  102,  n.  26 


TABLE   OF    CASES.  xlui 
[All  references  are  to  Sections.] 

Ex  parte  Kingston 6  L.  R.  Ch.  632 327 

Marquis  of  Abercorn     ....     31  L.  J.  Ch.  828 138 

McKeiina 3  L.  J.  Bank.  20 326 

Nichols 5  Jur.  n.  s.  205 132 

Overend,  Gurney,  &  Co.    .     .     .     L.  R.  4  Ch.  460 103 

Pease       I  Rose,  232 324 

Pease       19  Ves.  25 693 

Pye 18  Ves.  Jr.  140 610 

Randleson 2  Deac.  &  C.  534 327 

Rigby 19  Ves.  Jr.  463       438 

Robinson 2  DeG.  M.  &  G.  517 125 

Roney 33  L.  J.  Ch.  731 138 

—  Rowton 1  Rose,  15 583 

Sargeant 1  Rose,  153 683 

SchoUenberger 96  U.  S.  369 46 

South 3  Swanst  392 407 

Stevens 11  Ves.  Jr.  24 329 

Thompson 1  Mont.  &  MacA.  102     ...     .    583 

Wakefield  Bank 1  Rose,  243,  19  Ves.  Jr.  25      .     .    324 

Waring 36  L.  J.  Ch.  151      ....    289,  568 

Exchange     Bank    v.    Bank    of    North 

America 132  Mass.  150 567 

w.  Farmers' Bank 19  Gratt.  738 641 

V.  Gardner 104  Iowa,  176 172 

V.  Knox        19  Gratt.  746 637 

V.  La  Banque 3  Mon.  L.  R.  Q.  B.  232  .    .     .     408  c 

V.  Quebec  Bank 6  Mon.  L.  R.  S.  C.  10     .     .     .     457  c 

V.  Rice 107  Mass.  37 499 

V.  Sutton  Bank 78  Md.  577 214, 428 

y.  Tliird  Nat.  Bank        ....     112  U.  S.  290 252,272 

V.  Tiddy       67  N.  C.  169       637 

Exchange  National  Bank  v.  Miller    .     .  19  Fed.  Rep.  373    ...     .    II.  141  x 

Exeter  Bank  v.  Rogers 7  N.  H.  21 16,  27,  42 

Exeter  Nat.  Bank  v.  Orchard        ...    39  Neb  485        II.  130  k 

Exton  V.  Scott 6  Sra.  31        610 

Eyerman  v.  Second  Nat.  Bank      ...  13  Mo.  App.  289.  84  Mo.  408       .    604 

Eyrich  v.  Capital  State  Bank  ....  67  Miss.  60    .    .     317,  317  a,  326,  334 


F. 

Fabens  v.  Mercantile  Bapk      .    .    .    .  23  Pick.  330      218,  232,  236,  252,  274, 

286 

Fairfield  Savings  Bank  v.  Chase       .    .  72  Me.  226    ..     .   108,  109,  111,  134 

Fairlie  v.  Hastings       10  Ves.  123 167 

Falklend  v.  St.  Nicholas  Nat.  Bank  .     .    84  N.  Y.  145 326 

Fargo  V.  McVickar 38  How.  N.  Y.  1 46 

Farley  v.  Turner 26  L.  J.  n.  s.  710    .     .       188,  327,  567 

Farmer  v.  Bank       100  Tenn.  187 474 

■ u.  Manhattan  Savings  Institution    60  Hun,  462       620  c 

V.  Russell 1  B.  &  P.  296 '499 

Farmers  &  Mechanics'  Bank  v.  Baldwin  23  Minn.  201      ...    .      9,  n.  9,  73 


Xliv  TABLE    OF    CASES. 

[All  references  are  to  Sections.] 

Farmers  &  Mechanics'  Bank  v.  Butcliers 

&  Drovers  Bank 16  N.  Y.  125     98,  n.  17,  103,  155,  167, 

174,  413,  414,  n.  14,  418,  745 
Champlain     Transportation 


Co 18  Vt.  131 77,  113,  716 

V. 23  Vt.  186 98 

V.  Bearing 91  U.  S.  29     .     .     .      755,  II.  100,  130 

V.  Franklin  Bank 31  Md.  38 346 

V.  King 57  Pa.  St.  202        343,  346  A,  433,  567 

V.  Planters'  Bank       10  Gill  &  J.  422 322 

V.  Ryan 46  Pa.  St.  236 346  A 

i;.  Sniitli        19  Johns.  115     ....       9,  n.  9,  43 

V.  Sprague         52  N.  Y.  605 9,  n.  12 

Troy  City  Bank 1  Dougi.  457      ...       153,  156,  167 


Farmers  &  Merchants'  Bank  v.  Downy      53  Cal.  466 125 

17.  Tiiird  Nat.  Bank 165  Pa.  St.  500 425 

V.  Wallace 12  N.  E.  Rep.  439  (Ohio)     .       II.  128 

V.  Wasson     ........     48  Iowa,  336 697 

Farmers  &  Traders'  Bank  v.  Harrison  .     67  Mo.  503 760 

Farmers'    &    Traders'    Nat.    Bank    v. 

Hoffman 93  Iowa,  119 II.  141  s 

Farmers'  Bank  v.  Burchard      ....     33  Vt.  346 750 

U.Duval 7  Gill  &  J.  78     .     .   223,229,231,232 

V.  Inglehart 6  Gill,  50       699,  701 

V.  McKee 2  Pa.  St.  318 144 

V.  Owen 5  Cranch  C.  C.  504 250 

V.  Payne       25  Conn.  444- 136 

V.  Reynolds        4  Rand.  186        650,  651 

r.  Vail 21N.  Y.  485      .....     232,454 

Farmers'     Banking    &     Trust    Co.    v. 

Newland 97  Ky.  473      221,  231,  236  c,  247,  494, 

538 

Farmers'  Deposit   Nat.  Bank   v.   Penn 

Bank       123  Pa.  St.  283       337 

Farmers'  Loan  Co.  v.  McKinney        .     .     6  McLean,  1 46 

Farmmgton  Savings  Bank  v.  Fall      .     .     71  Me.  49       750 

Farrar  v.  Alston       1  Dev.  69       369 

V.  Oilman 1  App.  440 165 

Farwell  v.  Boston  &  W.  R.  R.  Co.      .     .    4  Met.  49 102 

V.  Curtis       7  Biss.  160 428 

Fatman  y.  Lobach 1  Duer,  354 713 

Fawcett  v.  Laurie 1  Drew.  &  S.  192 128 

Fay  V.  Noble 12  Cush.  1 158 

Featherston  v.  Norris       7  S.  Car.  472 290 

Feckeimer  v.  National  Excliange  Bank 

of  Norfolk 78  Va.  80       ....      755,  II.  112  a 

Fells  Point  Savings  Inst.  v.  Weedon      .     18  Md.  528 299,  302 

Felton  V.  Dickinson 10  Mass.  287 409 

Fenner  v.  Meares 2  W.  Bl.  1269 499 

Fera  v.  Wickham 176  L.  R.  A.  456 329 

Fernandez  v.  Glynn 1  Camp.  426 362,  450 

Field  V.  Holland       6  Cranch,  8 562 

V.  Nickerson 13  Mass.  131 302 


TABLE    OF    CASES.  xlv 
[All  references  are  to  Sections.] 

Fifth  Ward  Savings  Bank  v.  First  Na- 
tional Bank 47  N.  J.  Eq.  357 144  rf 

Figley  v.  McDonald 89  Pa.  St.  128 421,  n.  20 

Finch  V.  Karste 97  Mich.  21 219 

Finkbone's  Appeal        86  Pa.  St.  368 322 

Finnucane  v.  Small       1  Esp.  315     ....    102,  n.  22,  201 

First  National  Bank  v.  Alexander     .     .     84  N.  C.  30 421,  n.  17 

V.  Allen 100  Ala.  476 472 

V.  Anderson 172  U.  S.  573 727 

V.  Ayers 160  U.  S.  650 II.  141  y 

V.  Bache       71  Pa.  St.  213 342 

V.  Barnett 51  Neb.  897   ..     .      II.  130,  130  c,  k 

V.  Behan        91  Ky.  562 249 

V.  Bennington       16  Blatchf.  53 II.  128 

V.  Bininger 26  N.  J.  Eq.  345 342 

V.  Born Indiana  MS 415 

V.  Brewer 7  Ind.  App.  685 474  a 

V.  Buckhannon  Bank     ....    80  Md.  475 421  c,  d,  i 

V.  Butler       19  Wk.  R.  601       ...       102,  n.  16 

V.  Chehalis  Co 6  Wash.  64    ...     .      II.  141  g,  h,  v 

V.  Childs        133  Mass.  248     ...     .     II.  130  b,  g 

V.  Christopher        40  N.  J.  L.  435       136 

V.  City 174  U.  S.  438 II.  141  u 

I'.  City  Nat.  Bank 34  S.  W.  458 236  6 

V.  Clark        134  N.  Y.  368 493 

V. 42  Hun,  538       159,  300 

V.  Coates 3  McCrary,  9 495,  539 

V.  Coleman        11  Brad.  511 309 

V.  Crawford       2  Cin.  S.  C.  Rep.  125      ....    573 

V.  D.  &  S.  Co 52  Iowa,  378 495,  541 

t\  Den  son 115  Ala.  650       II.  130(/ 

V.  Devenish       15  Col.  229 455 

V.  Douglas  Co 3  Dill.  298      ...      II.  141,  a,  6,  g,  o 

V.  Drake        29  Kans.  311 101,  n.  5 

V.  Dunbar 19  111.  App.  558 322 

V.  Fancher 48  N  .  Y.  524 II.  141  a 

V.  First  Nat.  Bank 4  Ind.  App.  555 466  e 

V. 55  Neb.  303        250 

V. 58  Ohio  St.  207 463 


V.  First  National  Bank  of  Rich- 
mond    76  Ind.  561    ...     .       248,  568,  593 

V.  Fourth  Nat.  Bank      ....  77  N.  Y.  323      ....  219,  240,  247 

I.. 16  Hun,  332 247 

V. 56  Fed.  967 236  6 

V.  Galton 172  III.  625 324  c 

V.  Garlinghouse 22  Ohio  St.  492 II.  130 

f.  German  Nat.  Bank    ....     107  Iowa,  633 265 

V.  Gish 72  Pa.  13 494 

V.  Graham 100  U.  S.  699 48 

V. 79  Pa.  St.  108 191 

V.  Gregg 79  Pa.  St.  384 602 

V.  Gruber 87  Pa.  St.  468    ...     .  14,  II.  130  m 

V.  Haire 36  Iowa,  443 75,  754 


xlvi  TABLE    OF   CASES. 

[All  references  are  to  Sections.] 

First  National  Bank  v.  Hanover  Nat. 

Bank 66  Fed.  34 144 

y.  Harris 108  Mass.  514 *  .    72,  442 

V.  Hawkins 79  Fed.  51 579,  675 

V.  Hayslett 40  Iowa,  659 346  A 

V.  Hershire 31  Iowa,  18 141 1 

„  Hock 7  W.  N.  Cas.  298 77 

V.  Hubbard 49  Vt.  1 H-  157 

y.  Jagger-s 31  Md.  38 346 

„  Kidd 20  Minn.  234 II.    •  102 

(,  King 21  Nev.  404 H-  141  y 

r.  La  Due 39  Minn.  415 11.157 

V.  Lamb 5  N.  Y.  100 XL  130 

V.  Leach 52  N.  Y.  350      ....  414,  415,  451 

V.  Lucas 21  Neb.  281 147 

„.  Lucas  Co.  Treasurer       ...  25  Fed.  Kep.  749   .     ...      H-  141  v 

V.  Lumber  Co.  Bank      ....     30  Oreg.  296 421  g 

V.Mason 95  Pa.  St.  113 342 

I,.  McManigle C9  Cal.  156 395 

V.  McMicliael 106  Pa.  St.  460      ...   409,  493,  526 

V.  Merchants'  National  Bank     .  7  W.  Va.  544    ...     .   406,  408,  413 

y  Miller 37  Neb.  500 422,  424 

j;.  Miltonberger 33  Neb.  847 IL  130  ^ 

V.  National  Exchange  Bank   of 

Baltimore 39  Md.  600 77,  IL  108  a 

^.  2  Otto,  122 77 

,.■ 51  How.  Pr.  320    ....    67,  59,  77 

r.  Nelson 105  Ala.  180 594 

i;  New  146Ind.  411 144  m 

„■  Ocean  National  Bank    .     .     .  60  N.  Y.  278      .    48,98,191.194,196, 

197,  200,  289,  568,  II.  100  a 

J,.  Overman 22  Neb.  46 IL  130 /* 

„  Owen 23  Iowa,  185 229 

„  Pease  168  111.  40 474 

V.  Peterborough 56  N.  H.  38 H-  HI 

V.  Pettit 41  111.  492 512 

V.  Pierson 24  Minn.  141      .......      73 

y.  Reed 36  Mich.  263 106,  147 

V.  Reno  County  Bank  ....  1  McCrary,  491      ....      326,  593 

j;  Rex  89  Pa.  St.  308 201 

r.Ricker 71111.439 463 

V.  Sherburne 14  111-  App.  566 72 

j;.  Shoemaker 117  Pa.  St.  94 458 

r.  Smith 65  111.44 H.  141c 

„  36  Neb.  199 IL  130^? 

V.  Sprague 34  Neb.  318 274 

I,  Stauffer             6  Week  Jur.  793   ....       IL  130  c 

f!  Stewart 107  U.  S.  676 11-159 

^r.  Stone 106  Mich.  367 158c 

V.  Tappan 6  Kans.  456 473 

„.  Waters 19  Blatchf.  242      ....      IL  141  « 

V.  Whitman 94  U.  S.  346      ....  290,  474,  493 

V  Williams 100  Pa.  St.  123 145 


TABLE    OF   CASES.  xlvii 
[All  references  are  to  Sections.] 

First  National  Bank  v.  Wilmington  .     .     77  Fed.  401 248 

V.  Zahm IG  W.  N.  Cas.  552 562 

V.  Zent 39  Ohio  St.  105      ...  194,  198,  200 

First  Parisli  in  Sutton  v.  Cole  ....     3  Pick.  237 55,  76 

Fisher  i>.  Essex  Bank 5  Gray,  373 710 

V.  Fisher 98  Mass.  303 600 

V.  Knight 61  Fed.  491 326/ 

V.  Willmoth 68  Ind.  449 499 

Fisiikill  Savings  Inst.  v.  Bostwick    .     .     92  N.  Y.  564 180 

Fishmongers'  Co.  v.  Robertson     ...     12  L.  J.  n.  s.  185 70 

Fisse  V.  Dietrick 3  Mo.  App.  584 568 

Fitch  V.  Redding 4  Sand.  130 421,  n.  14 

Fitzgerald  v.  State  Bank 64  Minn.  469 325 

Flanders  v.  Maynard 58  Ga.  56 579 

Fleckner  v.  Bank  of  United  States   .     .  8  Wheat.  338     .  9,  n.  9,  50,  70,  73,  89, 

98,  116,  144,  n.  23,  156,  158,  750,  761 

Fleig  V.  Sleet 43  Ohio  St.  53 544 

Fletcher  v.  Commonwealth  Ins.  Co.      .     18  Pick.  419 21 

V.  Fletcher 4  Hare,  67 610 

I'.  Manning 12  M.  &  W.  571 553 

V.  Pierson 69  Ind.  281 421,  n.  14 

V.  Sharpe 9  N.  E.  R.  142 629 

Flint  V.  Board  of  Aldermen  of  Boston  .    99  Mass.  141 II.  141  g 

V.  Rogers 15  Me.  67 229 

Florence  Mining  Co.  v.  Brown      ...     124  U.  S.  385 493 

Flour  City  National  Bank  v.  Garfield    .     30  Hun,  579 324 

V.  Traders'  National  Bank     .     .     35  Hun,  241 414,  n.  22 

Flournoy  &    Epping  v.  First   National 

Bank 78  Ga.  229 563 

Fogarties  iJ.  State  Bank  .     .....  12  Rich.  518      .     .     .     .494,499,536 

Fogg  V.  Sawyer 9  N.  H.  365 662 

Foley  V.  Hill 2  H.  L.  Cas.  28      .     .     .  289,  309,  568 

Folger  V.  Chase 18  Pick.  63 158,  230 

Follansbee  v.  Parker 70  III.  11 290 

Forbes's  Case 41  L.  J.  Ch.  467 294 

V.  Omaha  National  Bank  ...     10  Neb.  338 233 

Ford  V.  Mitchell 15  Wise.  304 299 

V.  Terrell 9  Gray,  401 9,  n.  19 

V.  Thornton 3  Leigh,  695 324 

Forgarties  &  Stillman  v.  State  Bank      .     12  Rich.  518 298 

Forster  v.  Mackreth L.  R.  2  Exch.  163     ....  389,  439 

Fort  V.  Bank  of  Cape  Fear 1  Phill.  N.  C.  417 312 

Fort  Dearborn  Nat.  Bank  v.  Blumen- 

zeverg 46  111.  App.  297 329 

Fortier  y.  New  Orleans  National  Bank .     112  U.  S.  439 754 

Foss  V.  Lowell Ill  Mass.  285 608,  612 

Foster  v.  Bank  of  London 3  F.  &  F.  214 294,  446 

■ w.  Bank  of  New  Orleans     .     .     .     21  La.  An.  338 192,312 

1'.  Chase 75  Fed.  797 679 

V.  Clements 2  Camp.  17 463,  558 

V.  Essex  Bank 17  Mass.  479,  48,  102,  n.  29,  144,  n.  17, 

191, 196,  201,  203,  205,  232,  289, 
668,  666,  717,  765 


xlviii  TABLE    OF    CASES. 

[All  references  are  to  Sections.] 

Foster  v.  Paulk 41  Me.  428     ...     .     379,  421,  n.  14 

V.  Shattuck 2  N.  H.  446 370,  474 

V.  Wilson 12  M.  &  W.  201 637 

Foulker  v.  Union  Baking  Co 6  W.  N.  Cas.  109 572 

Fountaine  v.  Carmarthen  R.  R.  Co.  .     .     L.  R.  5  Eq.  316 440 

Fourtli  Nat.  Bank  v.  City  Nat.  Bank  of 

Grand  Rapids 68  III.  398 329,  494,  530 

Fowler  y.  Pickering 119  Mass.  33 9,n.  3 

V.  Scully 72  Pa.  St.  456   .     .     .     .      747,  II.  128 

Fox  V.  Bank  of  Kansas  City    ....     30  Kans.  441 603 

V.  Davenport  Nat.  Bank     ...    73  Iowa,  649 252 

V.  Northern  Liberties  Bank    .     .  3  Watts  &  S.  103  .     .     .     .      102,  n.  9 

V.  Onondaga  Savings  Bank    .     .     3  Silverman,  397 620  c 

Foxton  V.  Kucking 55  Me.  346 605 

Fraker  v.  CuUen 24  Kans.  679 II.  130/ 

Francis  >:  Evans 33  N.  W.  93  (Wise.) 305 

Francistown  Bank  Case 63  N.  H.  138 617 

Frank  i;.  Chemical  National  Bank     .     .     84  N.  Y.  209 473 

V.  Edwards 10  Exch.  81 31 

V.  Wessels 64  N.  Y.  155 299 

Frankfort  Bank  u.  Johnson       ....  24  Me.  490    ...     .    80,98,119,127 

Franklin  v.  Vanderpoole       1  Hall,  78     ....     421,  n.  14,  425 

Franklin  Bank  v.  Byran        39  Me.  489 360 

V.  Commercial  Bank     ....     36  Ohio  St.  350 59 

V.  Cooper 36  Me.  179    .     .     .     17,  19,  21,  33,  103 

1-.  Freeman 16  Pick.  535 113,388 

V.  Stevens 39  Me.  532 21 

V.  Steward 37  Me.  519    .     98,  n.  11,  103,  157,  167 

Franklin  Company  v.  Lewiston  Inst,  for 

Savings 68  Me.  43 749 

Franklin  Co.  Bank  v.  Beal 49  Fed.  606 250 

Frazier  v.  Erie  Bank 8  Watts  &  S.  18 343 

V.  Warfield        9  Sm.  &  Mar.  220       ...      12,  n.  17 

Freeholders  of  Middlesex  v.  State  Bank  32  N.  J.  Eq.  467    ..     .   254,  544,  587 

V.  Thomas 20  N.  J.  Eq.  41 544 

Freeman  v.  Citizens'  Nat  Bank     ...     78  Iowa,  150 246 

V.  Savannah  Bank 88  Ga.  253 474 

Freeman's  Bank  v.  Nat.  Tube  Works     151  Mass.  417 217 

V.  Perkins 18  Me.  292 217 

Freese  v.  Brownell 35  N.  J.  L.  285       ....      12,  n.  13 

Freiberg  v.  Cody 55  Mich.  108 423 

Frelinghuysen  v.  Baldwin 16  Fed.  Rep.  452 38 

French  v.  Eastern  Trust  Co 91  Me.  485 290,  291  b 

V.  Irwin 4  Baxter,  401 416 

V.  Raymond 39  Vt.  623 608,  612 

Freund   v.    Importers  &  Traders'   Na- 
tional Bank 3  Hun,  689,  12  Hun,  537     .      399,  411 

Fridley  v.  Bowen     . 87  111.  151 75,  747 

Frontier  Bank  v.  Morse 22  Me.  88 662 

Fro.st  V.  Dominion  Sewing  Machine  Co.     133  Mass.  563 159 

Fruhling  v.  Schroeder 2  Bing.  N.  R.  77    .     .     .     .      398,  408 

Fry  V.  Evans 8  Wend.  5.]0 334 

Frye  v.  Tucker 24  111.  180 54 


TABLE    OP   CASES.  xlix 

[All  references  are  to  Sections.] 

Fryer  v.  Rankin 11  Sim.  55 606 

Fuller  V.  Beurut 2  Hare,  402 109 

V.  Hooper 3  Gray,  334 365 

V.  Hutchings 10  Cal.  523 393 

V.  Randall 1  Gray,  G08       346 

V.  Smith Ryan  &  M.  49 465 

V.  Smith       1  C.  &  r.  197 558 

Fulton  Bank  v.  Benedict 1  Hall,  480 184 

V.  N.  York  &  Sharon  Canal  Co.    4  Paige,  127       .     .      89,  111,  133,  134, 

144,  n.  16,  166,  440 

V.  Phoenix  Bank 1  Hall,  557 63« 

Fulton  Nat.  Bank  v.  Gosline     ....     168  Mass.  86 603 

Fultz  V.  Walters      ........    2  Mont.  165       299 

Fulweiler  v.  Hughes 17  Pa.  St.  440 393 

Fusz  V.  Spannhorst 67  Mo.  257 130 


G. 

Gaffney  v.  ColviU 6  Hill,  567 717 

Gaffney's  Estate 146  Pa.  St.  49        610 

Gallatin  v.  Bradford 1  Bibb,  209        .......     9,  n.  8 

Gallot  V.  United  States 87  Fed.  446       II.  159 

Galveston  R.  R.  Co.  v.  Cowdrey  ...     11  Wall.  459 46 

Gardner  v.  Merritt       32  Md.  78 610 

V.  National  City  Bank   ....  39  Ohio  St.  600     ...     .      495,  540 

V.  Post 43  Pa.  St.  19 14  a 

V.  Walsh 32  Eng.  L.  &  Eq.  162     ....     485 

Garmire  v.  State 104  Ind.  444 298 

Garnet  v.  McKewan L.  R.  8  Exch.  10 327 

Garrard  v.  Lewis 10  Q.  B.  D.  30 485 

Garrison  v.  Howe 17  N.  Y.  458 691 

Gath Wright  v.  Callaway  County   ...     10  Mo.  663 19 

Gauch  V.  Harrison 12  111.  App.  457 695 

Gauley  v.  Troy  City  National  Bank      .    98  N.  Y.  487 204,  322 

Gaunt  V.  Taylor 2  Hare,  413 438 

Geary  v.  Page 9  Bosw.  290 615 

Gelpecke  v.  Dubuque       1  Wall.  176 10 

Georgia   Manuf.  &  Paper   Mill  Co.  v. 

Amis       53  Ga.  228 672 

Georgia  National  Bank  v.  Henderson     .  46  Ga.  487    .      227,  255,  367,  381,  383 

Georgia  Seed  Co.  v.  Talmage   ....    96  Ga.  256 329 

Geovanowich  v.  Citizens'  Bank     ...     26  La.  An.  15 600 

Gerald  Point  Storage  Co.,  v.  Roy      .     .     93  Fed.  575 589 

Gerhardt  v.  Boatman's  Savings  Inst.     .  38  Mo.  60  .  .     .       102,  n.  17,  265,  287 

German  Amer.  Bank  v.  Third  Nat.  Bank  18  Alb.  L.  J.  252, 

2  Tex.  L.  J.  150      ...       247,  568 


German  Bank  v.  Himstedt 42  Ark.  64    .     .     , 

German  Exch.  Bank  v.  Commissioners  6  Alb.  N.  C.  394    , 

German  National  Bank  v.  Burns  ...  12  Col.  539   .     . 

V.  Farmers'  &  Merchants'  Bank  54  Neb.  593       .     , 

V.  Meadowcroft 1  N.  W.  Rep.  759 

TOL.  I. — d 


342,  434 
.  .  342 
.      2.36  b 

687,  693 
.     .     727 


1  TABLE    OP   CASES. 

[All  references  are  to  Sections.] 

German  Savings  Bank  v.  Wulfekuhler     19  Kans.  60 128,  n.  13 

German  Savings  Inst.  v.  Adae      ...  8  Fed.  Rep.  106     ...    .      495,  541 

German  Security  Bank  v.  Jefferson  .     .     10  Busli,  326 700 

Germania  Ins.  Co.  v.  R.  R.  Co.      ...     72  N.  Y.  91 89 

Germania  National  Bank  v.  Case,  Rec.     96  U.  S.  628 683 

Gerrish  v.  New  Bedford  Savings  Inst.   .     128  Mass.  157 609,  610 

Getchell  v.  Ciiase 124  Mass.  366 545 

Getman  v.  Second  Nat.  Bank  of  Oswego    23  Hun,  498 146 

Gianella  v.  Bigelow 96  Wise.  185 686 

Gibbs  V.  Fremont 20  Eng.  L.  &  Eq.  555     .     .      12,  n.  15 

Giblin  v.  McxMuIlen 2  L.  R.  P.  C.  317    102,  n.  20  &  24, 199, 

201 

Gibson  v.  Corner 3  Ga.  47 600 

V.  Goldthwaite 7  Ala.  281 144 

V.  Minet 2  Bing.  7,  9  Moore,  31    ....     398 

V.  National  Park  Bank       .     .     .     98  N.  Y.  87 415,  417 

V.  Peters       150  U.  S.  342 II.  150 

Giddings  v.  Baker 80  Tex.  308       ......      147  </ 

V.  Coleman        12  N.  H.  153 496 

Gilchrist  v.  Leonard 2  Bailey,  135 355 

Giles  V.  Perkins 9  East,  12 324,  329,  583 

Gill  V.  Cubitt 3  Barn.  &  Cr.  466       .     .      565,  n.  1,  b 

Gillard  v.  Wise        5  Barn.  &  Cr.  134 637 

Gillespie  v.  Mather 10  Pa.  28 51,  299 

i;.  Gaston  &  Thomas      ....    67  Tex  599 II.  141  s 

Gillett  V.  Campbell 1  Den.  520    ....       98,  n.  35,  165 

t;.  Phillips 2  Kern.  114 137,158 

Gillman  v.  Peck 11  Vt.  516 662 

Gilpin  V.  Gilpin 1  My.  &  K.  520 610 

Gindat  v.  Mechanics'  Bank       ....  7  Ala.  325      .     .     .    9,  n.  19,  9  D,  233 

Girard  Bank  v.  Bank  of  Penn  Township  39  Pa.  St.  92     155,  322,  414,  n.  14,  418 

Gladstone  v.  Tempest 2  Curt.  650 554 

Glazier  v.  Douglas  ........     32  Conn.  393 562 

Gleason  v.  Bank 89  Wise.  534 583/ 

V.  Henry 71  111.  109 468 

Glen  V.  Noble 1  Blatchf.  104 393 

Gloucester  Bank  v.  Salem  Bank  ...  17  Mass.  33    289,  464,  466  d,  487,  6o8, 

659 

Gloucester  Ins.  Co.  v.  Younger    ...     2  Curt.  338 10 

Godbold  V.  Branch  Bank 11  Ala.  191    ...     .     128.  n.  10,  140 

Goddard  v.  Merchants'  Bank  ....    4  N.  Y.  147 465,  488 

Godin  V.  Bank  of  Commonwealth     .     .     6  Duer,  76 389 

Goetz  V.  Bank  of  Kansas  City  ....     7  Sup.  Ct.  Rep.  318 225 

GoflFy.  Great  Northern  Railway    .     .     .  30  L.  J.  Q.  B.  148       .     .     .    102,  n.  11 

Gold  Mining  Co.  v.  National  Bank    .     .     96  U.  S.  640 752,  753 

Goldsbury  y.  Inhabitants  of  Warwick  .     112  Mass.  884 XL  141  j 

Goldsmid  v.  Lewis  County  Bank  ...     12  Barb.  407 652 

Goldwick  V.  Bristol  Co.  Savings  Bank       123  Mass.  320 620 

Goodbar,  White  &  Co.  v.  Nat.  Bank      .     78  Tex.  461 702 

Goodbody  v.  Foster Byles,  p.  25 309 

Goodloe  V.  Godley 13  S.  &  M.  233       .    .      98,  n.  24  &  25 

Goodman  v.  Simonds 20  How.  343      .       393,  565  n.  13  &  10 

Goodwin  v.  American  National  Bank    .    48  Conn.  550 317 


TABLE   OP   CASES.  ll 
[All  references  are  to  Sections.] 

Gordon  v.  Kearney 17  Ohio,  672 326 

I'.  Mucliler 34  La.  An.  604 557 


Gough  V.  Staats 13  Wend.  549    ...    .  244,  425,  442 

Gould  V.  Cayuga  National  Bank  ...     50  How.  Pr.  505 103 

Goulding  I'.  Harbury 85  Me.  227 611 

Goundie  v.  Nortliampton  Water  Co.      .     7  Pa.  St.  233 754 

Gourley  v.  Lisenbigler^ 51  Pa.  St.  345 611 

Govenor  v.  Allen 8  Humph.  176 19 

Governor  v.  Carter 3  Hawks.  328 637 

Graham  v.  National  Bank  of  State  of 

New  York 32  N.  J.  Eq.  804 IL  128 

Grammel  v.  Carmer 55  Mich.  201 493,  521 

Grand  Bank  v.  Blanchard     .     .  .     .     23  Pick.  505 231 

Grand  Gulf  Bank  v.  Archer      ....  8  Sm.  &  Mar.  151  .     .     .     .      754,  763 

Grand  Rapids  Savings  Bank's  Appeal  .     52  Mich.  557 676,  688 

Granitevile  Manuf.  Co.  v.  Roper  ...  15  Rich.  L.  S.  C.  138      ....     638 

Grant  v.  Cropsey 8  Neb.  205 167 

y.  Mechanics' Bank  of  Phila.      .  15  Serg.  &  R.  140      .     .     .      702,713 

V.  Taylor .     .     .  35  N.  Y.  Sup.  Ct.  351     ...     .     332 

„.  Vaughn 3  Burr.  1525,  3  T.  R.  177     395  A,  480 

V.  Walsh 81  Hun,  449 573 

Graves  v.  American  Exchange  Bank     .  17  N.  Y.  208      ....  395,  474,  480 

V.  Lebanon  National  Bank     .     .  10  Bush,  23   .     .     .      19,  20,  21,  32,  33 

Gray  v.  Anderson 99  Iowa,  342 425 

V.  Johnston 3  L.  R.  H.  Cas.  14 317 

V.  Portland  Bank 3  Mass.  364 127,  707 

Gray's  Adm'r  v.  Bank  of  Kentucky      .     29  Pa.  St.  365 393 

Gregg  V.  George 16  Kans.  546 421 

V.  Union  County  National  Bank    87  Ind.  238 299,  303 

Green  v.  Dennis 6  Conn.  304 76 

V.  Farley 20  Ala.  322 233 

V.  Farmer 4  Burr.  2214 328 

V.  Odd  Fellows'  Bank   ....     65  Cal.  71 320,  322 

v.  Sizer 40  Miss.  530 192,  205 

V.  Tyler 39  Pa.  St.  361 9,  n.  9 

V.  Van  Buskirk 7  Wall.  139 12,  n.  9 

I'.  Walkill  National  Bank  .     .     .     7  Hun,  63 IL  150  a 

Greene  v.  Jackson  Bank 18  R.  I.  779 326 

Greenfield  Bank  v.  Crafts 4  Allen,  447 468 

Greenleaf  y.  Mumford 50  Barb.  543 ,     .     346 

Greeneaux  i'.  Wheeler     ......     6  Tex.  55 600 

Gresham  v.  Island  City  Savings  Bank  2  Tex.  Cir.  App.  52  .     .     .     .      622  A 

Greves  v.  Sliaw 173  Mass.  205 II.  141  e 

Grew  V.  Breed 10  Met.  569  .     655,  687,  689,  690,  693 

V.  Burditt 9  Pick.  265 334 

Griffin  v.  Central  Bank 3  Kelly,  371 639 

«;.  Heard 78  Tex.  607 IL  141« 

V.  Kemp 46  Ind.  172 421 

V.  Riblet 6  N.  Y.  Leg.  Obs.  421    ....     421 

V.  Rice 1  Hilt.  184 9,  557 

Griffith  V.  Zipperwick 28  Ohio,  388 200 

Grigby  v.  Oakes 2  Bos.  &  P.  526 637 

Grinnan  v.  Walker 9  Iowa,  426 9,  n.  9 


lii  TABLE   OF    CASES. 

[All  references  are  to  Sections.] 

Grlnnell  v.  Suydara 3  Sandf.  133 493,  502 

Griswold  v.  Chandler 5  N.  H.  497 309 

Grivot  V.  Louisiana  State  Bank    ...     24  La.  An.  265 318 

Grocers'  Bank  v.  Kingman 16  Gray,  473     ...     .  19,  32,  34,  42 

V.  Penfield 14  N.  Y.  S.  C.  281      ...   565,  n.  15 

Grocers'  Nat.  Bank  j;.  Clark     .     .     •     .     48  Barb.  26 II.  144 

Gruber  v.  First  Nat.  Bank  of  Clarion    .  8  Weekly  Notes,  113  Pa.     .    II.  130  m 

Grymes  v.  Howe 49  N.  Y.  17 550,  611 

Guernsey  v.  Black  Diamond  Coal  and 

Mining  Co 68  N.  W.  777 143 

Guiman's  Appeal 70  Conn.  342 611 

Gulick  V.  National  Bank 56  Iowa,  434 274,  283 

Gumbel  V.  Abrams 20  La.  An.  568      ....       193,  312 

Gunkle's  Appeal 48  Pa.  St.  13 128,  129 

Gurney  v.  Howe 9  Gray,  404 395 

Guthrie  v.  Reid 107  Pa.  St.  251      ...  XL  130,  n.  57 

Gwynn  v.  Godby 4  Taunt.  346 809 


H. 

Hackett  v.  Reynolds,  Lamberton,  &  Co.     114  Pa.  St.  328 602 

Hackettstown  National  Bank  v.  Rea      .     64  Barb.  175 II.  130/ 

Haddock  ;;.  Citizens'  National  Bank      .     53  Iowa,  542 299 

Hade,  Rec,  v.  McVay 31  Ohio  St.  231      ....     II.  130  m 

Hagen  v.  Bowery  National  Bank  ...    64  Barb.  197 476 

Hager  v.  Union  National  Bank  .  .  63  Me.  509  .  699,  708,  IL  112,  157  a 
Hagerstown   v.  Loudon   Savings  Fund 

Society 3  Grant,  135 171,  755 

Hagerstown   Bank   v.  Adams  Express 

Co 45  Pa.  St.  419 648 

Haile  v.  Peirce 32  Md.  327 154 

Hale  V.  Rawallie 8  Kans.  136 203 

V.  Richards 80  Iowa,  164 146j 

V.  Walker 31  Iowa,  344 II.  150d 

Hales  1-.  Seaman's  Bank 28  Hun,  407 620  c 

Hall  V.  Bank 30  Neb.  99    ....  II.  130  c,  d,  k,  n 

V.  Bank  of  State 3  Rich.  366 215,  252 

V.  City  of  Buffalo 1  Keyes,  193 495,  541 

V.  Fuller 5  Barn.  &  Cr.  750 480 

V.  Harris 69  N.  H.  71 566,  632 

V.  Huse 10  Mass.  40 468 

V.  Marston 17  Mass.  575 499 

V.  New  Farmers'  Bank  ....     98  Ky.  146 334 

V.  Otes 77  Me.  122 355 

V.  Smith 2  D.  &  R.  584 439 

V.  Vermont     &     Massachusetts 

R.  R.  Co 28  Vt.  401 140 

Wilson 16  Barb.  584 565 


Hallen  v.  Tillinghast 19  Wash.  20 248  a 

Hallet  V.  narrower 33  Barb.  537 13 

Hallowell  v.  Curry 41  Pa.  322 252 

Hallowell,  &c.  Bank  v.  Howard    ...  13  Mass.  235 637,  640 


TABLE   OF   CASES.  liil 
[All  references  are  to  Sections.] 

Halsey  v.  Brown 3  Day,  346 9  A,  9  F 

Ham  V.  Greve 31  Ind.  19 17 

Hambright  u.  Cleveland  Nat.  Bank  .     .     66  Tenn.  40 II.  130  e 

Hamilton  v.  Lumber  Co 95  Mich.  436 421 

V.  Vought 34  N.  J.  Law,  187       .     .  565,  n.  1  a  12 

Hamlin  v.  Simpson 105  Iowa,  125    ..     .    421,  421  d,  425 

Hamtramuk  u.  Bank 2  Miss.  169 760 

Hamum  v.  Richardson 48  Vt.  508 565 

Hanauer  v.  Doane 2  Wall.  .342 565,  n.  12 

Hancock  v.  Citizens'  Bank 32  La.  An.  590 331 

Handy  v.  Dibdin 12  Johns.  220 637 

Hannon  v.  Williams 34  N.  J.  Eq.  255 339 

Harbeck  v.  Craft 4  Duer,  122        421,  n.  9 

Hardy  v.  Blazer  . 29  Ind.  226 499 

V.  Chesapeake  Bank     ....     51  Md.  585 472 

V.  Veasey 3  L.  R.  Eq.  107 294 

Hare  v.  Copland 13  Irish  C.  L.  426      ...      380,  476 

V.  Henty 10  C.  B.  n.  s.  65    .     .     .     45,  238,  427 

Hargroves  v.  Chambers 30  Ga.  580     .     .     .     .     128,  n.  15,  150 

Harker  v.  Anderson 21  Wend.  372 381,  389 

Harlem  v.  Mercantile  Trust  Co.    ...     64  N.  Y.  494 487 

Harley  v.  Thornton 2  Hill,  S.  C.  509 662 

Harmonson  v  Bain 1  Hughes,  188 367,  376 

Harper  v.  Calhoun 7  How.  Miss.  203 165 

V.  Carroll 66  Minn.  487     .     .  675  b,  680,  693,  694 

Harred  V.  Blackwell 107  N.  C.  200 289  a 

Harrington  y.  First  National  Bank    .     .  1  Tliomp.  &  C.  361    123,  XL  108  (/,  110 

Harris  v.  Babbitt 4  Dillon,  185     .- 27 

V.  Bradley 7  Yerg.  310 476 

— : V  Clark 3  Comst.  93  .     .     .    493,  494,  533,  550 

V.  First  Parish  in  Dorchester      .    23  Pick.  112 693 

y.  Lane 16  Ga.  217 687,  693,  694 

V.  McFerren 19  Brad.  172 557 

V,  Runnels 12  Flower,  80 751 

Harrisburg  Bank  v.  Commonwealth      .    26  Pa.  St.  451 606 

V.  Forster 8  Watts,  12 173 

V.  Tyler 3  Watts  &  S.  373       ...      167,  343 

Harrison  v.  Central  R.  R.  Co 2  Vroom,  296  (N.  J.)      ....     102 

V.  Sterry 5  Crancii,  298 12,  n.  9 

Harrison,  Rec,  v.  Wright 100  Ind.  515      ....  493,  511,  517 

Harry  v.  Wood 2  Miles,  327 346 

Hart  V.  Albany 9  Wend.  571 43 

V.  Bank 33  Vt.  252 166 

V.  The  F.  &  M.  Bank     ....    33  Vt.  252 109,  134 

Hartford  Bank  v.  Barry 17  Mass.  94 158,  159,  165 

V.  Hart 3  Day,  493    ..     .      89,  98,  n.  22,  103 

V.  Stedman 3  Conn.  489 220,  233 

Hasel  V.  Long 2  M.  &  S.  363 27 

Hastings  v.  Barud 55  Neb.  93 687 

Hatch  V.  Atkinson 56  Me.  324 611 

V.  Johnson  Loan  &  Trust  Co.     .     79  Fed.  828 317 

w.  Nat.  Bank 147  N.  Y.  184 590e 

Hathaway  v.  Fall  River  Nat.  Bank  .     .     131  Mass.  14 325 


liv 


TABLE   OP    CASES. 


[All  references  are  to  Sections.] 

Hauser  v.  Tate 85  N.  C.  81   .     .     . 

Haux  V.  Dry  Dock  Savings  Institution  2  N.  Y.  Ap.  D.  165 

Haven's  Petition 8  Bened.  309 

Hawes  v.  Blackvvell 107  N.  C.  200 

Hawkins  y.  Fourth  Nat.  Bank       .     .     .  150  Ind.  117 

Hawley  v.  Jetter 10  Oregon,  31 

Haxtura  v.  Bisliop 3  Wend.  13  . 

Hayden  v.  Brooklyn  Savings  Bank   .     .  15  Abb.  Pr.  n.  s.  297 

V.  Chemical  Nat.  Bank       ...  84  Fed.  874  . 

V.  Hayden 142  Mass.  448 

V.  Thompson 71  Fed.  60    . 

Hayes  v.  Beardsley 136  N.  Y.  299 

V.  Shoemaker 39  Fed.  319  . 

V.  Western  R.  R 3  Cush.  270  . 

Haynes  v.  Birks 3  Bos.  &  P.  599 

Hays  V.  Northwestern  Bank      ....  9  Gratt.  127 

Hayward  v.  National  Ins.  Co 52  Mo.  181 

Hazlett  V.  Commercial  Nat.  Bank     .     .  132  Pa.  St.  118 

Heane  v.  Rogers 9  Barn.  &  Cr.  577 

Heart  v.  Rhodes 66  111.  351     .     . 

Heath  v.  Portsmouth  Savings  Bank      .  46  N.  H.  78  .     . 

V.  Second  National  Bank  ...  70  Ind.  107    .     . 

V.  Silverthorn  Lead  Mining  Co.  39  Wise.  147     . 

Hefner  v.  Dawson 63  111.  403      .     . 

■ V.  Vandolah 62  111.  483     .     . 

Heidelbach  v.  Nat.  Park  Bank      ...  87  Hun,  117      . 

Hellings  v.  Hamilton 4  Watts  &  S.  462 

Helwege  v.  Hibernia  National  Bank      .  28  La.  An.  520  . 

Hencke  v.  Twomey 58  Minn.  550     . 

Heming  v.  Clutterbuck 1  Bligh,  n.  s.  479 

Hemphill  v.  Yerkes 132  Pa.  St.  545 

Henderson  Nat.  Bank  v.  Alves,  Assignee  91  Ky.  146    ....  II 

Henman  v.  Dickinson 5  Bing.  183 

Henniker  v.  Wigg .    .  4  Q.  B.  (Ad.  &  El.)  792 


Henry  v.  Northern  Bank  of  Alabama    .  63  Ala.  527  . 

Henshaw  v.  Root 60  Ind.  220   . 

Hepburn  v.  School  Directors    ....  23  Wall.  480 

Herrick  v.  Whitney 15  Johns.  240 

Herring  v.  Kesew South.  Law  Rev.  18 

Hershire  v.  First  National  Bank    ...  35  Iowa,  272 

Hervey  v.  Lord 11  Biss.  144  . 

Hewett  V.  Adams 50  Me.  271    . 

Hewison  v.  Guthrie 3  Scott,  311  , 

Hewitt  V.  Kaye 37  L.  J.  Ch.  633 

Heywood  v.  Pickering 9  Q.  B.  428   . 

Higby  V.  First  Nat.  Bank  of  Beverly     .  26  Ohio  St.  75 

Higgins  V.  Hayden 53  Neb.  61     . 

Hill  V.  Gray 1  Stark.  434 

V.  National  Bank  of  Barre      .     .  66  Vt.  582    . 

V.  National  Trust  Co 108  Pa.  St.  1 

V.  Pine  River  Bank 45  N.  H.  300 

V.  Royds L.  R.  8  Eq.  290 


138,  148 
.  610 
248,  631 
493,  511/ i 
158  rf 
234,  383 
641,  644 
.  620 
II.  152 
.  610 
.  708 
.  623 
.  679 
.  102 
.  232 
14 
109,  134 
.  247 
.  290 
.  546 
.  620 
.  78 
565,  n.  15 
.  468 
.  468 
329,  567 
.  662 
414,  482 
693 
.  554 
494,  604 
130,  130 /i,  n 
...  481 
289,  327,  355 
562,  568 
145 
.  421 
141,  c,  y 
.  659 
.  383 
141,  b,  fj 
II.  150 
687,  696 
.  3.30 
.  550 
.  236 
n.  130 
.  629 
.  21 
II.  1.30  / 
413 
701 
512,  564 


IL 


II. 


TABLE   OF   CASES.  Iv 

[All  references  are  to  Sections.] 

Hill  V.  Silvey 81  Ga.  508 671 

V.  Stevenson 63  Mo.  864 608,  610 

Hillman  v.  Wilcox 30  Me.  170 103 

Hills  V.  Daniels 15  La.  An.  280 200 

V.  Hills 8  M.  &  W.  401 611,  612 

Himmelman  r.  Hotaling 40  Cal.  Ill 421 

Hinsdale  v.  Bank  of  Orange      ....  6  Wend.  378      ....  648,  649,  650 

V.  Larned 16  Mass.  70 643,  657 

Hintermisher  r.  First  Nat.  Bank  .     .     .     64N.Y.  212 IL  130 

Hirshfield  i-.  Bopp 39  Hun,  613 677,  693 

y.  Fitzgerald 157  N.  Y.  166 693 

Hitchcock  V.  Galveston 96  U.  S.  341 758 

Hodges  V.  New  England  Screw  Co.  .    .     1  R.  I.  312 128 

Hodges,  Ex'r,  v.  First  Nat.  Bank  ...    22  Gratt.  51 143,  145 

Hodgin  V.  People's  Nat.  Bank  .     .     .     .     124  N.  C.  540 326  d,  334 

Hodgson  V.  Cleever 8  Mo.  App.  318 687 

Hoffman  v.  First  Nat.  Bank      .     .     .     .  46  N.  J.  L.  604     569,  582.  583,  586,  593 

Hoit  V.  Mclntire 50  Minn.  466 389,  390 

Holden  V.  New  York  Bank 72  N.  Y.  286 166 

V.  Phelps 135  Mass.  61 97 

Holland  v.  Heyraan 60  Ga.  174 139,  695 

V.  Lewiston  Falls  Bank      ...    52  Me.  564 150 

HoUey  ?;.  Adams 16  Vt.  206 550,611 

Hollister  v.  HoUister  Bank 2  Keyes,  246 694,  706 

Holmes  v.  Boyd 90  Ind.  332 78 

V.  Briggs 131  Pa.  St.  233 543 

„.  Roe 28  N.  W.  R.  864     .     .     .    .      421,  425 

Holt  V.  Bacon 25  Miss.  567 158 

Home  National  Bank  v.  Newton   ...     8  111.  App.  563 559 

Home  Savings  Bank  v.  Case     ....  18  Ont.  Ap.  489     ...    .      679,  690 

V.  Traube 75  Mo.  199 26 

Homer  v.  Nat.  Bank  of  Commerce     .     .     140  Mo.  225 329 

Honig  i».  Pacific  Bank 15  Pac.  R.  58  (Cal.)  .     .     .      314,433 

Honsom  v.  Rogers 40  Pa.  St.  190 641 

Hooky.  Pratt 78N.Y.371 593 

Hooker  v.  Eagle  Bank 30  N.  Y.  83 98,  n.  22,  101 

Hoover  v.  Wise 91  U.  S.  308      .  108,  249, 250,  267,  285 

Hopkinson  v.  Foster L.  R.  19  Eq.  74      .         .  493,  511,  516 

Hopper  I'.  Moore 42  Iowa,  563     ..     .              .    .     320 

Home  V.  Green 52  Miss.  452 XL  141 

Horrigan  v.  First  National  Bank   ...  10  Leg.  News,  112      ..     .         .     167 

Hortsman  v.  Henshaw 11  How.  177 476,  477 

Hotchkiss  V.  Artisans'  Bank     ....  42  Barb.  517,  2  Keyes,  564      9,  n.  9  & 

18,  179 

V.  Mosher 48  N.  Y.  482 298 

Houghton  V.  Adams 18  Barb.  545 662 

V.  First  National  Bank  ....  26  Wise.  663     ....     46,  158,  168 

Housatonic  Bank  v.  Martin 1  Met.  294 136 

Houston  V.  Thornton 122  N.  C.  365 132 

Hovey  v.  Blanchard 13  N.  H.  145 110,  166 

Howard  v.  Deposit  Bank 80  Ky.  496 316 

„.  Ives 1  Hill,  263 232 

r.  Roeben 33  Cal.  399 188 


Ivi  TABLE    OF    CASES. 

[All  references  are  to  Sections,] 

Howard  v.  Savannah T.  Charlt.  173 43 

V.  Savings  Bank 40  Vt.  507 600 

Howard  National  Bank  of  Burlington 

V.  Loomis 51  Vt.  349 II.  128 

Howard  &  Co.  I'.  Walker 8  Pickle,  456 248,248  a 

Howarth  v.  Angle 39  Ap.  D.  151 693 

Howe  V.  Hartness 11  Ohio  St.  449 299 

V.  Merrill 5  Cush.  83 565 

Howell  V.  Adams 68  N.  Y.  314 802 

V.  Village  of  Cassopolis      ...     35  Mich.  471 II.  141/ 

Howland  v.  Myer 3  Comst.  290 165 

Hoyt  V.  Seeley 18  Conn.  353     ....  393,  494,  538 

r.  Shelden 3  Bosw.  267 43 

?;.  Thompson 19N.Y.  207      .     12,43,144,158,165 

V. 1  Seld.  320 98,  n.  26 

Hubbard  i-.  Board  of  Supervisors      .     .     23  Iowa,  130 II.  141  m 

Hubbell  i\  Houghton 86  Fed.  547 679 

Huffaker  r.  National  Bank  of  Monticello     12  Bush,  287 II.  106  a 

Hughes  V.  Bank  of  Somerset    ....     5  Litt.  45 39,  42,  89 

V.  Lake 63  Miss.  557 629 

u.  Neal  Loan  &  Building  Co.      .     97  Ga.  383 247  c 

Hull  V.  Bank Dudley,  259 455 

Hultz  V.  Commonwealth 3  Grant,  61 19 

Hume  V.  BoUan 1  C.  &  M.  130 290 

V.  Commercial   Bank   of   Knox- 

ville 9  Lea,  728 131 

Hummell  v.  First  Nat.  Bank     ....     2  Col.  Ap.  571 208 

Humphrey  v.  County  National  Bank     .     113  Pa.  St.  417 322 

Humphries  v.  Bickness 2  Litt.  299 393 

Hungerford  National  Bank  v.  Van  Nos- 

trand 106  Mass.  559 II.  106  a 

Hunt  V.  Divine 37  111.  137 13,  302 

V.  Hunt 119  Mass.  474 611 

V. 16  N.  Y.  Sup.  Ct.  622     .     .      12,  n.  13 

o.  Maybee 3  Seld.  266 230 

V.  Poole 139  Mass.  224 613 

V.  Rousmanier 8  Wheat.  204 100 

V.  Van  Alstyne 25  Wend.  605 144,  n.  19 

.Hunter  v.  Wilson 19  L.  J.  Ex.  8 225 

Huntington  v.  Savings  Bank     ....  96  U.  S.  388      ...    3,  566,  617,  6.32 

Huntress  v.  Patten 20  Me.  28 113 

Husband  v.  Davis 10  C.  B.  640 435 

Hussey  v.  Manufacturers'  Bank   ...     10  Pick.  415 709 

Hutchinson  v.  Sturges Willes,  621 335 

Hyde  V.  First  National  Bank    ....     7  Biss.  156 249,  250,  272 

■ V.  Kitchen 69  Hun,  280 610 

V.  Planters'  Bank 17  La.  660    .     .     .    236,  265,  274,  287 

I. 

Ide  V.  Bank 73  Iowa,  58 255 

V.  Pierce 134  Mass.  264 610 

Ikiu  V.  Bradley 5  Price,  536 309 


TABLE   OP   CASES.  Ivil 
[All  references  are  to  Sections.  ] 

Illinois  Trust  &  Savings  Bank  Case  .     .    21  Blatdif.  275 589 

Importers'  &    Traders'    Nat.    Bank    v. 

Peters 12.'}  N.  Y.  272 590  c 

Indian  Head  Nat.  Bank  t'.  Clark  ...     166  Mass.  27 166 

Indiana  National  Bank  v.  HoUsclaw      .     98  Ind.  87 395,  474 

Indig  V.  City  Bank 80  N.  Y.  100      .     .     236,  272,  557,  567 

Industrial  Bank  v.  Bowers 165  111.  70 421  rf 

Industrial  Trust  &  Title  Co.  i,-.  Weakley  103  Ala.  463     252,  358,  373,  421,  421  g 

Ingham  v.  Primrose 7  C.  B.  n.  s.  82 445 

Ingraliam  v.  Maine  Bank 13  Mass.  208 27 

y.  Speed 3  Miss.  410 74 

Inhabitants  of  Farmington  i'.  Stanley    .     60  Me.  472 38 

Innerarity  u.  Merchants' Nat.  Bank  .     .     139  Mass.  332 136,  lid  k 

Innes  v.  Stephenson 1  M.  &  Rob.  145 435 

In  re  Agra  &  Masterman's  Bank  .     .     .  3G  L.  J.  Ch.  151     ...     .      289,  568 
Assignment,  Bank  of  Oregon    .     32  Oreg.  84 158  c,  565 

Bank  of  Madison 5  Biss.  575    .     .     .    573,  589,  II.  150  c 

Bank 100  U.  S.  446 II.  150 

Beaks  Estate 13  L.  R.  Eq.  734 550 

Brown 2  Story  C.  C.  512  .     389,  459,  460,  495 

Carew 31  Beav.  39 134 

Duryea 17  Nat.  Bank.  Reg.  495  .     .     II.  108/ 

East  of  England  Banking  Co.    .     4  L.  R   Ch.  14 425 

Empire  City  Bank 18  N.  Y,  199       675,  676,  679,  691,  693 

European  Bank 8  L.  R.  41 327 

Farnsworth,  Brown,  &  Co.     .     .     5  Biss.  223 324 

Franklin  Bank 1  Paige,  249      ....  186,  289,  574 

Grant 7  Moore  P.  C.  141 125 

Gross 6  L.  R.  Ch.  632 327 

HoUister  Bank 27  N.  Y.  393 693,  694 

Howe 1  Paige,  214 55,76 

Johnson 61  N.  W.  352 248 

King 8  Nat.  Bank  Reg.  (Ga.)  285    .     .     394 

Manufacturers'  Nat.  Bank     .     .     5  Biss.  499 II.  143,  146 

Medewe 26  Beav.  588 325 

North 16N.  B.  R.  (Mass.  Dist.)420.     .     337 

Norwich  Yarn  Co 22  Beav.  143 440  B 

Oliver  Lee  &  Co.'s  Bank   ...     21  N.  Y.  9 676 

Powell's  Trusts 1  Johns.  49,  5  Jur.  n.  s.  331    .     .    606 

Reciprocity  Bank 22  N.  Y.  9 656,  679,  687 

Tallassee  &  Co 64  Ala.  595 324 

United  Service  Co 6  L.  R.  Ch.  212      ....    102,  n.  26 

Wild 11  Blatchf.  243 IL  130 

Williams 3  Ir.  Eq.  346 324 

Insurance  Co.  v.  Connor 17  Pa.  St.  136 43 

International  Bank  i;.  German  Bank     .    3  Mo.  App.  367 51,  374 

V.  Jones 15  Brad.  594 445 

V. 9  N.  E.  885  (111.) 334 

r. 119  111.  407 334 

Irish  V.  Nutting       47  Barb.  370 611 

Iron  City  Nat.  Bank  v.  McCord    .     .     .     139  Pa.  St.  52 374 

Irons  V.  Manufacturers'  Nat.  Bank    .     .     6  Biss.  301 II.  146 

V. 21  Fed.  Kep.  197   ...     .     II.  112  b 


Iviii  TABLE   OF    CASES. 

[All  references  are  to  Sections.] 

Irons  V.  Manufacturers'  Nat.  Bank  of 

Chicago       17  Fed.  Rep.  308   ...     .      II.  112  6 

Irvine  v.  Lowrv 14  Pet.  293 46 

Irving  Bank  ..."vVetherald 36  N.  Y.  335      ...     .155,413,419 

Irwin  V.  Lumberman's  Bank     ....     2  Watts  &  S.  190 113 

Island  City  Savings  Bank  v.Sachtleben     3  S.  W.  733  (Tex.) 320 

Israel  v.  Bowery  Savings  Bank     ...     9  Daly,  507 620 

Ivory  V.  Bank  of  State  of  Missouri  .     .     36  Mo.  475 252,  383 


J. 

Jacks  V.  Darrin 3  E.  D.  Smith,  557 398 

V.  Moyer 187  Pa.  St.  87 360 

Jackson  v.  Bank  of  United  States     .     •     10  Pa.  St.  61 113,  343 

y.  Brown 5  Wend.  590 74 

..  Union  Bank 6  Har.  &  J.  146      ...  270,  274,  287 

Jackson  Ins.  Co.  v.  Cross 9  Heisk.  283 181 

Jackson  Marine  Ins  Co.  Matter     ...     4  Sandf.  Ch.  550 760 

Jacob  V.  First  National  Bank    ....     Ham.  Co.  Dist.  Ct.,  3  Bull.  274  .     511 

Jacobsohn  v.  Belmont 7  Bosw.  14 242 

Jacobson  ^;.  Bank 66  111.  Ap.  470 450,494 

Jao-ger  v.  Nat.  German-American  Bank     53  Minn.  386 219 

James  v.  James 81  Tex.  373 710  a 

Jameson  v.  Swinton 2  Taunt.  225 45 

Janin..Bank 92  CaL  18 472 

Jarvis  r.  Rogers 15  Mass.  389 567 

Jassoy  ..  Horn 64  111.  379 309 

Jefferson  v.  Holland 1  Del.  Cli.  116 66^ 

Jefferson  Co.  Bank  v.  Chapman  ...     12  Johns.  322     ....  640,  641,  644 

«.  Commercial  Nat.  Bank  .     .     .     98  Tenn.  337 221,223 

Jenkins  ..  Fowler 63  N.  H.  244 606 

«.  National  Village  Bank  .     .     .     58  Me.  275  ^ 211 

Jennison  v.  Citizens'  Savings  Bank  .     .     122  N.  Y.  135 730 

Jenys  V.  Fowler 2  Str.  946 463 

Jessop  V.  Miller 1  Keyes,  32 599 

Jeune  V.Ward 2  Stark.  326 409 

Jewett  V.  Yardley 81  Fed.  920 289 

Jimmerman  v.  Carpenter 84  Fed.  748 o»b 

John  V.  City  National  Bank  of  Selma   .     57  Ala.  96 233 

Johns  «;.  Mason 9  Hare,  29    .......      395  A 

Johnson  ..  Catlin ^7  Vt.  89.  1  Williams,  87        .    95,  HO 

t,.  Farmers' Bank 1  Harr.  117 113,  296,  o22 

V.  First  National  Bank  ....    6  Hun,  124 248 

r.  Frankfort  Bank 23  Me.  322 27 

..  Harth 1  Bail.  485  (S.  C.)      .....    228 

V.  Henderson 76  N.  Car.  227 299 

r.Laflin 103  U.S.  800,  „  „  ,,„ 

17  Alb.  Law  Jour.  145    713,  II.  112 

V.  National  Bank  of  Gloverville     74  N.  Y.  329 H.  130  c 

V.  Pavne  Bank 56  Mo.  Ap.  257 317 

V.  Robarts L.  R.  10  Ch.  App  505   ...     .     598 

v.  Tally 60Ga.  540 643 


TABLE    OF   CASES.  lix 
[All  references  are  to  Sections.] 

Johnson  v.  Way 27  Ohio  St.  374 565 

V.  Windle 3  Ring.  New  R.  225 480 

Johnson  Brinkman  Co.  I'.  Central  Bank     116  Mo.  558 543 

Johnston  v.  Frankfort  Bank     ....     23  Me.  322 27 

V.  Southwestern  R.  R.  BMnk       .  3  Strobh.  Eq.  263  .     .     .     .      669,  692 

Johnston   Bros.  v.  Charlottesville  Nat. 

Bank 3  Huglies,  657 47,  65,  749 

Jones  V.Brown 34  N.  H.  439 611 

V.  Fales 4  Mass.  262  .     .     .     9,  n.  19,  9  A,  220 

('.  Hawkins 17  Ind.  550 744 

V.  Heiliger 36  Wise.  149 421 

y.  KiUneth 49  Ohio  St.  401 248a 

V.  Locke L.  R.  1  Ch.  App.  25 551 

V.  Manufacturers'  Bank     ...  10  Wk.  No.  Cas.  102      ....    329 

V.  Milliken 41  Pa.  251 602 

V.  Nicholay 2  Robt.  288 554 

V.  Peppercorne 5  Jur.  n.  s.  140 324 

V.  Ryde 5  Taunt.  488      ....  289,  476,  480 

V.  Weakley 99  Ala.  441 612 

V.  Wiltberger 42  Ga.  575 687,  693 

Jones,  Assignee  v.  Johnson 86  Ky.  545 671 

Jordan  v.  Harlock 84  Pa.  366 388 

V.  Nat.  Shoe  &  Leather  Bank     .     74  N.  Y.  473 329,  561 

Jose  V.  Hewett 50  Me.  248 21 

Jourdaine  v.  Lefevre 1  Esp.  N.  P.  66 324 

Joy  V.  Campbell 1  Sch.  &  Lef.  346  .     .     .     .      324,  326 

Judy  V.  Farmers  &  Traders'  Bank      .     .     81  Mo.  404 186,  208,  325 

Jung  V.  Second  Ward  Savings  Bank     .     55  Wise.  364 395 

Juniper  v.  Bank 39  S.  C.  296 143,  179 

Justh  V.  National  Bank ,    .  56  N.  Y.  478      ....  493,  524,  567 


K. 

Kahnweiler  v.  Anderson 78  N.  C.  133 606 

Kansas  Lumber  Co.  v.  Central  Bank     .     34  Kans.  635 454 

Kansas  Valley  Nat.  Bank  of  Topeka  v. 

Rowell 2  Dillon  C.  C.  371      ....    IL  128 

Kean  v.  Johnson 1  Stockt.  401 .721 

Keane  v.  Roberts 4  Mass.  332,  357 317 

Kearney  v.  King 2  Barn.  &  Aid.  301 366 

Keen  v.  Davis 21  N.  J.  Law,  683 365 

Keene  v.  Beard 8  C.  B.  n.  s.  372    .    378,  380,  391,  393, 

414,  495,  529 

V.  Collier 1  Met.  417  (Ky.)     .    183,  190,  567,  574 

Kekewich  v.  Manning 1  DeG.  M.  &  G.  176  .     .     .      610,  615 

Kelley  v.  Newburyport  Horse  R.  R.      .     141  Mass.  496 101 

t'.  Chenango     Valley      Savings 

Bank 22  Hun,  202 180 

Kelly  V.  Brown 5  Gray.  108 388 

V.  Roberts 40  N.  Y.  432 346 

Kelly  &  Co.  v.  Phelan 5  Dill.  228 337 

Kelsey  v.  Nat.  Bank  of  Crawford      .     .     69  Pa.  St.  426 II.  144 


]X  TABLE  OF  CASES. 

[All  references  are  to  Sections.] 

Kelty  V.  Second  Nat.  Bank 52  Barb.  328 421,  544 

Kerable  v.  Mills 1  M.  &  G.  757 380 

Kenistons  r.  Sceva 54  N.  H.  37 549,611,612 

Kennebec,  &c.  R.  Co.  v.  Kendall   ...    31  Me.  470 43 

Kennedy  r.  Gibson 8  Wall.  505  .      11.112  6,150,156,157 

V.  Otoe  Co.  Nat.  Bank  ....     7  Neb.  65 103,  145,  168 

V.  Savings  Bank 101  Cal.  495 750 

Kent  f.  Dawson  Bank 13  Blatchf.  237      ....      272,280 

Kentucky  Flour  Co.'s  Assignee  i".  Mer- 
chants'Nat.  Bank     90Ky.  229 329 

Kenyon  v.  Stanton 44  Wise.  479 421,  n.  11 

Kermever  v.  Newby 14  Kans.  1G4 544 

Kern's  Estate 171  Pa.  St.  55 551 

Kerr  v.  People's  Bank 158  Pa.  St.  305 314 

Key  V.Knott 9  Gill  &  J.  342       636 

Keysery.Hitz 2  Mackey,  513  (D.  C.)    ....      14 

y, 133  U.  S.  138 679 

Kiggins  V.  Munday 19  Wash.  233 696  A 

Kilgore  v.  Bulkey 14  Conn.  362 51,  298 

Kilsby  V.  Williams 5  Barn.  &  Aid.  815     ..     •      409,  572 

Kimbal  v.  Cleveland 4  Mich.  606 158 

V.  Leland 110  Mass.  325 612 

V.  Norton 59  N.  H.  1 609,  620 

Kimball  V.  Dunn 89  Fed.  782 II.  154 

Kimbo  V.  Bank  of  Fulton 49  Ga.  419 643 

Kimins  v.  Boston  Five  Cents  Savings 

Bank 141  Mass.  33 620 

Kimmel  v.  Dickson 5  S.  D.  226 567  6 

Kimraird  v.  Webster 10  Ch.  D.  189 180 

King  0.  Birmingham 8  Barn.  &  Cr.  29 754 

V.  Dedham  Bank 15  Mass.  447 644 

V.  Elliott 6  Sm.  &  Mar.  447 672 

t;.  Gillaland 60  Tex.  271 324c 

Kingman  v.  Perkins 105  Mass.  Ill 506,  612 

Kinney  &  Co.  v.  Paine 68  Miss.  258 421  i 

Kirk  v.Blurton 9  Mees.  &  Wels.  284 439 

Kirkham  u.  Bank  of  America  .     .     .     .     26  Hun,  110 252o 

Kirkland  Land  &  Improvement  Co.  v. 

Jones 18  Wash.  407 564 

Kirkpatrick  v.  McCullough      ....     3  Humph.  171 299 

Kirkwood  v.  First  Nat.  Bank    ....     40  Neb.  485 297 

Kirtland  v.  Moore 40  N.  J.  Eq.  106 511 

Klanber  v.  Biggerstaff 47  Wise.  551 299 

Kleekamp  t;.  Meyer 5  Mo.  App.  444 424 

Klopp  V.  Lebanon  Bank 46  Pa.  St.  88 699,  703 

Knapp  V.  Cowell 77  Iowa,  528 324 

V.  First  Nat.  Bank 173  111.  331 H.  141  a,  x 

KnatchbuU  v.  Hallett 13  Ch.  D.  696    .     .     .     .  326,  355,  589 

Knecht  v.  U.  S.  Savings  Inst 2  Mo.  App.  568 329 

Knight  V.  Old  National  Bank    ....     4  Am.  Law  Times  Kep.  240   .    II.  112 

Knights  V.  Wiffin Law  Rep.  5  Q.  B.  6G0     .     .     .     .     478 

Knobeloch  r.  Germania  Savings  Bank  .     50  S.  C.  259 146  J 

Knowles  v.  Beatty 1  McLean,  41 71 


TABLE   OF    CASES.  Ixi 

[All  references  are  to  Sections.] 

Knox  V.  Clifford 38  Wise.  651 565,  n.  15 

Kobbi  V.  Underbill 3  Sandf.  Ch.  277 544 

Koehler  v.  Adler 91  N.  Y.  657 547 

Kohler  v.  Black  River  Falls  Iron  Co.    .    2  Black,  T21 125 

Kost  V.  Bender 25  Mich.  516 565 

Kuhn  V.  Frank 10  Rec.  622,  Hamilton  Co.  Dist. 

Ct.  (Oh.) 457 

Kuhns  V.  Westmoreland  Bank      ...    2  Watts,  136 562,  703 

Kux  V.  Savings  Bank 93  Mich.  511 619 

Kyle  u.  The  Mayor,  &c 75  N.  C.  445 II.  141.9 

Kymer  v.  Laurie     .    . 18  L.  J.  Q.  B.  218      .    .    .      459,  550 


La  Banque  D'Espargues  u.  La  Banque  2  Mon.  L.  R.  (C.  B.)  64      .     ,     .171^ 

La  Banque  de  Peuple  v.  La  Banque  .     .  1  Mon.  L.  R.  (S.  C.)  231     ..     .  408  c 

La  Dow  V.  Bank 51  Ohio  St.  234 II.  130 

La  Due  v.  First  Nat.  Bank  of  Kasson    .     31  Minn.  33 441 

Lackey  v.  Miller Phill.  N.  C.  L.  26 642 

Laclede  Bank  v.  Schuler 120  U.  S.  511     .     .     .     .  493,  511,  514 

Lafayette  Bank  v.  State  Bank  ....    4  McLean,  208 156 

Lahey  v.  City  Nat.  Bank 15  Col.  339 457 

Lamb  v.  Cecil 25  W.  Va.  288,  28  Id.  659  .      158,  165 

Lamberton  v.  Merchants'  Nat.  Bank  of 

Winona 24  Minn.  281 346  A 

Lamoille  Co.  Nat.  Bank  v.  Bingham      .     50  Vt.  105 II.  ISO  f 

Lamp  Co.  v.  Manufacturing  Co.  ...     64  Mo.  Ap.  115 374 

Lamson  v.  Beard 94  Fed.  30 144,  146  d 

Lancaster  Bank  i'.  Smith 12  P.  F.  Smith,  54     .     .     .       191,  204 

V.  Woodward 18  Pa.  St.  357    .     9,  357,  442,  443,  553 

Lancaster  National  Bank  v.  Taylor  .     .     100  Mass.  18 482,  486 

Lane  v.  Bailey 47  Barb.  395 325 

V.  Bank  of  West  Tennessee   .     .     9  Heisk.  419 231 

V.  Morris 10  N.  Y.  162      .     ,     675,  687,  689,  696 

Lanfear  v.  Blossman 1  La.  An.  148 225 

Langdale  v.  Whitfield 4  K.  &  J.  426,  27  L.  J.  Ch.  795    .     606 

Langton  v.  Lazarus 5  M.  &  W.  629 481 

Larrabee  v.  Hascall 88  Me.  511 611 

Larsen  r.  Breen 12  Col.  480 547  A 

Lathrop  v.  Commercial  Bank  of  Scioto     8  Dana,  119 46 

Latimer  v.  Bard 76  Fed.  536 679 

V.  Citizens'  State  Bank      ...     102  Iowa,  162 679 

Laubach  v.  Leibert 87  Pa.  St.  55 511 

Lauglilin  v.  Marshall 19  111.  390 51,  298,  299 

Lauterman  i;.  Travous 174  111.459 629  6 

Law's  Estate 144  Pa.  St.  499 289 « 

Lawler  v.  Burt 7  Ohio  St.  340 666 

Lawrence  v.  American  Nat.  Bank     .     .     54  N.  Y.  435 464 

V.  Bank  of  Republic      ....     35  N.  Y.  320 326,  346 

V.  Fox 20  N.  Y.  268 512 

V.  Gebhard 41  Barb.  575 98,  n.  27 

—  V.  Nelson 21  N.  Y.  158 339 


Ixii  TABLE    OF    CASES. 

[All  references  are  to  Sections.] 

Lawrence  v.  Schmidt 35  111.  440 447 

V.  Stonington  Bank 6  Conn.  521       .     .     250,  274,  287,  601 

Laws  V.  Raud 3  C.  B.  n.  s.  442    .     .     .  378,  421,  n.  9 

Lawson  v.  Lawson IP.  VVms.  441 550 

Lazarus  v.  Shearer  .......     2  Ala.  718 365 

Lazear  y.  Nat.  Union  Bank  of  Maryland    52  Md.  78 61,  XL  130  i 

Le  Rose  v.  Logansport 102  Ind.  332 3t> 

Leach  v.  Buchanan 4  Esp.  226 468 

V.  Hale 31  Iowa,  69 196,  II.  108  6 

j;.  Hill 106  Iowa,  171  , 408e 

V.  Lambeth 14  Ark.  6Q 326 

;;.  Perkins 17  Me.  462 424 

Leaphart  v.  Bank 45  S.  C.  563 298 

Leas  V.  Walls 101  Pa.  St.  57 485 

Leather  y.  Simpson L.  R.  11  Eq.  398 225 

Leather  Manufacturers'  Bank  v.  Mer- 
chants' Bank 1?.8  U.  S.  26 476 

V.  Morgan 117  U.  S.  96 290,  472 

Leavitt  v.  Beers Hill  &  D.  221 149 

V.  Fisher 4  Duer,  1       ....     144,  n.  22,  713 

V.  Palmer 3  Comst.  19 51,  298,  745 

i;.  Yates 4  Edw.  Ch.  134     63,  77,  98,  n.  36,  690 

Leazure  v.  Hillegas 7  Serg.  &  R.  313 754 

Lebanon  Bank  v.  Morgan 28  Pa.  452 299 

Lebanon  Nat.  Bank  v.  Karmany  ...  98  Pa.  St.  65     .     .     .     .  II.  130,  n.  58 

Lee  y.  Marion  Nat.  Bank 94  Ky.  43 317,317  a 

Leftley  v.  Mills        4  T.  R.  175 450 

Legard  v.  Hodges 1  Vesey,  477 576 

Leggett  V.  Bank  of  Sing  Sing  ....    24  N.  Y.  283 698,  702 

V.  N.  J.  Manufacturing  &  Bank- 
ing Co     Saxt.  '341 115,  144 

Legro  V.  Staples 16  Me.  252 496 

Lehman  v.  Tallassee  Manufacturing  Co.     64  Ala.  567 324 

Lemmon  v.  Box 20  Tex.  429 408 

Lening  v.  Ralston    - 23  Pa.  St.  139 12,  n.  18 

Lenox  v.  Cook 8  Mass.  460       227 

Lesassier  v.  Kennedy .36  La.  An.  539 681 

Lester  v.  Howard  Bank 33  Md.  558 125,  751 

Lester  &  Co.  r.  Given,  Jones,  &  Co.       .  8  Bush  (Ky.),  357  .   .     .373,494,532 

Lett  V.  Morris 4  Sim.  607 495,  541 

Levi  V.  National  Bank 6  Dill.  104 247,  248,  568 

Levy  V.  Bank 27  Neb.  557 476 

V.  Bank  of  America 24  La.  An.  220 474 

V.  Bank  of  Commerce  ....     38  S.  W.  886 224 

V.  Bank  of  United  States  ...  1  Binn.  27      .      171,  463,  466,  488,  569 

1>.  Franklin  Savings  Bank      .     .     117  Mass.  448 620 

V.  National  Bank 7  Cent.  L.  ,L  249 9,  n.  9 

V.  Peters 7  Serg.  &  R.  125 425 

V.  Pike 25  La.  An.  630 200 

17.  Pyne Car.  &  M.  453 440 

Lewis  r.  Eastern  Bank 32  Me.  90 119,  295 

V.  International  Bank    ....     13  Mo.  App.  207 400 

V.  Merritt 113  N.  Y.  386 611 


TABLE   OF   CASES.  Ixiil 
[All  references  are  to  Sections.] 

Lewis  I'.  Park  Bank 42  N.  Y.  4G3 440  A 

V.  Peck  &  Clark 10  Ala.  142 267 

V.  Robertson 13  Sm.  &  Mar.  558     ..     .      668,  670 

V.  Switz 74  Fed.  381 679 

L'Herbette  v.  Pittsfield  Nat.  Bank    .     .     162  Mass.  138 171^" 

Libby  v.  Hoppins 104  U.  S.  307 567 

V.  Union  National  Bank     ...    99  111.  622 95 

Liggett  Spring  &  Axle  Co.'s  Appeal     .     Ill  Pa.  St.  291 333 

Lilly  V.  Hays 5  Ad.  &  El.  548     ...     .      398,  408 

Lime  Rock  Bank  v.  Hewett      ....  62  Me.  531    ...     9,  n.  19,  103,  167 

V.  Macomber 29  Me.  564 98,  n.  22,  101 

V.  Plimpton 17  Pick.  161 565,  566 

Lincoln  &  Kennebeck  Bank  v.  Page      .  9  Mass.  155  .     .  9,  n.  19,  9  A,  9B,  220 

V.  Richardson 1  Greenl.  79 765 

Lindauer  v.  Fourth  National  Bank   .     .     55  Barb.  75 599 

Lindeman  v.  Desborough 8  Barn.  &  Cr.  586 21 

Lindsay  v.  First  Nat.  Bank 156  U.  S.  485 IL  141  b 

V.  Lord  Downes 2  Ir.  I']q.  307 41 

i;.  National  Bank  of  Monticello  .     12  Busli,  287 IL  106  « 

V.  McClelland 18  Wise.  481     ...     .     51,  298,  299 

Linton  v.  Childs 105  Ga.  567 150  A 

Linville  v.  Welch 29  Mo.  203 421 

Lionberger  v.  Rouse 9  Wall.  468 II.  141  6,  // 

Litchfield  Bank  v.  Church 29  Conn.  137 669,  670 

V.  Peck 29  Conn.  884 565,  n.  1  a 

Little  V.  O'Brien 9  Mass.  94 752 

V.  Phoenix  Bank 2  Hill  (N.  Y.),  425     274,  393,  421,  422 

Lloyd  V.  Osborne 92  Wis.  93 421 

V.  Sandilands Gow,  13 891,  393,  652 

V.  West  Branch  Bank   .     .     .     .  15  Pa.  St.  172   .     98,  n.  26,  102,  n.  29, 

103,  191 

Loan  Association  v.  Stonemetz     ...     29  Pa.  St.  534 140 

Lobdell  V.  Baker 1  Met.  193 477 

Locke  V.  Prescott 82  Beav.  261     .......     326 

Lockwood  V.  American  National  Bank      9  R.  I.  308 124,  II.  112 

Lodge  V.  Phelps 1  Johns.  Cas.  139  .     .     .     .      12,  n.  13 

Loeb  V.  Weiss 64  Ind.  285 499 

Lohman  v.  N.  Y.  &  Erie  R.  R.  Co.    .     .     2  Sandf.  39 98,  n.  26 

London  Chartered  Bank  v.  White     .     .     4  App.  Cases,  413 324 

London  &  Co.  Banking  Co.  v.  Ratcliffe  L.  R.  6  App.  Cas.  722     ...     .    331 
London  &  River  Plate  Bank  v.  Hanover 

National  Bank 36  App.  D.  (Hun)  487    .     .     .      326.9 

Long  V.  Strauss 107  Ind.  94 297,  298 

Longman  v.  Barry 6  Ir.  R.  C.  L.  457 359 

Loomis  V.  Eagle  Bank Disney,  285      ....  103,  134,  136 

V.  Simpson  ........     13  Iowa,  532 275 

Loring  v.  Brodie 134  Mass.  453 166 

Loucks  i;.  Johnson 70  Hun,  565 611 

Loud  V.  Hall 106  Mass.  414 9,  n.  3 

Louisiana  Bank  v.  Bank  of  U.  States     .     7  Mart.  398 652 

Louisiana  Ice  Co.  v.  State  Nat.  Bank    .     1  McClain,  185 585 

Louisiana  Nat.  Bank  v.  Citizens'  Bank  28  La.  An.  189       .     .      414,  n.  20,  482 

Louisiana  State  Bank  i;.  Rowell   ...    6  Mart.  506 233 


Ixiv                                           TABLE    OF  CASES. 

[All  references  are  to  Sections.] 

Louisiana  State  Bank  v.  Senecal  ...     13  La.  525 134 

Louisville   National  Bank   v.  Brannin, 

Loring,  &  Harvey 82  Ky.  370 128,  n.  21 

Louxi;.rox 171  Pa.  St.  68 424 

Loveli  V.  Hammond  Co 60  Conn.  500 395  B 

Lovett  V.  Cornwell 5  Wend.  369 398 

V.  Steam  Saw  Mill  Association  .     6  Paige,  54 165 

Loving  V.  Brodie 134  Mass.  469 317 

Lowe  V.  Lehman 15  Ohio  St.  179 9,  n.  19 

Lowry  v.  Murrell 2  Port.  (Ala.)  286 662 

Loyd  <;.  Freshfield 2  Car.  &  P.  325 294 

V.  Lvnchburg  Nat.  Bank  ....    86  Va.  694 325 

^.  McCaflFrey 46  Pa.  St.  410 493,526 

Lucas  ..Coe 86  Fed.  972 679 

,,.  Dorrien 7  Taunt.  278,  1  Moore,  29  .     .     .     324 

V.  Governor's  National  Bank  of 

Pottsville 78  Pa.  St.  228 11.130 

Luff  ..Pope 5  Hill,  413 493,502 

Lumbard  v.  Aldrie 8  N.  H.  34 46 

Lumley  v.  Palmer Strange,  1000 408 

Lund  V.  Seamen's  Bank 37  Barb.  129 317 

Lundsborg  v.  Ober  &  Hagerman  ...    31  Ivans.  599 421  d 

Luntv.  Bank  of  North  America    .     .     .     49  Barb.  221 493 

Lyman  v.  United  States  Bank  ....     12  How.  225 137 

Lynch  v.  Goldsmith 64  Ga.  42 299 

V.  National  Bank  of  W.  Virginia     22  W.  Va.  554 II.  130  (/ 

Lyndeboro' Glass  Co.  j;.  Mass.  Glass  Co.     Ill  Mass.  315 101 

Lynn  Nat.  Bank  v.  Smith 132  Mass.  227 217 

Lyon  V.  Jerome 26  Wend.  485 117 

Lyons  v.  Culbertson 83  III.  33 9,  n.  12 

V.  Lyons  National  Bank    ...     19  Blatchf .  279 II.  128 


M. 

M.  A.  Association  v.  Jacobs      ....     13  III.  App.  340 183 


Mabey  i'.  Adams 
Mabie  v.  Bailey 


3  Bosw.  346 132 

95N.  Y.  206 610 

L'y.  Johnson 15N.Y.  S.  Ct.309 565 

MacGregor  v.  Rhodes 6  El.  &  B.  266 477 

Macartney  v.  Graham 2  Sim.  285 649 

Macbean  v.  Irvine 4  Bibb,  17 144 

Mack  V.  Mechanics  &  Farmers'  Savings 

Bank  50  Hun,  477 608 

Mackersy  v.  Ramsay 9  Clark  &  F.  818  .     .     .  249,  272,  277 

Mackey  v.  Craig 144  Ind.  203 370 

Mackintosh  v.  Eliot  National  Bank  .     .     123  Mass.  393 470 

Maclaren  v.  Stanton 16  Beav.  279 46 

Macomber  v.  Doane 2  Allen,  541 506 

Macungie  Savings  Bank  I',  llottenstein    89  Pa.  St.  328 II.  130  i 

Macy  V.  Williams 83  Hun,  243      .......    610 

Madderom  v.  De  Young 35  111.  App.  588 421  rf 


TABLE    OF   CASES.  Ixv 
[All  references  are  to  Sections.] 

Madison   &   Indianapolis   R.  R.    Co.  v. 

Norwich  Saving  Soc 24  Ind.  457 89,  98,  n.  36 

Magee  v.  Cannack 13  111.  289 489 

Magruder  v.  Colston 44  Md.  349 II.  150  d 

Maguire  v.  Dollar  Savings  Bank  ...     131  Pa.  St.  362 493 

Magwood  V.  Southwestern  R.  R.  Bank  .     5  Rich.  L.  379 714 

Mahaiwe  Bank  v.  Douglas 31  Conn.  170     .    9,  n.  9,  221,  480,  484, 

485,  486 

Maher  v.  Brown 2  La.  492 496 

Mahony  v.  East  Holyford  Mining  Co.   .     33  Law  T.  383 440 

Main  V.  Second  National  Bank      .     .     .     6  Biss.  26 IL  157 

Maine  Bank  r.  Butts 9  Mass.  49 309 

Maine  Trust  &  Banking  Co.  v.  Southern 

Loan  &  Trust  Co 92  Me.  444 690 

Maitland  v.  Citizens'  National  Bank      .    40  Md.  540 565,  600 

Malcolm  v.  Scott 5  Exch.  601 398,  408,  605 

Mallett  V.  Simpson 94  N.  C.  37 56 

Manchester  Bank  v.  Fellows     ....     28  N.  H.  302 223 

Mandeville  v.  Union  Bank 9  Cranch,  9 557,  558 

y.  Welch 5  Wheat.  286    .  403,  494,  502,  528,  550 

Manhattan  Co.  v.  Lydig 4  Johns.  377      98,  n.  20,  179,  291,  295 

Mann  v.  Mann 1  Johns.  Ch.  231 606 

V.  Pentz 2  Sandf.  Ch,  259 671 

V.  Second  Nat.  Bank  of  Spring- 
field      30  Kans.  412,  34  id.  746      .      135,  603 

Manning  v.  McClure 36  111.  489 5G5 

V.  Purcell 1  Sm.  &  G.  284 606 

V.  Westerne 2  Vern.  606 327 

Manningford  o.  Toleman 1  Coll.  670 326 

Manufacturers   &   Mechanics'   Bank   v. 

Gore 15  Mass.  75 544 

Manufacturers'    Bank    v.    Continental 

Bank 148  Mass.  553 217 

V.  Perry 144  Mass.  313 454 

Manufacturers'  National  Bank  v.  Baack    8  Blatchf.  149 II.  157 

V.  Barnes 65  111.  69 291,  463,  467 

V.  Thompson 129  Mass.  438 351 

Mapes  V.  Scott 88  111.  352 II.  128 

V.  Second  Nat.  Bank  of  Titusville     80  Pa.  St.  163 103 

Marine  Bank  v.  Biays 4  Har.  &  J.  338 716 

V.  Birney 28  111.  90 312 

«.  Chandler 27  111.525     ......      191,312 

V.  Clements 3  Bos.  600 158 

1-.  Fulton  Bank 2  Wall.  252    247,248,289,493,567,568 

, V.  Ogden 29  111.  248 312,  447 

V.  Rushmore 28  111  463 248,  312,  568 

?;.  Smith 18  Me.  99 231 

Marine  National  Bank  v.  City  National 

Bank 59  N.  Y.  71    .    414,  n.  16  &  17,  480,  482 

Marion  Nat.  Bank  v.  Thompson   .     .     .     101  Ky.  277 II.  130  b 

Maritime  Bank  v.  Union  Bank      ...  4  Mon.  L.  R.  (S.  C.)  244    ...    406 

Market  v.  Hartshorne 3  Keyes,  137 569 

Market  Street  Bank  v.  Stumpe     ...     2  Mo.  App.  545 37 

VOL.  I.  —  e 


Ixvi  TABLE    OF  CASES. 

[All  references  are  to  Sections.] 

Markle  v.  Hatfield 2  J<,hns.  455      ....  289,  659,  662 

Marlborough  Mannf.  Co.  ?'.  Smith     .     .  2  Conn.  54 1 712 

Marr  v.  Bank  of  West  Tennessee  ...  4  Lea,  578    ..     .    671,  672,  678,  691 

Marrett  v.  Brackett 60  Me.  527 424.  544 

Marsh  r.  Fulton  Co 10  Wall.  676 43 

y.  Oneida  Central  Bank      ...  34  Barb.  298      289,  324,  559,  560,  568 

Marshall  v.  American  Express  Co.    .     .  7  Wise.  1 45 

V.  Sherman 84  Hun,  186 693 

r.  Treeman 52  111.  App.  42 421  d 

Marston  v.  Marston 21  N.  H.  491 608 

Martin  v.  Bank  of  United  States  ...  4  Wash.  C.  C.  253     .     .  649,  650,  651 

J,.  Funk 75  N.  Y.  134 610,  615 

i;.  Home  Bank 30  App.  I).  (Hun)  498  .     ...     238 

r.  Kunzmuller 37  N.  Y.  396 329 

V.  McCullough 136  Ind.  331 610 

V.  Mechanics'  Bank 6  Har.  &  J.  235 562 

J,.  Morgan 3  Moore,  635 380,  449 

V.  Webb 110  U.  S.  7 133,  171 

Marvin  V.  Ellewood 11  Paige,  365 342 

Marvine  v.  Hymers 2  Kern.  223 156 

Marzetti  r.  Williams 1  Barn.  &  Ad.  415      311,458,459,507 

Mason  v.  Dousay 35  HI.  424 12,  n.  13 

r.  Hunt IDougl.  297 225 

Masonic  Savings  Bank  v.  Bangs   ...  84  Ky.  140 325 

Massachusetts  National  Bank  v.  Bullock  120  Mass.  86 346  A 

Master  v.  Miller 4  T.  R.  320 481 

Mathew  v.  Sherwell 2  Taunt.  439 400  A 

Mathews  y.  Massachusetts  Nat.  Bank   .  1  Holmes,  396 159 

V.  Skinner 62  Mo.  329 75,  IL  128 

Matter  of  Bolin 136  N.  Y.  177 613 

Matter  of  Crawford 113  N.  Y.  560 608,615 

Matthews  v.  Columbia  Nat.  Bank     .     .  77  Fed.  372 670 

Mauran  v.  Lamb 7  Cow.  174 393 

Maury  v.  Coyle 34  Md.  235 203 

V.  Ingraham 28  Miss.  171 652,  761 

May  V.  Jones 88  Ga.  311 265 

V.  Le  Claire 11  Wall.  217 565,  n.  1 

Mayall  v.  Boston  &  Maine  R.  R.  Co.  .     .  19  N.  H.  122 98 

Mayer  v.  Chattahoochee  Nat.  Bank  .     .  51  Ga  325 185,  605 

V.  Hartranft 28  Fed.  Rep.  358 489 

.  i-_  Mode 14  Hun,  155 389 

Mayhew  v.  Fames 3  Barn.  &  Cr.  601 104 

Maynard  v.  Bank 1  Brewster,  483 II.  144 

f.  Maynard 49  Vt.  299 21 

V.  Newman 1  Nev.  271 192 

Mayor  v.  Johnson 3  Camp.  324 650 

V.  Thomas 5  Cold.  GOO II  141 1 

Mayor  of  Colchester  v.  Lowten     ...  2  Kent  Com.  280,  1  Ves.  &  B.  226    62 
Mayor  of  Macon  i;.  First  National  Bank 

of  Macon 59  G a  648 n.l41o 

Mayor  of  New  York  v.  Tenth  National 

Bank 111N.Y.446 136 

McAllister  v.  Commonwealth  ....  30  Pa.  536 590 


TABLE    OF   CASES.  Ixvii 
[All  references  are  to  Sections.] 

McAllister  v.  Oberne 42  111.  App.  287 494 

Mc Brides  v.  Farmers'  Bank      ....     2G  N.  Y.  450 599 

McCagg  V.  Woodman 28  111.  84 559,  560 

McCall  V.  Byram  Manufacturing  Co.     .     6  Conn.  420 46 

McCartee  v.  Orphan  Asylum  Society    .     9  Cowen,  437 55 

McCarty  v.  Roots 21  How,  432 565,  600 

McClain  i>.  Lowther 35  W.  Va.  297  .    373,  42U/,  421/ 552 

McCleilan  v.  Chipman 164  U.  S.  347     ...     .  II.  108/,  141 

McCord  V.  California  Nat.  Bank  ...    96  Cal.  197 317 

McCormick  v.  Trotter 10  Serg.  &  R.  94 299 

McCrath  v.  Nat.  Mohawk  Valley  Bank     10  N.  E.  862 78 

McCullough  V.  Annapolis  R.  R.    .     .     .     4  Gill,  58 48 

McCurdys  Appeal 65  Pa.  St.  29 12 

McDaniel  v.  Harvey 51  Mo.  App.  198 133 

McDonald  y.  Chemical  Nat.  Bank     .     .     174  U.  S.  610 452 

V.  Mosher 23  111.  App.  206 421 

■ —  V.  Williams 174  U.  S.  397 II.  138 

McDougal  V.  Bellamy 18  Ga.  411     45,  121,  656,  690,  692,  758 

V.  Lane 18  Ga.  444 656,  669,  G87 

McDowell  V.  Bank  of  Wilmington     .     .  1  Harr.  369  .     .     .     .9,  324,  562,  698 

McElroy  v.  Albany  Savings  Bank     .     .     8  N.  Y.  App.  D.  46 609 

McEwen  v.  Davis 39  Ind.  11 313,  342 

McFadden  v.  Jenkins 1  Hare,  458 610 

. V.  Wilson 96  Ind.  253 506 

McGahan  v.  Lockett 54  S.  C.  364 494 

McGill  u.  Bank  of  United  States  .     .     .     12  Wheat.  511 33 

u.  Ott 10  Lea,  147 557 

McGirr  v.  Aaron 1  Pa.  49 76 

McGough  V.  Jamison 107  Pa.  St.  336 302,  322 

McGrade  v.  German  Savings  Institution    4  Mo.  App.  330 522 

McGratii  v.  Reynolds 116  Mass.  566 615 

McGregor  f.  Loomis 1  Disney,  247 311,494 

McGuire  v.  Grant 1  Dutch.  317 102,  n.  13 

McHugh  V.  County  of  Schuylkill      .     .    67  Pa.  St.  391 468 

Mclndoe  v.  City  of  St.  Louis    ....     10  Mo.  577 754 

Mcintosh  V.  Lytle 26  Minn.  336 370 

Mclver  «.  Robinson 53  Ala.  456 11.141/ 

McKay  v.  Myers 168  Mass.  312 646 

McKelroy  v.  Southern   Bank  of  Ken- 
tucky       14  La.  An.  458 466 

McKinster  v.  Bank  of  Utica     ....  9  Wend.  46,  11  id.  473   .  232,  251,  2o2 

McLaflin  r.  Jones 155  111.  539 317 

McLain  r.  Wallace 103  Ind.  562      ....  186,  210,  568 

McLaren  v.  Pennington 1  Paige,  102 338 

McLean  v.  Eastman 21  Hun,  312 708 

V.  Lafayette  Bank 3  McLean,  587  .     .    9,  n.  9,  50,  73,  704 

McLemore  y.  Louisiana  State  Bank  .     .     91  U.  S.  27 11.108/ 

McLennan  I'.  Bank 87  Cal.  569 171  A 

McLeod  i;.  Drummond 17  Ves.  Jr.  153 317 

V.  Evans 28  N.  W.  Rep.  173     .     .  248,  567,  568 

McMahon  v.  Bank 67  Conn.  78 615 

McManus  v.  Crickett 1  East,  106 102,  n.  9 

McMasters  v.  Pennsylvania  R.  Co.   .     .    69  Pa.  St.  374 9,  n.  7 


Ixviii  TABLE   OF    CASES. 

[All  references  are  to  Sections.] 

McNarama  ?».  McDonald 69  Conn.  484 615 

McNulta  V.  Corn  Belt  Bank      ....     164  111.  427    ..     .    119,  150,  714,  730 

McVeigh  v.  City  of  Chicago     ....    49  111.  318 II.  141  j 

Mc Williams  r.  Webb 32  Iowa,  577 492,541 

Meach  v.  Meach 24  Vt.  591 550 

Meacher  u.  Fort 3  Hill  (S.  C),  227 476 

Meadu.  Engs 5  Cow.  303 232 

V.  Young 4  T.  R.  28 474,  480 

Meadow  v.  Dollar  Savings  Bank  ...     56  Ga.  605 302 

Meadowcroft  v.  People 103  111.  56 628  6 

Meads  v.  Merchants'  Bank 25  N.  Y.  143      ...     165,  414,  n.  14 

Mechanics  &  Farmers' Bank  f.  Smith  .     19  Jolms.  115 291 

Mechanics  &  Traders'  Bank  v.  Dakin    .     50  Barb.  593 346 

V.  Debolt 1  Ohio  St.  591 6 

Mechanics'  Bank  v.  Bank  of  Columbia    5  Wheat.  326    .     .  70,  102,  n.  21,  154, 

156,  744 

V.  Crow 60  N.  Y.  85 566 

V.  Earp 4  Rawle,  384     224,  249,  250,  269,  274, 

283,  290,  702,  703,  704 

V.  Levy 3  Paige,  606 360 

V.  Merchants'  Bank 6  Met.  13 226,  256,  299 

V.  Seitz  Bros 130  Pa.  St.  632 562 

,;.  Seton 1  Pet.  299 133,  699 

V.  Straiton 8  Keyes,  365 370 

V.  Valley  Packing  Co 4  Mo.  App.  200 217,  593 

Mechanics'  Banking  Association  v.  New 

York  &  Saugerties  Lead  Co.      ...    23  How.  Pr.  74,  35  N.  Y.  505 .     .      98, 

n.  34,  158 

Medland  Nat.  Bank  v.  Brightwell      .     .     148  Mo.  358 237 

Meighen  f.  Bank 25  Pa.  St.  288 113,295 

Meisser  V.  Thompson  .     .......    9  111.  App.  368 693,696 

Mellen  v.  Wliipple 1  Gray,  321 499 

Melville  v.  Doidge 6  C.  B.  450 26 

Mercantile  Bank  r.  McCarthy  ....     7  Mo.  App.  318 171 

V.  New  York 121  U.  S.  136 XL  141^y 

Mercer  v.  Dyer 15  Mont.  317 338 

Merchant  V.  Merchant 2  Bradf.  432 611 

Merchants  &  Farmers'  Bank  of  Cliar- 

lotte  V.  Meyer 74  N.  C.  514 IL  130  A 

Merciiants  &  Manufacturers'  National 

Bank  v.  Stafford  National  Bank  .  .  44  Conn.  564,  U.  S.  Dist.  Ct.  .  .  252 
Merchants  &  Planters'  Bank  r.  Meyer  .  56  Ark.  499  ...  .  317,  562  a,  568 
Merciiants  &  Planters'  National  Bank  v. 

Trustees  of  Masonic  Hall      ....     65  Ga.  603 H.  143 

Merchants'  Bank  v.  Cardoza     ....    3  Jones  &  S.  162 II.  101 

V.  Carhart 95  Ga.  394 202 

V.  Central  Bank 1  Kelly,  418 154,744 

V.  Clark 139  N.  Y.  314 134 

r.  Cook 4  Pick.  405 716 

r.  Demere 92  Ga.  739 325 

V.  Exchange  Bank  of  N.  Orleans     16  La.  457 479,  480 

V.  Jefferies 21  W.  Va.  504 173 

V.  Lassee 33  Mo.  350 49,  52 


TABLE   OF   CASES.  Ixix 
[All  references  are  to  Sections.'] 

Merchants'  Bank  v.  Livingstone    ...     74  N.  Y.  223 103 

0.  Maple 65  111.  App.  484 324 

V.  Marine  Bank 3  Gill,  96 167 

i).  McNeir 51  Minn.  123 158  c 

r.  Rudolf 5  Neb.  527    .     46,  137,  159  /  167,  168 

V.  Spicer 6  Wend.  445 393 

V.  State  Bank 10  Wall.  675      .     .     103,  152,  155,  161 

Merchants'  National  Bank  v.  Coates      .     79  Mo.  168 493,  522 

V.  Cook 95  U.  S.  342 IL  152 

V.  Gumming Thompson's  Nat.  Bank  Gas. 

926 IL  141  6 

V.  Eagle  National  Bank  of  Mass.  101  Mass.  281    ...     .  352,  464,  488 

V.  Glendon  Co 120  Mass.  97 IL  106  a 

V.  Goodman 109  Pa.  422 236,  274,  282 

V.  Hanson 33  Minn  40 593,  752 

V.  Mears 8  Bissell,  158 75 

V.  Nat.  Bank  of  Commonwealth  139  Mass.  573    .     .    349,  351,  352,  455 

V.  Ritzinger  et  al 118  111.  486,  20  111.  App.  29      329,  369, 

372,  375 

V.  Ritzinger 20  Brad.  App.  29  ...     .      494,  630 

V.  State  National  Bank      ...  10  Wall.  604      .    46,  51,  98,  n.  31,  152, 

153,  155,  158,  160,  171,  174,  298,  359, 
378,  402,  413,  414,  n.  16,  II.  108  g 

V.  Stone 115  Mich.  648 329 

V.  Tracy 77  Hun,  443 166 

V.  United  States 101  U.  S.  1 II.  141  « 

Merriam  v.  Haas 154  U.  S.  542 005 

V.  Wolcott 3  Allen,  258 477 

Merrick  V.  Bank  of  the  Metropolis    .     .     8  Gill,  59 116,120 

Merrill  v.  First  Nat.  Bank 75  Fed.  148 629  A 

V.  Shaw 38  Me.  267 688 

Merritt  v.  Gate  City  Nat.  Bank     .     .     .     100  Ga.  147 421  d 

Mervin  v.  Butler 17  Conn.  138 45 

Metcalfe  v.  Bruin 12  East,  400 29 

V.  Williams 104  U.  S.  98 365 

Metropolitan  Bank  v.  Claggett      .     .     .     141  U.  S.  520 IL  144  a 

V.  Godfrey 23  111.  579 74 

Metropolitan  Nat.  Bank  v.  Jones       .     .     137  111.  634 494 

V.  Loyd 90  N.  Y.  530 574,  589 

Metropolitan  Savings  Bank  v.  Murphy  .     82  Mich.  314 609 

Meyers  v.  New  York  County  Nat.  Bank  36  Ap.  Div.  (N.  Y.)  187      .     .      326.7 

V.  Valley  National  Bank    ...  18  Nat.  Bankruptcy  Reg.  34  .     .      77 

Michener  v.  Dale 23  Pa.  St.  59 611 

Michigan  State  Bank  v.  Gardiner      .     .     15  Gray,  356 576 

Michigan  Trust  Co.  v.  State  Bank     .     .     Ill  Mich.  306 702 

Midland  Nat.  Bank  v.  Brightwell  ...     148  Mo.  358 214 

Milburn  v.  State  of  Maryland  ....     1  Md.  1 42  c 

Milford  V.  Worcester 7  Mass.  48 754 

Millard  v.  National  Bank  of  Republic    .     3  McArthur,  54 474 

Miller  «.  Austen 13  How.  218      .     .     .61,289,299,300 

V.  Bank 172  Pa.  St.  197 289  c? 

V.  Billingsly 41  Ind.  489 499 

V.  Burk 68  N.  Y.  615 9,  n.  12 


Ixx  TABLE    OF    CASES. 

[All  references  are  to  Sections.] 

Miller  t'.  Dows 94  U.  S.  444 12 

i-.  Farmers  &  Mechanics'  Bank  .     30  Md.  392 591 

t,.  Mickel 12  Pacif.  Rep.  240 334 

y   Miller 3  P.  Wms.  356 611 

i/  Kaee 1  Burr.  457 637,  654 

I,.  Receiver  of  Franklin  Bank     .     1  Paige,  444      ....   338,  343,  641 

r.  State  Bank 57  Minn.  319 604  a 

Milliken  v.  Sharpleigli 36  Mo.  599 592 

«.  Steiner 56  Ga.  251 98  a 

Mills  V  Bank  of  United  States      ...     11  Wheat.  431      9,  n.  19,  221,  231,  238 

V.  Barney "^2  Cal.  240 299 

Mills  County  Nat.  Bank  v.  Perry       .     .     72  Iowa,  15 129 

Millspaugh  v.  Putnam T>  Abb.  Pr.  380 610 

Millward  Cliff  Estate 161  Pa.  St.  157 146  c 

Milnes  v.  Dawson 5  E.xch.  948 551 

Milroy  V.  Lord 4  DeG.  F.  &  J.  264 610 

Minet  V.  Gibson 1  H.  Bl.  569.  3  Term,  481  ..     .    370 

Mining  Co.  v.  Anglo-California  Bank    .     104  U.  S   192 358 

Minor  t'.  Mechanics' Bank 1  Pet.  46  .     .24,26,30,37,42,98,102, 

171,  172,  669,  675 

V.  Rogers 40  Conn.  572 610 

Minturn  v.  Fisher 4  Cal.  35  ...     .     381,  382,  383,  387 

Missouri  River  Telegraph  Co.  v.  First 

National  Bank  of  Siou.x  City     .     .     .     74  111.217 11.130  6 

Mitchell  V.  Beckman 67  Cal.  117 322,  687 

,;.  Cook 29  Barb.  243 159 

V.  Easton 37  Minn.  335 302 

V.  Howe  Savings  Bank      ...     38  Hun,  257 620 

y  Walker 25  Inter.  Rev.  Record,  64  .     .    II.  157 

r.  Wilkins    .     . 33N.W.  910  (Minn.)      ....     302 

Mix  V.  National  Bank  of  Bloomington  .    91  111.  20 14,  600 

Mobile  V.  Tuille 3  Ala.  144 43 

Mobley  V.  Clark 28  Barb.  390 227 

Mohawk  Bank  i;.  Broderick      ....     10  Wend.  306,  13  Wend.  133  .     9,  n.9 

&  11,  243,  244,  389,  421.  n.  4  &  9, 
422,  425,  442 

Mohawk    Nat.    Bank    v.    Schenectady 

Bank 78  Hun,  90 698 

Moise  V.  Chapman 24  Ga.  249 637 

Moniteau  National  Bank  v.  Miller     .     .  73  Mo.  187 II.  130,  n.  51 

Monongahela  National   Bank   v.  Over- 
holt    96  Pa.  St.  327 II-  130  i 

Montague  v.  Pacific  Bank 81  Fed  602 631 

Montelins  v.  Charles 76  111.  303 421 

Montgomery  v.  Albion  Nat.  Bank     .     .  50  Neb.  652  . H-  130 

Montgomery  County  Bank  v.  Albany 

City  Bank 3  Seld.  460 282,  272,  278 

„. 8  Barb.  399 409 

Bankof  State  of  New  York    .  3  Seld.  459 278 


Moody  V.  Mack 43  Mo.  210 421,  n.  15 

Moore  v.  Bank  of  Commerce    ....  62  Mo.  377 103 

V.  Bushell 27  L.  J.  Eq.  3 512.  564 

V.  Davis 67  Mich.  255     ....  493,  511,  521 


TABLE   OF  CASES.                                             Ixxi 
[All  references  are  to  Sections.] 

Moore  v.  Jones 3  Woods,  53      .     .     .      680,  II.  112  a 

V.  Lowrey 25  Iowa,  336 495,  541 

V.  Meyer 57  Ala.  20 214,  594 

V.  Ryder 65  N.  Y.  441 5G5 

y.  Tenth  Nat.  Bank IIIN.  Y.  447 317 

V.  Turberville 2  Bibb,  602 359 

V.  Waitt 13  N.  H.  415 231 

Moores  v.  Citizens'  National   Bank  of 

Piqua Ill  U.  S.  156 103 

Mordis  v.  Kennedy 23  Kans.  408 421,  544 

Morehouse  v.  Second  National  Bank  of 

Oswego 98  N.  Y.  503      ....  II.  130.  n.  56 

Moreland  v.  Brown 86  Fed.  257 567  c 

V.  State  Bank 1  Breese,  205 159,  750 

Moreland's  Assignee  y.  Citizens'  Savings 

Bank 97  Ky.  217 206 

Morgan  v.  Bank  of  North  America  .     .  8  Serg.  &  R.  73     9,  n.  11,  697,  698,  709 

f.  Bank  of  State  of  New  York   .     1  Duer,  434 474 

v.  Brower 77  Ga.  634 679 

c.  First  Nat.  Bank 93  N.  C.  352      ....      II.  130//,  n 

V.  Malleson L.  R.  10  Eq.  475 610 

V.  Merchants'  National  Bank  of 

Memphis 13  Lea,  234 103,  145 

V.  Tenet 83  Pa.  St.  305 267,  285 


Morley  v.  Culverwell 7  M.  &  W.  178 389 

Morrell  v.  Wootten 16  Beavan,  197      ....      398,  407 

Morrill  v.  Brown 15  Pick.  177 637 

I'.  Raymond 28  Kans.  415 343 

Morris  v.  Edwards 1  Ham.  189 637 

r.  Eufaula  Nat.  Bank    ....  106  Ala.  388      .     .  247,  247  c,  252,  421 

Morris  Canal  &  Banking  Company  v. 

Van  Vorst 3  Zabr.  98 42 

Morrison  v.  Bailey 5  Ohio  St.  13     381,  382,  383,  387,  494, 

538 

v.  McCartney 3  Mo.  183 421 

i;.  Price 23  Fed.  Rep.  217  .     .     .     .      11.112  6 

Morse  v.  Chapman 24  Ga.  249 338 

V.  Hodson 5  Mass.  314 19 

V.  Massachusetts  National  Bank  1  Holmes  C.  C.  209    .       155,  157,  378, 

414,  425,  453 

Morton  v.  Nailor 5  Hill,  583 494,  538 

V.  Rogers 14  Wend.  575 246 

Mortzenian  v.  Younkin 27  Iowa,  350 II.  141  c 

Mosby  V.  Williamson 5  Heisk.  278 627 

Moses  V.  Franklin  Bank 34  Md.  574 493,  519 

V.  OcoU  Bank        1  Lea,  398 140,  719 

Mosse  V.  Salt 32  Beav.  269     ...     .  292,  309,  326 

Mott  V.  Havana  National  Bank    ...     22  Hun,  354 255 

V.  United  States  Trust  Co.     .     .     19  Barb.  568 754 

Moule  V.  Brown 4  Bing.  N.  C.  266,  4  Scott,  694    .    238, 

243,  421 

Moultrie  v.  Hoge 21  Ga.  513 128 

Mount  V.  First  National  Bank  ....    37  Iowa,  457 227,  255 


Ixxii  TABLE   OP   CASES. 

[All  references  are  to  Sections.] 

Mount  Holly  L.  &  M.  Turnpike  Co.  v. 

Ferree 17  N.  J.  Eq.  118 713 

Mount  Sterling  Nat.  Bank  v.  Greene     .     35  S.  W.  911 458 

Mount  Sterling  Turnpike  Co.  iJ.Looney     1  Met.  (Ky.)  550 144 

Mount  Vernon  Bank  y.  Porter      .     .     .  148  Mo.  176      ....      1736,176  a 

Mountford  v.  Harper 16  M.  &  W.  825 552 

Movins  «;.  Lee 30  Fed.  R.  298 130 

Moyser  v.  Wliitaker 9  Barn.  &  Cr.  409 380 

Mudd  V.  Reeves  .     .     - 2  H.  &  J.  368 659 

Muench  v.  Valley  National  Bank      ..11  Mo.  App.  144 659 

Mulcahey  v.  Emigrant  Indus.   Savings 

Bank 89  N.  Y.  435    • 604 

Mullick  V.  Radakissen 28  Eng.  L.  &  Eq.  94       .     .     421,  n.  9 

Mullins  V.  Brown 32  Kans.  312 544 

Mumford  v.  Hawkins 5  Den.  355 143,  159 

Munger  v.  Albany  County  Bank  ...    85  N.  Y.  587 298,  302 

Munn  V.  Burch 25  111.  35  ...     .     315,  393,  450,  494 

Munnerlyn  v.  Augusta  Bank    .         .     .     88  Ga.  337 322a 

Munson  et  al.  v.  Syracuse,  &c.  R.  R.  Co.     103  N.  Y.  58 125 

Murray  v.  Cannon 41  Md.  466 308,  610,  615 

V.  Earl  of  Stair 2  Barn.  &  Cr.  82 390 

,;.  Judah 6  Cow.  484    .     393,  421,  n.  9,  425,  446 

V.  Lardner 2  Wall.  110 565 

V.  Nelson  Lumber  Co 143  Mass.  251 101,  762 

V.  Pinkett     .     .  * 12  CI.  &  F.  764 326 

Mussey  v.  Eagles'  Bank 8  Met.  306     .     .     9,  98,  n.  17,  155,  413 

Mustard  v.  Union  Nat.  Bank     ....     86  Me.  177 708 

Mutual  Bank  v.  Rotge 28  La.  An.  933 415 

Mutual  Savings  Inst.  v.  Enslin     ...     46  Mo.  200 454 

Myers  v.  Board  of  Education    ....     51  Kans.  87       590  d 

V.  Southwestern  Nat.  Bank    ..    193  Pa.  St.  1 472 


N. 

Nance  v.  Hemphill 1  Ala.  551 13 

Naser  v.  First  Nat.  Bank 36  llun,  .343 346 

Nash  r.  Manufacturers  &  Traders' Bank     5  Hun,  568 II.  130 (f 

Nassau  Bank  u.  Broadway  Bank      .     .     54  Barb.  2.j6 411 

. y.  Jones f)5N.  Y.  115 730 

National  Albany  Exch.  Bank  t;,  Wells  .     18  Blatchf.  478 II  141  v 

National  Bank  v.  Atkinson 55  Fed.  465 65,  144 

V.  Babbidge 160  Mass.  563 146  / 

V.  Berry 53  Kans.  696 143 

V.  Board  of  Equalization     ...  64  Iowa,  140     ...     .  IL  141,  n.  98 

('.  Brulen  &  Williams    ....     64  Tex.  571 II.  130 

:-  t;.  Burkhart 100  U.  S.  686 451,  569 

r.  Carpenter 52  N.  J.  L.  165 IL  130c? 

y.  Case 99  U.  S.  628      ...     IL  108  a,  1126 

V.  Chicago,  B.  &  N.  R.  Co.     .     .     44  Minn.  224 544 

V.  City  Bank 103  U.  S.  668 224 


TABLE   OF   CASES.  Ixxiii 

[All  references  are  to  Sections.] 

National  Bank  r.  Colby 21  Wall.  609      .     .     II.  150  a.  c,  157  a 

V.  Commonwealth 9  Wall.  353 II.  141,  b,  q 

V.  Drake 35  Kans.  564 124 

V  Eliot  Bank 20  Law  Rep.  138  .   289,  493.  494,  499, 

511,520,568 

V.  EUicott 31  Kans.  173 247 

I,  Fisher 45  Kans.  726 11.  141  g 

j;.  Flanagan 129  Mo.  178 567 

y  Graham 79  Penn.  106, 100  U.  S.  699  48, 102,  727 

r.  Grimes 49  Kans.  219 IL  1306 

V.  Hamilton  Nat.  Bank      ...    42  Fed.  880 250 

V.  Indiana  Banking  Co.      ...     114  111.  483 346,  542 

V.  Insurance  Co 104  U.  S.  54      ....  325,  326,  567 

?;.  Johnson 91  Ky.  181 H.  130,  130  A 

I'.  Levanseler 115  Midi.  372 144  m 

V.  Lewis 78  Wise.  475 144 

V.  Logan 35  Neb.  182 421  i 

V.  Mateby 53  Kans.  567 604 

i;.  Matthews 98  U.  S.  625     .     .     .    48, 752,  IL  144 

V.  Naell 52  Kans.  211 219 

V.  National  Bank 7  W.  Va.  544 413 

^;.  Nolting 94  Va.  263 480 

V.  Norton 1  Hill,  572 134 

„.  Perry 38  N.  W.  341  (Iowa)      .    .     .   IL  129 

V.  Rowley 52  Kans.  394 II.  130  d 

Second  National  Bank  of  Lou- 


isiana        60  Ind.  479   ..     .    366,  410,  493,  517 

i;.  Smith 66N.  Y.  271 562 

V.  Speight 47  N.  Y.  668 567 

V.  Stever 169  Pa.  St.  574 166 

V.  Wade 84  Fed.  10 IL  153 

V.  Washington  County  National 


Bank 5  Hun,  605 300,  302,  303 

V.  West.  National  Bank     ...     51  Md.  128 419,  464 

Whitney 103  U.  S.  99      ....     72,  752,  754 


National  Bank  of  America  v.  Indiana 

Banking  Co 114  111.  483   ..     .     375,  494,  530,  542 

National  Bank  of  Auburn  i-.  Lewis    .     .     75  N.  Y.  516 IL  130  c 

National  Bank  of  Camden  r.  Pierce      .  18  Alb.  Law  Jour.  16     .    46,  II.  108  j?, 

141  r 

National  Bank  of  Chattanooga  ?;.  Mayor    8  Heisk.  814 II.  141a 

National  Bank  of  Chemung  I'.  Elmira   .     53  N.  Y.  49 II.  141a 

National  Bank   of  Commerce  v.   Mer- 
chants' National  Bank 91  U.  S.  (1  Otto)  92  .     .  218,  225,  226 

227,  593 

V.  National  Mechanics'  Banking 

Association 55  N.  Y.  211     .     .     .     .    479,480,481 

V.  New  Bedford 155  Mass.  313 II.  141  b 


National   Bank    of    Commonwealth   v. 

Grocers'  National  Bank 35  How.  Pr.  412 463 

r.  Mechanics' National  Bank      .     94  U.  S.  4.37 IL  160  c 

National  Bank  of  Fairhaven  v.  Phoenix 

Warehousing  Co 6  Hun,  71     .    .     II.  106  a,  108  g,  157 


Ixxiv                                          TABLE    OF  CASES. 

[All  references  are  to  Sections.] 

National  Bank  of  Fayette  Co.  v.  Du- 

shane 96  Pa.  St.  340 II.  130 1 

National  Bank  of  Madison  v.  Davis  .     .  6  Cent.  Law  Jour.  106  .     .     II.  ISOd 

National  Bank  of  Metropolis  v.  Orcutt  .     48  Barb.  256 11,  106  a 

National  Bank  of  Michigan  v.  Green      .  33  Iowa,  140     ...     .     12,  n.  13,  49 
National  Bank  of  New  Haven  v.  Phoenix 

Bank 6  How.  71 46 

National   Bank   of   North  America   v. 

Bano-s                    106  Mass.  441    .     463,  466,  466  d,  477, 

°  488,  489 

National  Bank  of  Republic  y.  Millard   .  10  Wall.  152      .     .289,474,41)3,511, 

513,  568 

National  Bank  of  Rochester  v.  Pearson  Thomp.  Nat.  Bank  Cas.  637  .     .      73 
National  Bank  of  Rockville  v.  Second 

National  Bank  of  Lafayette  ....     69  Ind.  479 410,  517 

National  Bank  of  Winterset  v.  Eyre      .  2  N.  W.  Rep.  995  .     .     .     .    II.  130  m 
National  Butchers  &  Drovers'  Bank   v. 

Hubbell 117  N.  Y.  381 631 

National  Citizens'  Bank  v.  Howard  .     .     3  How.  Pr.  n.  s.  572 575 

National  City  Bank  v.  Wescott    .     .      .     118  N.  Y.  468 391,  479 

National  Commercial  Bank  v.  Miller     .  77  Ala.  168  .  346,  396,  399,  414,  n.  12, 

493,  515,  577,  584 
National  Commercial  Bank  of  Mobile  v. 

Mobile 62  Ala.  284 II.  141,  n.  55 

National  Exchange  Bank  v.  Boylen      .     26  W.  Va.  554 II.  130  / 

y.  McLoon 73  Me.  498 495 

,,,.  Moore 2  Bond,  170  .     .     .     .     49,  II.  130  d,  i 

V.    National     Bank     of    North 

America 132  Mass.  143 352,  353 

National  Gold  Bank  v.  McDonald      .     .     51  Cal.  64 237,  569,  572 

National  Lock  Co.  v.  People     ....     50  III.  App.  336 450 

National  Mahaiwe  Bank  v.  Peck  ...  127  Mass.  298   .     .     .     .,    .      562,  563 
National  Mechanics'  Banking  Associa- 
tion V.  Conklin 24  Hun,  496 ,      30 

National  Pahquioque  Bank   v.   Bethel 

Bank 36  Conn.  325     .     .     .     .171,  IL  150  a 

National  Park  Bank  v.  Eldred  Bank      .     90  Hun,  285 248  6 

V.  German  Mat.  W.  &  Security 

Co       53  N.  Y.  S.  Ct.  367 136 

V.  Gunst 1  Abb.  N.  Cas.  292   ...     .    II.  157 

V.  Harmon 79  Fed.  891 680 

V.  Ninth  National  Bank     ...    46  N.  Y.  77 463 

V.  Seaboard  Bank 44  Hun,  49 479 

„. 114N.  Y.  28 248  6 

V.  State  &  Johnson 58  Hun,  81 564  A 


National  Security  Bank  v.  Cushman      .  121  Mass.  490   ...     .  109,  134,  136 

V.  Price 22  Fed.  Rep.  697 623 

National  Shoe  &  Leather  Bank  v.  Me- 
chanics' National  Bank 89  N.  Y.  467 H-  157  a 

National  State  Bank  v.  Boylan     ...  2  Abb.  N.  Cas.  216    ..     .     II.  130  a 

V.  Brainard 61  Hun,  339 H-  130  c 

„.  Weil 141  Pa.  St.  457 421  6 

V.  Rmgel 51  Ind.  393 299 


TABLE   OF   CASES.  Ixxv 
[All  references  are  to  Sections.] 

National  State  Bank  r.  Young       .     .     .     25  Iowa,  811 II.  141  m 

National  Ulster  Co.  Bank  v.  Madden     .     114  N.  Y.  280 485 

Nave  V.  First  National  Bank    ....     88  Tnd.  204 170 

V.  Hadley 74  Ind.  156 170 

Neal  V.  Coburn 92  Me.  139 463 

V.  Moultrie 12  Ga.  104 128,  n.  14 

Neely  v.  Rood 54  Mich.  134    .    .     186,  289,  320,  5(58 

Neiffer  i).  Bank  of  Knoxville    ....     1  Head,  102 98,  n.  14,  144 

Nelligan  u.  Citizens'  Bank  of  Louisiana  21  La.  An.  332      ....       192,312 

Nelson  y.  First  National  Bank  .     .     .     .     48  111.36 407,511 

V. 107  Mass.  48 407 

Nesmitli  v.  Washington  Bank  ....    6  Pick.  329 9,  n.  11,  502 

New  England  Fire  &  Marine  Ins.  Co.  v. 

Schettler 88  111.  166 89 

New  England  Mar.  Ins.  Co.  V.  Chandler     10  Mass.  275 190 

New  Farmers'  Bank's  Trustee  v.  Young     100  Ky.  683 338 

New     Hampshire     Savings     Bank     v. 

Downing ^ 16  N.  H.  187     .     .     .     .     89,  98,  n.  22 

New  Hope  &  Delaware  Bridge  Co.  v. 

Perry 11111.467 652 

V.  Phoenix  Bank 3  Comst.  166 162 

New  Jersey  Steamboat  Co.  v.  Brockett     121  U.  S.  637 102,  n.  15 

New  Orleans  Canal  &  Banking  Co.  v. 

City  of  New  Orleans 9  Otto,  97 IL  141  u 

New  Orleans   National   Bank   v.   Ray- 
mond   29  La.  An.  736 IL  128 

New  York  Bank  v.  Gibson 5  Duer,  574 493,  502 

New  York  Bowery  Ins.  Co.  v.  New  York 

Ins.  Co 17  Wend.  359 21 

New  York  Cable  Co.  v.  Mayor,  &c.  of 

New  York 104  N.  Y.  43      .     .     .45,726,758,764 

New  York  Dry  Dock  v.  Hicks      ...     5  McLean,  111 46 

New  York  Firemen's  Ins.  Co.  v.  Ely    .     2  Cow.  707 9,  n.  9,  50 

New  York  Iron  Mine  v.  Citizens'  Bank      44  Mich.  844 889 

New  York  M.  Iron  Works  v.  Smith  .     .     4  Duer,  362 565 

New  York,  &c.  R.  R.  Co.  v.  Haws      .     .     56  N.  Y.  175 654 

New  York  Trust  &  Loan  Co.  v.  Helmer     12  Hun,  35 14 

Newark  Savings  Inst.  Case 28  N.  J.  Eq.  552     ....      566,617 

Newberry  Petroleum  Co.  v.  Weare    .     .     27  Ohio  St.  343 46 

Newbold  v.  Wright 4  Rawle,  195 9,  n.  9 

Newell  y.  National  Bank  of  Somerset    .     12  Bush,  57 II.  130  r/ 

NewHn  v.  McAfee    .  ' 72  Ala.  357 576 

Newport  National  Bank  v.  Tweed    .     .  4  Houston  (Del.),  99,  225   .      II.  130  c 

Newton  v.  Snyder 44  Ark.  42 612 

Niagara  Bank  v.  Roosevelt 9  Cow.  409 637 

Niagara  Co.  Bank  v.  Baker      ....  15  Ohio  St.  68  .     .     .       9,  n.  9,  50.  73 

Niblack  v.  Coster 80  Fed.  590 166,  2'.)0 

V.  Park  Nat.  Bank 169  111.  517 494 

Nicholas  v.  Adams 2  Whart.  (Pa.)  17 611 

Nicholls  V.  Pearson 7  Pet.  109 49 

Nichols  r.  Bank 55  Mo.  App.  81 167  6 

r.  State 46  Neb.  715 186,360,508 

Nicholson  v.  Crook .56  Md.  55 346 


Ixxvi                                         TABLE   OF  CASES. 

[All  references  are  to  Sections.] 

Nicholson  v.  Ricketts 29  L.  J.  Q.  B.  55 439 

Nickerson  v.  Kimball 1  Chic.  Law  Jour.  42     .     .      II.  141  e 

Nicollet  National  Bank  v.  City  Bank     .     38  Minn.  85 699  c 

Nolan  V.  Bank 67  Barb.  24 414,  n.  10 

Nonotuck  Silk  Co.  v.  Fair 112  Mass.  354 9,  n.  3 

Norfolk  National  Bank  y.  Schneuk  .     .     46  Neb.  381 11.  130, 130  ^f 

Norman  v.  Ricketts Lond.  Bank.  Mag.  June,  1886,  497  395 

Norris  v.  Here 22  La.  An.  905 604 

u.  Staps Hob.  211 43 

North  River  Bank  »;.  Ayraar    ....  3  Hill  (N.  Y.),  262     .     .112,134,136 
North  Ward  National  Bank  of  Newark 

V.  Peterborough 10  Vroom,  380 II.  141 

Northampton  Bank  w.  Pepoon  ....     11  Mass.  288 158 

Northampton  National  Bank  v.  Smith   .     169  Mass.  281 454 

Northern  Bank  v.  Farmers'  Bank      .     .     18  B.  Monr.  506 650 

V.  Johnson 5  Coldw.  88 744 

Northern  Central  Railway  Co.  v.  Bas- 

tian 15  Md.  494 98,  n.  26 

Northern  National  Bank  v.  Lewis      .     .     78  Wis.  475 144 

Northern  Trust  Co.  v.  Rodgers     ...     60  Minn.  208 493 

Northrop  v.  Hope 73  Me.  66 615 

r.  Newton 3  Conn  544 712 

V.  Sanborn 22  Vt.  433  ' 366 

Northwestern  Bank  v.  Machir  ....     18  W.  Va.  271 14 

Northwestern  Railway  Co.  y.  Whinray      10  Exch.  77 31 

Norton  v.  Bank 61  N.  H.  592 65,  752 

V.  Seymour 3  C.  B.  792 439 

Norvill  V.  Hudgins 4  Munf.  496 565 

Norway  Savings  Bank  v.  Merriman  .     .     88  Me.  146 610 

Note-holders  of  Bank  of  Tennessee  v. 

Funding  Board 16  Lea,  46 650 

Noyes  y.  Newburyport  Savings  Inst,     .     104  Mass.  583 604c 

Nutt  V.  Morse 142  Mass.  1 614 

Nutting  17.  Burkett 48  Mich.  241 


423 


o. 

Oakland  Bank  of  Savings  v.  Wilcox     .     60  Cal.  127 147 

Oakland   Co.    Savings    Bank   v.   State 

Bank 113  Mich.  284 701 

Oakley   v.  Workingmen's    Benevolent 

Society 2  Hilton,  487 

Oates  V.  First  Nat.  Bank  of  Montgomery  100  U.  S.  2,39    .     .      49,  563,  II.  130 -^ 

Ober  V.  Carson 62  Mo.  209 9,  n.  3 

O'Brien  v.  Smith 1  Black,  99 421 

v.  Weiler 68  Hun,  64 610 

Ocean  National  Bank  v.  Carll  ....     7  Hun,  237 II.  150  a,  c,  d 

Ocean  Tow-Boat  Co.  v.  Ship  Ophelia    .     11  La.  An.  28 546 

O'Connor  v.  Brandt 12  N.  Y.  App.  596 338 

V.  Majoribanks 4  Man.  &  G.  435 325 

I'.  Mechanics' Bank 124  N.  Y.  324 289a 

Oddie  V.  National  City  Bank    ....  45  N.  Y.  735      ....  451,  569,  571 


143 


TABLE   OF   CASES.  Ixxvii 
[All  references  are  to  Sections.] 

Oelricks  v.  Ford 23  Hun,  49 9,  n.  4 

Ogden  V.  Benas Law  R.  Com.  P.  C.  513      ...    475 

I'.  Dobbin 2  Hall,  112 217 

V.  Marchand 26  La.  61 565 

V.  Raymond 22  Conn.  384 128,  n.  22 

Ogdensburg  Bank  v.  Van  Rensselaer    .     6  Hill,  240 144,  n.  19 

O'Hare  v.  Second  Nat.  Bank  of  Titus- 

viUe 77  Pa.  St.  96     ...     .     734,  IL  129 

Ohio  Railroad  Co.  v.  Wheeler  ....     1  Black.  286 46 

Oil  City  V.  Oil  City  Trust  Co 1  Dist.  R.  (Pa.)  661    ..     .      II.  141  a 

Oil  Well  Co.  V.  Exchange  Nat.  Bank    .     131  Pa.  St.  101 252 

Olcott  V.  Ratlibone 5  Wend.  490 169,  544 

Oldham  v.  First  National  Bank  of  Wil- 
mington   85  N.  C.  240 IL  130  ;" 

Olmstead  v.  Winstead  Bank     ....    32  Conn.  278 652 

Olney  v.  Chadsey 7  R.  L  224 144,  150 

O'Neill  V.  Bradford 1  Finn.  390 299 

Ontario  Bank  u.  Lightbody 13  Wend.  101 637,662 

V.  Schermerliorn 10  Paige,  107 298 

Ordway  w.  Central  National  Bank     .     .     47  Md.  217 IL  130  a,  143 

Orn  V.  Merchants'  National  Bank     .     .     16  Kans.  341 II.  128 

Orr  V.  Lacey 2  Dougl.  252 750 

f.  McGregor 43  Hun,  529 615 

V.  Union  Bank  of  Scotland     .     .     1  Macq.  H.  L.  513 480 

Osborne  v.  Byrne 43  Conn.  155     ..     .    3,  566,  617,  632 

Osgood  V.  Lewis 2  Har.  &  G.  495 103 

Ostrander  v.  Scott 161  111.  339 546 

Otes  V.  Gross 96  III.  612 186,  568 

Other  V.  Iveson 3  Drew.  187 435,  553 

Oulton  V.  Savings  Inst 17  Wall.  109 2 

Overholt  v.  National   Bank  of  Mount 

Pleasant 82  Pa.  St.  490 IL  130  6 

Overman  v.  Hoboken  City  Bank  ...  1  Vroom,  61,  2  Vroom,  563     .351,  409 

Owen  V.  Bowen 5  Car.  &  P.  93,  96 185 

V.  Branch  Bank  of  Mobile      .     .     3  Ala.  258 664 

Owens  V.  Stapp 32  111.  App.  653 360 

Owenson  v.  Morse 7  T.  R.  64 637 

Oxford,  &c.  V.  Bunnell 6  Conn.  552 712 

Oyster  &  Fish  Co.  v.  Bank 51  Ohio  St.  106 415 


'Pabst  Brewing  Co.  v.  Reeves   ....    42  111.  App.  154 494 

Pace  V.  Howard  College  Trustees     .     .     15  Ga.  486 605 

Pacific  Bank  v.  Stone 121  Cal.  202 143 

Pack  I'.  Thomas 13  S.  &  M.  11 421,  n.  9 

Packard  v.  Lewiston 55  Me.  456    .     ,     .     .     .     .     ,  II.  14W 

Packing  Co.  1-.  Davis 118  N.  C.  555 583  a,  6 

Paint  Co.  y.  Nat.  Bank 4  Utah,  353 252  a 

Palmer  v.  Lawrence -.3  Sandf.  161      ....  668,  669,  673 

V.  Marshall 60  111.  289 565 

V.  Ridge  Mining  Co 34  Pa.  St.  288 71 


Ixxviii  TABLE   OF   CASES. 

[All  references  are  to  Sections.] 

Falmer  ..  Yates       3  Sandf.  137 9,  n.  9,  115 

Pancoast  v.  Ruffin 1  Ohio  St.  381 641 

r:in<?born  v.  Westlake 36  Iowa,  526 -^  734 

Panhandle  Nat.  Bank  v.  Emery  ' ...     78  Tex.  498 143, 14o 

Piircher  v.  Saco  &  Biddeford  Savings 

Bmk  7  Atl.  R.  266  (Me.) 614 

Pardee  ..Fish 60  iN.  Y.  265      .     .     .51,298,299,302 

Pari.sh  V.  Wheeler 22  N.  Y.  494 750 

Parke  r.  Roser 67  Ind.  503 482 

Parkerr.  Carolina  Savings  Bank.     .     .     53  S.  C.  583  .     .      120,  144,  675a,  678, 

691,  693 

1-.  Gordon 7  East,  385 45 

,.  Hartley 91  Pa.  St.  465 207,  567 

V.  Marchant Y.  &  Coll.  C.  C.  290 606 

,.  Marston 27  Me.  19(3 611,612 

V.  Robinson 71  Fed.  256 686 

i,.  Stroud 98N.  Y.  379 322 

Parkersburg  Bank's  Appeal     ....     6  Wk.  No.  Cas.  394 C30 

Parkersburg  National  Bank  y.  Als    .     .     5  W.  Va.  50 309 

Parsons  v.  Tread  well 50  N.  H.  356 309 

Parton  v.  Hervey 1  Gray,  119 754 

Partridge  v.  Coates Ry.  &  Mood.  153 460 

Paschail  ;-.  Whitsell 11  Ala.  472 761 

Pascoag  Bank  v.  Hunt 3  Edw.  Ch.  583 173 

Patriotic  Bank  v.  Farmers'  Bank  ...     2  Cranch  C.  C.  560    .     .     9,  n.  19,  220 

Patterson  v.  Poindexter 6  Watts  &  Serg.  227  .     .     .     .51,  299 

Patterson  Bank  v.  Butler 7  N.  J.  Eq.  268 265 

Pattison  v.  Syracuse  National  Bank      .     80  N.  Y.  94 47,  195 

Patton  V.  Beecher 62  Ala.  579 576 

V.  State  Bank 2  N.  &  M.  464 660 

Patton's  Adm'r  v.  Ash 7  Serg.  &  R.  116 552 

Paul  t-.  McGraw 3  Wash.  296 II.  141  A 

V.  Virginia 8  Wall.  168 46 

Pauly  V.  State  Loan  &  Trust  Co.  .     .     .     56  Fed.  430 680 

Paxton  V.  Courtney 2  Fost.  &  Fin.  181 9,  n.  8 

,;   Sweet 1  Green  (N.  J.),  196 43 

Payne  i'.  Bullard 28  Miss.  88 671,  672,  687 

V.  Clark 23  Mo.  259 307 

V.  Commercial  Bank      .     .     .    .    6  Sm.  &  Mar.  24 165 

*•.  Gardner 29  N.  Y.  146 289 

Peachey  v.  Rowland 16  E.  L.  &  Eq.  442 102 

Peacock  v.  Purcell 14  C.  B.  n.  s.  728 565 

Peak  V.  EUicott 3  Kans.  156 567 

Pearce  i'.  Davis 1  M.  &  Rob.  865 552 

Pearson  v.  Bank  of  Metropolis      ...     1  Pet.  89 220,  222,  231 

Pease  v.  Landauer 63  Wise.  20 494,  537 

V.  Warren 20  Mich.  9 564 

Peck  V.  First  Nat.  Bank 43  Fed.  357 217 

V.  Mayo 14  Vt.  33 12,  n.  16 

Redder  v.  Preston 9  Jur.  n.  s.  496,  11  C.  B.  n.  s.  535    327 

Pederson  y.  South  Omaha  Nat.  Bank    .     52  Neb.  95 326.9 

PeeU-.  Tatlock 1  Bos.  &  P.  419 42 

Pelliara  v.  Adams 17  Barb.  384 51 


TABLE   OF   CASES.  Ixxix 
[All  references  are  to  Sections.] 
Pelton  V.  Commercial  National  Banli  of 

Cleveland 101  U.  S.  143 II.  141  u 

Pemigewassett  Bank  v.  Rogers     ...     18  N.  H.  256 103,  1:^6 

Pendergast  I'.  Bank  of  Stockton  .     .     .  6  Ani.  Law  Rec.  574  .     .     .     .11.112 

Pendleton  v.  Bank  of  Kentucky    .     .     .  1  T.  B.  Monr.  171     19,  25,  27,  42,  102, 

156,  168,  254 

Penfield  v.  Thayer 2  E.  D.  Smith,  305 608 

Penfold  V.  Mould L.  R.  4  Eq.  562 610 

Peninsular  Bank  v.  Hanmer     ....     14  Mich.  208 153 

Penn  Bank  i\  Farmers'  Deposit   Nat. 

Bank 130  Pa.  St.  209 337 

V.  Prankish 91  Pa.  339 433 

Penn  Bank's  Estate 152  Pa.  St.  65 291  e 

Pennell  v.  Deffell '    .     .  4  De  G.  M.  &  G.  372      .   343,  355,  590 

Penobscot   &   Kennebec   R.  R.   Co.   v. 

Dunn 36  Me.  501 671 

Pentz  V.  Sackett Hill  &  D.  113 144 

People  V.  Assessors  of  Albany      ...  5  Tliomp.  &  C.  155    ...       II.  141  6 

V.  Bank  of  Dansville      ....     39  Hun,  187 567 

V.  Bank  of  Niagara 6  Cow.  196 760,  761 

V.  Bartow 6  Cow.  290 13 

V.  Brewster 4  Wend.  498 13 

V.  City  Bank 93  N.  Y.  583 248,  630 

V. 96  N.  Y.  32 567 

V. 7  Col.  226 761 

V.  Commissioners 4  Wall.  244 IL  141  c,  y 

„. 8  Hun,  536 IL  141  r 

V. 4  L.  &  E.  Rep.  213    ..     .       II.  141  t 

V.  Commissioners  of  Taxes    .     .     2  Black,  620 II.  141  ( 

V. 94U.  S.  415      .....      11.141c 

V. 69N.  Y.  91 11.1416 

V.  Dolan 36  N.  Y.  59 II.  141  i 

f.  Hudson  Bank 6  Cow.  217 761 

V.  Jansen 7  Johns.  332 37 

V.Jenkins 17  Cal.  500 42  c 

V.  Johnson 14  III.  342 346 

V.  Kemp 76  Mich.  40 377 

V.  Manhattan  Co 9  Wend.  351 6,  764 

. V.   Mechanics    &   Traders'  Sav- 

Inst 28  Hun,  375 632 

V.  Merchants  &  Mechanics'  Bank  78  N.  Y.  269      .     .     248,  493,  524,  568 

V.  Oakland  County  Bank  ...  1  Dougl.  282      ...  46,  63,  761,  764 

V.  Security  Life  Ins.  Co.    ...     78  N.  Y.  122 632 

V.  Shaw 5  Johns.  236 298 

V.  Sheppard 37  App.  D.  (N.  Y.)  119  .     .     .     .     569 

V.  State  Bank 36  Hun,  607 609 

V.  State  Treasurer 4  Mich.  27 646 

V. 24  111.  433 647 

V.  St.  Nicholas  Bank     ....  77  Hun,  159      338,  414,  414  a,  m,  493, 

569 

V.  Thompson 21  Wend.  235 760 

V.  Throop 12  Wend.  183 124 

V.  Utica  Ins.  Co 15  Johns.  358 13 


ings 


Ixxx 


TABLE   OF   CASES. 


[All  references  are  to  Sections.] 

People  V.  Vilas 36  N.  Y.  459 

V.  Washington  &  Warren  Bank  6  Cow.  211    . 

People's  Bank  v.  Franklin  Bank  ...  88  Tenn.  303 

V.  Gndley 91  111.  457     . 

V.  Jefferson  Co  Savings  Bank   .  106  Ala.  525 

V.  Kurtz 99  Pa.  St.  344 

V.  Legrand 103  Pa.  St.  307 

V.  National  Bank 101  U.  S.  181 

V.  Tufts 35  Cal.  792   . 

People's  Savings  Bank  v.  Cuppo  ...  91  Pa.  St.  315 

Peoria  &  Pekin  Union  R.  Co.  v.  Buckly  114  111.  337    . 

Peppin  V.  Cooper 2  B.  &  Aid.  431 

Percy  v.  Millaudon 8  La.  568 

Perkins  v.  Challis 1  N.  H.  254  . 

V.  Franklin  Bank 21  Pick.  483 

Perley  v.  Muskegon  Co 32  Mich.  132 

Persons  «.  Gardner 42  App.  D.  (N.  Y.)  490 

Peters  v.  Fort  Madison  Construction  Co.  72  Iowa,  405 

Peterson  r.  The  Mayor 17N.  Y.  449 

V.  Union  National  Bank     ...  52  Pa.  St.  206 

Petillon  V.  Noble 9  Leg.  News,  314  (Biss, 

Petrie  v.  Myers 54  How.  Pr.  5ir 

Pew  V.  First  Nat.  Bank  of  Gloucester   .  130  Mass.  391 

Peyton  v.  Hallett 1  Caines,  363 

Phelan  v.  Iron  Mountain  Bank     .     .     .  Ill  U.  S.  125 
V.  Moss 67  Pa.  St.  62 


Philadelphia  Bank  v.  Ex'rs  of  Thomas 

Officer 12  Serg.  &  R.  49 

Philadelphia  Loan  Co.  v.  Towner      .     .  13  Conn.  259 

Philadelphia  Nat.  Bank  r.  Morgan    .     .  1  Marvel,  265 

Philadelphia  Railroad  Co.  v.  Derby  .     .  14  How.  468 
Philadelphia,  Wilmington,  &  Baltimore 

R.  R.  V.  Quigley 122  U.  S.  607 

Phillips  V.  BuUard 58  Ga.  256    . 

V.  Mercantile  Nat.  Bank     ...  140  N.  Y.  556 

V.  Franciscus 52  Mo.  370   . 

Phillips  Academy  v.  King 12  Mass.  546 

Phipps  V.  Milbury  Bank 8  Met.  79      . 

V.  Tanner 5  Car.  &  P.  488 

Phoenix  Bank  v.  Bank  of  America    .     .  1  N.  T.  Leg.  26  (Ohio) 

y.  Risley Ill  U.  S.  125 

Packard  v.  Bankes 12  I<;ast,  20    . 

V.  Sears 6  Ad.  &  El.  469 

Pickering  v.  Hastings 66  Neb.  201  . 

Pickett  V.  Merchants'  National  Bank  of 

Memphis 52  Ark.  346 11.130  c 

Pickle  V.  Muse 88  Tenn.  389    .  409,  410,  457,  460,  493 

Pierce   v.  Boston  Five  Cents  Savings 

Bank 129  Mass.  425 610,612 

V.  Butler 14  Mass.  303     ...     .      9,  n.  9,  221 

r.  Rowe 1  N.  H.  182 309 

V.  Williams 23  L.  J.  Exch.  322 42 

Pierson  v.  Thompson 1  Edw.  Ch.  212 140 


...   31 

645,  760,  761 
466  d,  476 
.  710 
.  217 
.  103 
.  562 
65,  101 
.  324 
.  620 
.  546 
.   27 

117,  127 
.  565 
.  636 
.  289 
.  677 
.  615 
.  159 
359,  569,  572 

II.  157  c 
.  324 
.  150 

494,  538 
.  568 
.  565 

.  295 

73,  743 

.  175 

102,  n.  6  &  12 

102,  n.  15 

544,  546 

171/ 

.  300 

.   55 

232 

.  444 

414,  n.  16 

248, 568 

.  .  637 

.  .  468 

.  .  693 


TABLE   OF   CASES.  Ixxxi 
[All  references  are  to  Sections.] 

Pindall  v.  N.  W.  Bank 7  Leigh,  617 659 

Pine  V.  Smith 11  Gray,  38 12,  n.  5 

Fine  River  Bank  u.  Hodsdon    ....    46  N.  H.  114 669 

Tiner  v.  Clary 17  B.  Mon.  (Ky.)  645     ...     .     299 

Piscataqua  Bridge  v.  N.  H.  Bridge    .     .     7  N.  H.  69 6 

Piscataqua  Exch.  Bank  v.  Carter      .     .  20  N.  H.  246      .     .     .     .     9,  n.  9  &  17 
Pittsburg  Locomotive  &  Car  Works  v. 

State  National  Bank 2  Cent.  Law  Jour.  692  .     .      IL  108/ 

Planters'  Bank  v.  Bank  of  Alexandria  .     10  Gill  &  J.  346 763 

V.  Farmers  &  Mechanics'  Bank  .     8  Gill  &  J.  449 322 

V.  Kesee 7  lleisk.  200 367,  375 

V.  Lamkin R.  M.  Charlt.  29 2G,  43 

V.  Merritt 7  Heisk.  177      .      421,  n.  12,  493,  527 

V. 4  Sm.  &  Mar.  75 750 

V.  Sharp       6  How.  301 6,  49 

V.  State 6  Sm.  &  Mar.  628 761 

V.  Union  Bank 16  Wall.  483 248 

Planters  &  Merchants' Bank  ?;.  Hill  .     .     1  Stew.  201 17,22 

Piatt  r.Beebe 57  N.  Y.  839      .     .     .     .      IL  101,  150 

V.  Grubb 48  Plun,  447 604 

V.  Sauk  Co.  Bank 17  Wise.  222 299 

Piatt,  Petition  of 1  Bened.  534    ....      IL  146,  157 

Piatt,  Rec,  V.  Beach 2  Bened.  303 IL  150  a 

V.  Bentley 11  Am.  Law  Reg.  171    ....    338 

Player  v.  Archer 2  Sid.  121 43 

Plets  y.  Johnson 3  Hill,  112 370 

Plymouth  Bank  V.  Bank  of  Norfolk  .     .  10  Pick.  454      ....    9,  n.  11,698 

Poirier  v.  Morris 20  Eng.  L.  &  Eq.  103     ....     505 

Polglass  V.  Oliver 2  C.  &  J.  15 447,  637 

Pollard  V.  Bowea 57  Ind.  232 423 

V.  Ogden 2  E.  &  B.  459 572 

V.  Rowland 2  Blackf.  22  (Ind.) 267 

V.    Stockholders    of    Kentucky 

Exporting  Co 4  J  J.  Marsh.  52 690 

V.  Wellford 99  Tenn.  113 473 


Pomeroy  v.  Arrisworth 22  Barb.  118 12,  n.  13 

Pond  V.  Underwood 2  Ld.  Raym.  1210 438 

Poorman  i>.  Mills 35  Cal.  118  .     .    .     .51,298,299,442 

Pope  V.  Bank  of  Albion 59  Barb.  226     ....   155,  406,  413 

V.  Capitol  Bank  of  Topeka    .     .     20  Ivans.  440 72 

Porter  «.  Bank  of  Rutland 19  Vt.  410 Ill 

V.  Sherman  Co.  Banking  Co.      .     40  Neb.  274 IL  130  i 

V.  Talcott 1  Cow.  359 544 

V.  Taylor 6  Mau.  &  Sel.  156 439 

V.  United  States 91  Fed.  494       II.  159 

Portland  Bank  v.  Storer 7  Mass.  433 77 

Pott  V.  Clegg 16  M.  &  W.  321     .    289,  309,  322,  568 

Potter  V.  Merchants'  Bank 28  N.  Y.  641 158,  175 

i;.  Tallman 35  Barb.  182 12,  n.  15 

Potts  V.  Schumaker 84  Md.  535 629  a 

Powell  V.  Jones 72  Ala.  392 576 

V.  Morrison 35  Mo.  244 604 

V.  Regem 3  Bro.  P.  C.  436 43 

VOL.  I.—/ 


Ixxxii  TABLE    OF    CASES. 

[All  references  are  to  Sections.] 

Powles  V.  Paige 3  C.  B.  25 134 

Pratlier  v.  Kean 'i9  Fed.  Rep.  498 212 

Pratt  V.  Foote 9  N.  Y.  466 410,  451 

Prescott  V.  Plaugliey 65  Fed.  053 132 

V.  Leonard 32  Kans.  142 217 

President  v.  Corwin 37  N.  Y.  320 136 

Preston   v.  Canadian    Bank    of   Com- 
merce       23  Fed.  Rep.  179 352 

V.  Prather 137  U.  S.  004 326/ 

Prewitt,  Trustee,  v.  Trimble     ....     92  Ky.  176 147  e 

Price  V.  Abbott 17  Fed.  Rep.  506 II.  157 

V.  Neale 3  Burr.  1355      ....  462,  463,  488 

Price,  Rec,  f.  Yates 19  Abb.  L.  J.  295      ...      II  150  a 

Prideaux  v.  Criddle L.  R.  4  Q.  B.  455  .     .     .     .      232,  427 

Proctor  V.  Wliitcomb 139  Mass.  303 78 

Pronger  v.  Old  Nat.  Bank 20  Wash.  618 724 

Proseus  V.  Potter 20  App.  D.  (N.  Y.)  44    ....     610 

Prosser  v.  Wagner 1  C.  B.  n.  s.  289 438 

Protection  Ins.  Co.  v.  Harmer  ....     2  Ohio,  452 9,  n.  9 

Providence  Assisting  Association  v.  Citi- 
zens' Savings  Bank 32  Atl.  306 317 

Providence  Bank  v.  Billings     ....     4  Peters,  561 6 

Providence  Inst.  v.  Taft 14  R.  1.  502 608 

Providence  Institution  for   Savings    v. 

Carpenter 18  R.  I.  287 614 

Provident  Inst,  for  Savings  v.  City  of 

Boston 101  Mass.  575 IL  141  i 

Pruyn  v.  Van  Allen 39  Barb.  354 706 

Pryse  v.  Farmers'  Bank 33  S.  W.  532 172 

Purcell  V.  Allemong 22  Gratt.  739 423 

Purchase  i;.  Mattison 6  Due r,  587  .     .     .     .     398,  421,  n.  16 

Putnam  v.  Sullivan 4  Mass.  45 480,  486 

Pym  V.  Campbell 25  L.  J.  n.  s.  277 390 


Q. 

Quincy  Canal  v.  Newcomb 7  Met.  277 764 

Quinn  v.  Earle 95  Fed.  728 589,  629  a 


Raborg  v.  Bank  of  Columbia   ....     1  Ear   «&,  G.  231 220 

liailroad  Co.  v.  Howard 7  Wall.  392 632 

V.  National  Bank 102  U.  S.  14 600 

Ramsdale  v.  Horton 3  Pa.  330 659 

Kamsden  V  Boston  &  Albany  R.  R.  Co.     104  Mass.  117 102 

Rand  v.  Columbia  Nat.  Bank    ....     87  Fed.  520 679 

Randall «;.  Shaw 28  Kans.  419 219 

Ranger  v.  Great  Western  R.  Co.  .     .     .     5  H.  L.  Cas.  72 102,  ii.  10 

Rankin  v.  Sherwood 33  Me.  509 688 


TABLE    OF    CASES.  Ixxxiil 
[All  references  are  to  Sections.] 

Ransom  v.  Mack 2  Hill,  592 255 

Eaphael  v.  Bank  of  England     ....     17  C.  B.  161 649 

Rapp  y.  National  Bank 136  Pa.  St.  426      .     .     .     .414^,578 

Rastell  V.  Draper Yelv.  80,  Moore,  775,  Cro.  Jac.  88    306 

Rathbun  v.  Citizens'  Steamboat  Co.      .     76  N.  Y.  376 247 

Ray  V.  Bank 10  Bush,  844 201 

V.  Dennis 5  Ga.  357 338 

V.  Simmons 11  R.  I.  266 610 

Raymond  v.  Baar 13  Serg.  &  R.  318 659 

— '- —  V.  McKinney 68  Mo.  App.  303 547  A 

u.  Sellick 10  Conn.  484 611 

Raynor  v.  Pacific  Nat.  Bank  of  Boston  .     93  N.  Y.  371 11.  152 

Read  v.  Marine  Bank 59  Hun,  578 306 

Reapers'  Bank  v.  WiUard 24  111.  433 646 

Receiver  of  N.  Amst.  Savings  Bank  v. 

Tartler 4  Abb.  N.  C.  215 339 

Receivers  v.  Patterson  Gas  Li.^rlit  Co.    .     23  N.  J.  Law,  283 338 

Receivers  of  Bank  of  Circleville  v.  Ren- 
nick     15  Ohio,  322 763 

Reddell  v.  Dobsce 3  Jiir.  722 550 

Redington  v.  Woods 45  Cal.  406 454,  489 

Reese  v.  Bank  of  Commerce     ....     14  Md.  271 699,  701,  702 

Reeve  v.  Smith 113  111.  47 346 

Reeves  v.  State  Bank 8  Ohio  St.  465  .  250,  265,  272,  279,  631 

Regina  1-.  Esdaile IF.  &F.  213 132 

?'.  Watts 2  Den.  (Crown  C.)  14    .     .     .     .    460 

Regina  Flour  Mills  Co.  v.  Holmes     .     .     156  Mass.  11 246 

Renner  v.  Bank  of  Columbia    .    .    ,     .  9  Wheat.  581      9  C,  9  F,  220,  229,  231 

Revere  v.  City  of  Boston 6  Rep.  46  (Mass.)      ...      II.  141  n 

Rex  V.  Bird 13  East,  384 43 

V.  Ginever 6  T.  R.  735 43 

V.  Nutt Fitzg.  47 102 

V.  Weymouth 7  Mod.  374 43 

Reynes  v.  Dumont 130  U.  S.  354 325 

Reynolds  v.  Chettle 2  Camp.  596 354 

V.  First  National  Bank  of  Craw- 

fordsviUe 112  U.  S.  405 IL  128 

Reynolds,  Assignee,  v.  Simpson  &  Led- 

beth 74Ga.  454 78 

Rhodes  y.  Childs 64  Pa.  St.  18 611,612 

V.  Morse       14  Jur.  800        395  A 

V.  Webb 24  Minn.  292     ...     .  99,  144,  n.  12 

Rice  r.  Stearns 3  Mass.  225 217 

V.  National  Bank 77  Mich.  414 324 

Rich  V.  Errol 51  N.  H.  350 752 

('.State  National  Bank  of  Lincoln     7  Neb.  201 65,  101,  144  ^- 

Richards  v.  Attleborough  Nat.  Bank     .     148  Mass.  187 138 

V.  Kountze 4  Neb.  200 II.  128 

V.  New  Hampshire  Ins.  Co.    .     .     43  N.  H.  263 125 

V.  Rock  Rapids 31  Fed.  505 II.  141  y 

Richardson  v.  International  Bank      .     .     11  Brad.  582 326,  445 

?;.  Rice Cent.  Law  Jour.,  Vol.  VII.,  No.  12   565 

V.  Richardson L.  R.  3  Eq.  686 610 


Ixxxiv  TABLE   OF   CASES. 

[All  references  are  to  Sections.] 

Eicliardson  v.  Wallace 39  S.  C.  231       701 

Kiclimond  v.  Irons 121  U.  S.  27 679 

Kickford  v.  Ridge 2  Camp.  537      .   9,  n.  9,  238,  240,  243 

Kicks  *;.  Broyles 78  Ga.  610 337 

Hidden  v.  Thrall 125  N.  Y.  572 611 

Kidgely  National  Bank  v.  Patton       .     .     109  III.  479 557 

Ridgway  v.  Farmers'  Bank 12  Serg.  &  R.  256       70,  98,  n.  33,  116, 

144,  n.  22,  160,  295 
Ridley  v.  Plymouth  Grinding  &  Baking 

Co 2  Exch.  711 127 

Riley  v.  Albany  Savings  Bank      ...     36  Hun,  513 319 

V.  City  of  Rociiester      ....     5  Seld.  62 55 

RindskofE  v.  Barrett 11  Iowa,  172 9,  n.  9 

Ringling  v.  Kolm 4  Mo.  App.  59 565 

Ringo  V.  Trustees  of  Real  Estate  Bank    8  Eng.  563 645 

Ripka  V.  Geddis 20  Pa.  St.  140 12,  n.  13 

Risley  y.  Phoenix  Bank 83  N.  Y.  318      .     .    407,493,511,524 

Ritchie  v.  Bradshaw 5  Cal.  228 421 

Rivanna  Navigation  Co.  v.  Dawson  .     .     3  Gratt.  19 55 

Riverside  Bank  v.  First  Nat.  Bank   .     .     74  Fed.  276 564  A 

y.Woodhaven  Junction  Land  Co.  34  App.  D.  (N.  Y.)  359  .     ...     573 

Robarts  v.  Tucker 16  Q.  B.  560 474,  480 

Robb  V.  Pennsylvania  Co 186  Pa.  St.  456      ....  470  A,  480 

V.  Ross  County  Bank     ....    41  Barb.  586 156,  158 

Roberts  v.  Corbin 26  Iowa,  315      367,  375,  493,  494,  496, 

528,  531 

V.  Hall 37  Conn.  205 565,  600 

V.  Hill 23  Blatchf.  191 623 

V.  Lane 64  Me.  108 750 

V.  Roberts 15  W.  R.  177 608 

V.  Washington  Nat.  Bank       .     .     11  Wash.  550 133 

Robertson  v.  Allen 59  Tenn.  233 565 

V.  Buffalo  Co.  National  Bank     .    40  Neb.  235 144 

V.  Burdekin 1  Ross  L.  C.  812    .     .     .     .      12,  n.  13 

Robinson  v.  Ames 20  Johns.  146 227 

V.  Bank  of  Attica 21  N.  Y.  406 452 

i;.  Bank  of  Darien 26  Ga.  17    649,652,655,687,691,761 

V.  Bealle 20  Ga.  275 126,  639,  687 

r.  Bland 2  Burr.  1077 743 

V.  Commonwealth 3  Sum.  220 10 

V.  Frost 14  Barb.  536 325 

V.  Hawksford 9  Q.  B.  52     .    378,  380,  421,  n.  10,  495 

V.  Lane 19  Ga.  339    .     .     .    656,  679,  692,  694 

II.  National  Bank  of  New  Berne     19  Hun,  477      II.  157  a 

V.  Ring 72  Me.  140 615 

V.  Smith 14  Cal.  94 600 

V.  Ward 2  Cow.  &  P.  59 604 

Robson  V.  Bennett 2  Taunt.  388 408,  418 

V.  Oliver 10  Q.  B.  704 425 

Roca  V.Byrne 145N.Y.  182 590  r 

Rochester  City  Bank  v.  Elwood   .     .     .    21  N.  Y.  88 23,  30 

Rochester  Printing  Co.  v.  Loomis      .     .     45  Hun,  93 66© 

Rock  V.  Nichols 3  Allen,  342 710 


TABLE  OP  CASES. 


Ixxxv 


[All  references 
Rock  County  National  Bank  v.  HoUister 
Rock  River  Bank  v.  Sherwood     .     .     . 

Rockwell  V.  Bank 

V.  Dye 

Rodick  V.  Gandell 

Roebling  v.  First  National  Bank  .     .     . 
Roger  V.  Keystone  National  Bank     .     . 

Rogers  v.  Durant 

V.  Huntingdon  Bank      .     .     .     . 

V.  Kelly 

V.  New  Jersey  Ins.  Co 


167 


RoUin  V.  Steward 

Rolls  V.  Pearce 

Rollston  National  Bank  v.  Carleton  . 

Root  V.  Erdlemeyer 

Rosa  V.  Brotherson 

Roscorla  v.  Thomas 

Rose  V.  Hart 

V.  Houston 


Rosenback  v.  Salt  Springs  Nat.  Bank   . 

Rosenberg  v.  Weeks 

Rosenblatt  v.  Haberman 

V.  Johnston 

Rosenthal  v.  Ehrhicher 

V.  Mastin  Bank 


Ross  V.  Bank 

V.  Bedell 

V.  Curtis 

Rothenberg  v.  Vierath 

Rothschild  v.  Corney 

Rounds  V.  Smith 

Rouvant  v.  San  Antonio  National  Bank 

Row  V.  Dawson 

Royal  Bank  v.  Turquand 

Ruffin  V.  Board  of  Commissioners     .    . 

Rufford  V.  Bishop 

Runner,  Assignee,  v.  Dwiggins     .     .     . 
Runyan  v.  Lessee  of  Coster      .     .     .     . 

Russell  V.  Hanky 

V.  Langstaffe 

Ryan  v.  Dunlap 

V.  Manufacturers  &  Merchants' 


are  to  Sections.  ] 
21  Minn.  385     . 
10  Wise.  230     . 
4  Col.  App.  562 
42  App.  D.  (N.Y.)  520 

1  DeG.  M.  &  G.  763 
30  Fed.  Rep.  744 
83  Pa.  St.  248   . 
140  U.  S.  298    . 
12  Serg.  &  R.  77 

2  Camp.  123 

4  Halst.  Ch.  R 
14  C.  B.  594      . 

5  Ch.  D.  730  . 
136  Mass.  226  . 
37  Ind.  225    .     . 

10  Wend.  86     . 

3  Q.  B.  234  .  . 
8  Taunt.  499     . 

11  Tex.  324  .  . 
53  Barb.  495  . 
67  Tex.  578      . 

8  Mo.  App.  486 
104  U.  S.  462  . 
154  Pa.  St.  396 : 
17  Blatchf.  318 
20  Nev.  191  .     . 

5  Duer,  462  .     . 

80  Barb.  238     . 

81  Md.  624    .     . 

9  Barn.  &  Cr.  389 
42  111.  245     .     . 
63  Tex.  610  .     . 
1  Ves.  Sen.  331 

6  Ellis  &  Black.  327 
69  N.  C.  498      , 

5  Russ.  346  .  . 
147  Ind.  238  . 
14  Pet.  122,  131 

6  T.  R.  12     .     . 
Douglas,  514 
17  111.  40  .     .     . 


495, 


Bank 


V.  North  End  Savings  Bank 


9  Daly,  308  . 
168  Mass.  215 


.    246 

.     750 

IL  130 

.     425 

511,  541 

.      78 

.     565 

.     377 

701,  702 

.      24 

.     713 

458,  459,  507 

.      549,  550 

...      30 

.      n. 141  a 

...     599 

.     .    .     103 

.     .     .     336 

.     .     .324  c 

698,  II.  112 

.  IL  141  c,  s 

...     424 

.     n.  141 u 

.     .     .  421  i 

493,  513,  522 

...     679 

.      393,  565 

.      499,  506 

.     .     .590  6 

402,  441,  442,  443 

414,  451,  494,  580 

.     .     466 

.     .     407 

98,  n.  32 

568,  II.  141 

.     309 

.     696 

46,  754 

.     252 

.    486 

.     159 


186, 


.     246 
319  A 


s. 


Sackett's  Harbor  Bank  v.  Lewis  Co. 

Bank 11  Barb.  213 59,  77 

Sacramento  Bank  v.  Pacific  Bank     .     .  124  Cal.  147 694 

Sadler  v.  Belcher 2  M.  &  Rob.  489    .,    .  289,  589,  6i;9 


Ixxxvi  TABLE    OF    CASES. 

[All  references  are  to  Sections.] 

Safford  y.  Bank 61  Vt.  373 II.  157  a 

v.  Wyckoff 4  Hill,  442    .     .     63,  70,  743,  744,  745 

Sagory  v.  Dubois 3  Sandf.  Ch.  466    ...     .      669,  670 

Sahlien  v.  Bank 90  Tenn.  229 218 

St.  Louis  V.  Johnson 5  Dill.  241     .       188,  567,  573,  575,  589 

St.  Louis  National  Bank  v.  Allen  ...    2  McCrary,  92 II.  157 

V.  Brinkman 1  Fed.  Rep.  25 II.  157 

V.  Papin 3  Cent.  Law  Jour.  669  .     .      II.  141  c 

St.  Louis  Perpetual  Ins.  Co.  v.  Cohen   .    9  Mo.  416 158 

St.  Louis   School   Board  v.   Broadway 

Savings  Bank  Estate 84  Mo.  56 42 

St.  Nicholas  Bank  v.  State  Nat.  Bank   .     128  N.  Y.  26 272 

St.  Paul  Nat.  Bank  v.  Cannon  ....     46  Minn.  95 564 

St.  Saviour's  Southwick  v.  Bostock  .     .     2  New  R.  174 27 

Salem  Bank  v.  Gloucester  Bank   ...  17  Mass.  1        89.  98,  n.  17,  102,  n.  22, 

127,  167,  171,  468,  658,  659 

Salladin  v.  Mitchell 42  Neb.  860 338 

Salt  Lake  City  t-.  Hollister 118U.  S.  256 102,  n.  15 

Salt  Springs  National  Bank  v.  Burton   .     58  N.  Y.  430 45,  229 

Salte  V.  Field 5  T.  R.  215 100 

Salter  v.  Burt 20  Wend.  205 380,  389 

Samples  v.  Bank 1  Woods,  523 643 

Sandford  v.  Hayes 52  Pa.  St.  26 193,  312 

D.  McArthur 18  B.  Mon.  411      ....    128,  n.  22 

San  Diego  Co.  v.  California  Nat.  Bank     52  Fed.  59 604/ 

Sandy  River  Bank  v.  Merchants'  Bank     1  Biss.  146 159 

Sargeant's  Case 1  Rose,  153 583 

Sargent  y.  Webster 13  Met.  (Mass.)  497 120 

Saunders  ;;.  Hattermaa 2  Iredell,  32 359 

V.  White 20  Gratt.  397 637 

Saunderson  v.  Jackson 2  B.  &  P.  238 365 

V.  Piper 5  Bing.  New  R.  430 444 

Savannah  Bank   &  Trust  Co.  v.  Hart- 
ridge  73  Ga.  223 136 

Savings  Bank  v.  Bates 8  Conn.  505 641 

y.  Fogg 82xMe.  538 614 

Savings  Bank  of  Cincinnati  y.  Benton  .     2  Met.  (Ky.)  240 143 

Savings  Institution  v.  Ilathorn      ...     88  Me.  122 610 

Savings  &  Loan  Co.  y.  Multnomah  Co.     169  U.  S.  421 IL  130  rf 

SawtcU  V.  Drew 122  Mass,  228 9,  n.  12 

Sawyer  y.Hoag 17  Wall.  610 566,632 

—  V.  Pawners'  Bank 6  Allen,  207 150 

y.  Wiswell 9  Allen,  42 565 

Saver  v.  Wagstaff 5  Beav.  415 447 

Sayles  v.  Cox 95  Tenn.  580 248  a 

Saylor  u.  Bushong 100  Pa.  23    .     398,410,403,511,517, 

526,  535 

Sayre  v.  Weil 92  Ala.  466   ...    .     317,  317  a,  610 

Schaffer  v.  Maddox 9  Neb.  205 -    .    421,  n.  14 

Schaffner  v.  Ehrman 139  111.  109 458 

Scharf  v.  Moore 102  Ala.  468 391 

Schepp  V.  Carpenter 51  N.  Y.  602 389 

Schick  V.  Grote 43  N.  J.  Eq.  352 613 


TABLE    OF   CASES.  Ixxxvii 
[All  references  are  to  Sections.] 

Schley  v.  Dixon 24  Ga.  273 128,  ]29 

Schluter  y.  Bank 117  N.  Y.  125 317  n 

Schmidt  v.  First  Nat.  Bank  of  Relma    .  22  La.  An.  314      ....       IL  150  c 

Sclineider  v.  Irving  Bank 1  Daly,  500 290 

Schneitinan  y.  Noble 75  Iowa,  120 158 e 

Schoenwald    v.    Metropolitan    Savings 

Bank 57  N.  y.  418 620 

Scholey  v.  Ramsbottom 2  Camp.  485 445 

ScboUmier  v.  Schoendilen 78  Iowa,  426 551 

School  District  v.  First  National  Bank     102  Mass.  126 326,  590 

Schoolfried  I'.  Moore 9  Heisk.  171 416,421 

Schrader  r.  Manufacturers'  Bank      .     .     133  U.  S.  67 688,  694 

Schram  v.  Cartwright 4  Dist.  R.  632 608 

Scliroe<ler  v.  Harvey 75  111.  638 489 

Schuyler  Nat.  Bank  v.  Bollong     ...     28  Neb.  684 II.  130 

V. 32  Neb.  70 IL  130^ 

Schwarz  v.  National  Bank 67  Tex.  217 472 

Scofield  D.  State  Nat.  Bank  of  Lincoln       9  Neb.  316 IL  144 

Scott  i:  Armstrong 146  U.  S.  499 338 

V.  Berkshire  Co.  Savings  Bank  .     140  Mass.  157 609,  610 

V.  Commonwealth 5  J.  J.  Marsh.  643 637 

r.  Franklin 15  East,  428 324 

V.  Fritz 51  Pa.  St.  418 334 

V.  Ilarbeck 49  Hun,  292 610 

y.  Latimer 89  Fed.  843 113  c 

V.  Meeker     .........     20  Hun,  161 421 

V.  Nat.  Bank  of  Chester  Valley  72  Pa.  St.  471   .     .     .    102,  n.  20,  191, 

196,  202 

V.  Ocean  Bank  in  City  of  N.  Y.  23  N.  Y.  289     ...     .   574,  583,  599 

V.  Pequonnock    National    Bank 

of  Bridgeport 21  Blatchf.  203 713 

V.  Porcher 3  Meriv.  652 398 

V.  Shirk 60  Ind.  IGO 557 


Scruggs  V.  Gass 8  Yerg.  175 662 

Scudder  v.  Union  National  Bank  ...     91  U.  S.  406 406 

Seagor  v.  Sligerland 2  Caines,  219 9,  n.  9 

Scale  ('.  Baker 70  Tex.  283       132 

Second  National  Bank  v.  Brown  ...  72  Pa.  St.  209  .     .     .     .     .     .    IL  130 

V.  Hill 76  Ind.  223 557,  563 

y.  Smoot 2McArthur,  371    ....       IL  loOe 

V.  West.  National  Bank     ...     51  Md.  128 464 

V.  Williams 13  Mich.  255     ...     .  493,  521,  550 

Security  Bank  v.  National  Bank       .     .  67  N.  Y.  458      ..     .     414,  n.  19,  4S2 

V.  Northwestern  Fuel  Co.       .     .     58  Minn.  577 421 

Security  Bank  of  New  York  v.  National 

Bank  of  Commonwealth 4  Thomp.  &  C.  518    .     .     .      II.  150  a 

Seeley  i>.  New  York  Exchange  Bank    .  Thomp.  Nat.  BankCas.  804     II.  113  </ 

Seiger  y.  Second  Nat.  Bank      ....     132  Pa.  St.  307 562  o 

Selden  v.  Equitable  Trust  Co 94  U.  S.  419 4 

Selfridge  /;.  Northampton  Bank    ...     8  Watts  &  S.  320 645 

Seligman    v.    Charlotteville    National 

Bank 3  Hughes,  647 65 

Seneca  Co.  Bank  v.  Lamb 20  Barb.  595 48,  746 


IxXXviii  TABLE   OF    CASES. 

[All  references  are  to  Sections.] 

Senter  v.  Continental  Bank      ....  7  Mo.  App.  532 622 

Serle  v.  Norton 2  Moody  &  R.  401      ...    421,  n.  10 

Serrell  v.  Derbyshire  Railroad  Co.    .     .  19  L.  J.  C.  P.  377      .     .  365,  440,  442 

Sessions  r.  Moseley 4  Cush.  78 549,611,612 

Seventh  National  Bank  I'.  Cook    .     .     .  73  Pa.  St.  483  .     .     410,414,474,511 

Sewall  V.  Boston  Water  Power  Co.   .     .4  Allen,  277 480 

V.  Lancaster  Bank 17  Serg.  &  R.  285       .     .  701,  702,  705 

Seward  County  Commissioners  v.  Cottle  14  Neb.  144 289 

Sewell  V.  Corp 1  Car.  &  P.  392 9,  n.  19 

Sevbel  v.  National  Currency  Bank   .     .  54  N.  Y.  288 565 

Seybold  v.  Bank 5  N.  D.  460 573,  611 

Shackamaxon  Bank  v.  Kinsler     ...  16  Week.  Not.  Cas.  509      ...     334 

Shafer  y.  National  Bank 53  Kans  614 II.  130  n 

Shaffer  v.  McKee 19  Ohio  St.  526 474 

Sharpe  y.  Bellis 61  Pa.  St.  69 486 

Shaw  I'.  Bauman 34  Ohio  St.  25 604 

V.  Clark 49  Mich.  384 136 

V.  Dartnall 6  Barn.  &  Cr.  57 291 

r.  Picton 4  Barn.  &  Cr.  715 291 

V.  Spenser 100  Mass.  382 317 

Shawmut  Nat.  Bank  v.  Manson    ...  168  Mass.  425 573 

Sheafe  v.  Larimer 79  Fed.  921 691 

Sheehan  v.  Davis 17  Ohio  St.  571      ....     98,  n.  36 

Shelburne  Falls  v.  Townsley    ....  102  Mass.  177 233 

Sheldon  v.  Clews 13  Abb.  N.  C  69 628 

Sherman  v.  Fitch 98  Mass.  59 101 

Sherwood  v.  Savings  Bank 103  Mich.  109 248 

Shiels  V.  Blackburn 1  H.  Bl.  158 215,  289 

Shinkle    v.    First    National    Bank    of 

Ripley 22  Ohio  St  516      .     75,  II.  108,  130  a 

Shipmani;.  Bank 126  N.  Y.  318      171/,  289  a,  290,  291  e 

Shipsey  v.  Bowery  National  Bank     .     .  59  N.  Y.  485 252 

Shirley  y.  Whitehead 1  Ired.  Eq.  130      ......     550 

Shoemaker  i'.  Mechanics'  Bank    ...  59  Pa.  St.  83 223 

V.  National  Mechanics' Bank      .  1  Abb.  U.  S.  416  .       750,11.108,129, 

157  6 

Shortbridge's  Case 12  Ves.  Jr.  28 436 

Shower  v.  Pilch 4  Exch.  477 608 

Shrieve  v.  Duckham 1  Litt.  194 393 

Shunk  I'.  First  National  Bank  of  Gallon  22  Ohio  St.  508      ....      IL  130  a 

V.  Merchants'  National  Bank      .  19  Chic.  Leg.  N.  83 329 

V.  Miller 5  Barr,  250 19 

Shute  V.  Pacific  National  Bank     .     .     .  136  Mass.  487   ..     .     .     51,  298,  302 

Silver  Lake  Bank  v.  North 4  Johns.  Ch.  370    .  46,  59,  74,  754,  763 

Simmons  v.  Aldrich 41  Wise.  240 II.  141  h 

V.  l?ank  • 41  S.  C.  186  .     .    .     .      167  6,  298,  494 

V.  Cincinnati  Savings  Society    .  31  Ohio  St.  457     , 551 

Simms  i;.  Clark 11111.137   • 659 

Simonton  v.  Lanier 71  N.  C.  498 48 

Simpson  v.  Moulden 3  Cold.  429  (Tenn.) 299 

V.  PaciSc  Mutual  Life  Ins.  Co.    .  44  Cal.  139    .     .     .  414,  n.  13,  421,  426 

V.  Savings  Bank 56  N.  H.  466 566 

V.  Waldby 30  N.  W.  Rep.  199 272 


TABLE   OF   CASES.  Ixxxix 
[All  references  are  to  Sections.! 

Sims  V.Bond 6  Barn.  &  Ad.  392      .     .289,293,343, 

439,  568 

J,.  United  States  Trust  Co.     .     .    9  N.  E.  605  (N.  Y.) 457 

Simson  V.  Ingiiam 2  Barn.  &  Cr.  72 327 

Sinclair  v.  Pearson 7  N.  H.  227 102 

SkiUling  V.  Warren 15  Jolms.  270 505 

SkiUman  v.  Titus 3  Vroom,  96 388,  441 

Skinner  V.  Merchants' Bank     ....     4  Allen,  290 103 

Skovvhegan  Bank  v.  Cutler 49  Me.  315 710 

Skyring  v.  Greenwood 4  Barn.  &  Cr.  281 290 

Slaughter  v.  First  Nat.  Bank    ....     109  Ala.  157 II.  130  c 

Slawson  v.  Loring 5  Allen,  343 365 

Slee  V.  Bloom 19  Johns.  456 43,  693 

Sleedy  v.  Roach 124  Mass.  472 012 

Sloan  V.  Union  Banking  Co 67  Pa.  St.  479 565 

Slonian  v.  Bank  of  England     ....     14  Sim.  459 435 

Small  V.  City 126  Ind.  231 II.  141  i 

V.  Franklin  Mining  Co.      ...  99  Mass.  277     ...     .   393,  422,  546 

V.  Smith 1  Den.  583 565 

Smart  v.  Sanders 5  C.  B.  895 100 

Smedes  u.  Bank  of  Utica 20  Johns.  372    .    9,  n.  9,  232,  265,  274 

Smiley  v.  Fry 100  N.  Y.  262 297,  302 

Smilie  v.  Stevens 39  Vt.  315 302 

Smith  V.  Addison 5  Cranch,  623 31 

V.  Anderson 37  Hun,  72 146  c 

v.  Ayer 101  U.  S.  320 317 

V.  Bank  of  Scotland 1  Dow.  Pari.  R.  294 21 

V.  Bank  of  the  State 18  Ind.  327 98,  750 

V.  Butler 1  Jones  &  Lat.  692 606 

V.  Chester 1  D.  &  E.  655    .     .     .     .  463,  476,  488 

V.  Dorsey 38  Ind.  451 611 

V.  Eighth  Ward  Bank    ....  31  App.  D.  (N.  Y.)  6      ....     329 

V.  Essex  County  Bank  ....     22  Barb.  627 214 

V.  Exch.  Bank  of  Pittsburg    .     .  23  Ohio  St.  141      ...    72,  II.  130  a 

V.  First  National  Bank  ....     99  Mass.  605 128,  202 

r.  Freeholders  of  Essex     .     .     .    48  N.  J.  Eq.  027 604 « 

V.  Hull  Glass  Co 11  C.  &  B.  897 98,  n.  28 

r  Janes 20  Wend.  192 421 

u.  Law 21  N.  Y.  299 54 

V.  Lawson 18  W.  Va.  212  .     .  144,  n.  15,  165,  171 

y.  Lee 2  Th.  &  C.  591 610 

V.  Livingston Ill  Mass.  342 565 

V.  Mechanics'  Bank 6  La.  An.  610 474 

V.  Mercer 6  Taunt.  76  .     .     .    463,  465,  487,  488 

V.  Miller 52  N.  Y.  545,  43  N.  Y.  176      234,  240, 

247,  421 

V.  Mosby 9  Heisk.  501 838 

V.  Northnmpton  Bank    ....     4  Cnsh.  1 163 

V.  Prattville  Manufacturing  Co.     29  Ala.  n.  s.  503 128 

V.  Bathburn 88  N.  Y.  660 89 

!•.  Smith 1  R.  I.  398 366,  444,  485 

,.  '.     .     2  Johns.  235 12,  n.  15 

i-  Snow 3  Mad.  C.  C  310 706 


Xc  TABLE    OF    CASES. 

[All  references  are  to  Sections.] 

Smith  r.  Speer 34  N.  J.  Eq.  336 614 

t.  Traders' Nat.  Bank    ....     74  Tex.  457 146  j? 

r.  Union  Bank  of  London      .     .     L.  R.  10  Q.  B.  291 245 

„.  Whiting 12  Mass.  6     .     .     .      9,  n.  19,  9  B,  221 

Snead  v.  Williams 9  L.  T.  n.  s.  Exch.  115  .     .     .  291,  327 

Snodgrass  v.  Sweetser 44  N.  E.  648 480 

Snohomish  Co.    v.    Puget    Sound   Kat. 

Bank 81  Fed.  518 H-  150  A 

Snow  r.  Housatonic  R.  R.  Co 8  Allen  (Mass.),  441 102 

Solomon  v.  Bank 72  Miss.  858 708 

f.  Bates 118N.  C.  287 132 

Solomons  i;.  Bank  of  England  ....     13  East,  135 649 

Soper  V.  Buffalo  &  Rochester  R.  R.  Co.     19  Barb.  310 103 

V.  Harvard  College 1  Pick.  177 43 

Southerland  v.  Southerl.md 5  Bush,  -591 608 

Southern  Bank  v.  Williams 25  Ga.  534 726,  750 

Southern  Development  Co.  v.  Houston    27  Fed.  Rep.  344 568 

Southern  Loan  Co.  v.  Morris    ....     8  Barr,  175 51,  298 

Southgate  v.  Atlantic  &  Pacific  R.  R.    .     61  Mo.  89 159 

Southwick  V.  Estes 7  Cash.  385 102,  n.  12 

V.  First  National  Bank  of  Mem- 
phis      7  Hun,  96 II.  157  a 

Souverbye  v.  Arden 1  Johns.  Ch.  240 610 

Sowles  V.  Witters 39  Fed.  403 691 

Spafford    v.    First    National    Bank    of 

Tama  City .37  Iowa,  181     ....     IL  108,  128 

Spahr  V.  Farmers'  Bank 94  Pa.  St.  434 758 

Spain  y.  Hamilton's  Administrator    .     .     1  WalL'604 493,495,514 

Spalding  i'.  Bank  of  Susquehanna  Co.  .     9  Barr,  28 145 

Sparks  v.  Farmers'  Bank  of  Delaware  .     3  Del.  Ch.  274 27 

Spear  v.  Ladd 11  Mass.  94 158 

Spencer  v.  Ballou 18  N.  Y.  327 232 

V.  Wilson 4  Munf.  130 100 

Spilman  v.  Payne 84  Va.  439 3.38 

SpoSord  V.  Norton 126  Mass.  533 246 

Spraights  v.  Hawley 39  N.  Y.  441 599 

Spring  Brook  Chemical  Co.  y.  Dunn     .  .39  App.  D.  (N.  Y.)  130  .     .     .     .629a 

Springfield  v.  Green 7  Baxter,  301 546 

Springfield  Bank  v.  Merrick      ....     14  Mass.  322 746 

Springfield   Institution   for    Savings  v. 

\    Copeland 160  Mass.  380 613 

Springfield  Marine  Bank  v.  Jlitchell      .     48  111.  App.  486 358 

Springfield  Mar.  &  Fire  Ins.  Co.  v.  Peck     102  111.  263 347 

Spurr  V.  United  States 87  Fed.  701 H-  lo9 

Spurraway  i:.  Rogers 12  Mod.  517 449 

Spyker  v.  Spence 8  Ala.  333 144 

Stackhouse  y.  Countess  of  Jersey      .     .     30  L.  J.  Ch.  421 326 

Stacy  f.  Dane  County  Bank     ....  12  Wise.  629     .     .    236,206,274,287 

r.  State  Bank 4  Scam.  91 I'lO 

Stafford  National  Bank  v.  Dover  .     .    .     58  N.  H.  316 H.  141  p 

Stag^  V.  Elliott 12  C.  B.  K.  s.  373  .     .     .     .      98,  n.  15 

Staib's  Estate,  Bender's  Appeal  ...     11  Pa.  447 604 

Stair  V.  York  National  Bank    .     .     .     .     5  P.  F.  Smith,  3G4 343 


TABLE   OP   CASES.  XCl 
[All  references  are  to  Sections.] 

Stalker  i-.  McDonald 6  Hill,  93 599 

Stamford  Bank  v.  Benedict 15  Conn.  437 70,  165 

V.  Ferris 17  Conn.  259 170 

Stanhope's  Case 3  DeG.  &  Sm.  198 119 

Staniland  y.  Willott 8  Mac.  &  G.  664 611 

Stanton  v.  Blossom 14  Mass.  116 90 

Staples  V.  Franklin  Bank 1  Met.  43 636 

Stapylton  v.  Stockton 91  Fed.  326 II.  152 

Star  Cutter  Co.  v.  Smith 37  111.  App.  212     ...    .      425,  507 

Star  Fire  Ins.  Co.  v.  New  Hampshire 

National  Bank 60  N.  H.  442      ....  472,  477,  489 

Stark  V.  Gamble 43  N.  H.  468 309 

w.  U.  S.  National  Bank      .     .     .    41  Hun,  506 599 

Stark  Bank  v.  U.  S.  Pottery  Co.  ...    34  Vt.  144 127 

Starts  V.  George 150  Mo.  1 338 

State  V.  Bank  of  Carolina 1  Speers,  433 761 

■ V.  Bank  of  Fayetteville     ...    3  Jones  Law,  450       666 

V.  Bank  of  State  of  S.  Carolina  .  1  Rich.  S.  C.  n.  s.  63      ....     718 

V.  Bank  of  Tennessee    ....     5  Baxt.  101 643,  718 

V.  Bartley 39  Neb.  353 568 

V.  Beach 43  N.  E.  949 628  6 

ij.  Bonner 103  Iowa,  106 6286 

V.  Brobston 94  Ga.  99 338 

V.  Buck 108  Mo.  622 628 

V.Butler 86  Tenn.  631 11.141 

V.  Clark 4  Ind.  316 183,  190,  567 

t;.  Commercial  Bank      ....  6Sm.&M.218    98,  n.  19, 165,  761,  762 

V.  Commissioners  of  Mansfield  .     3  N.  J.  500 55 

V.  Cook 3  Vroom,  347 II.  141  / 

V.  Curtis 35  Conn.  374 II.  157 

V.  Davis 50  How.  447 169 

V.  Erfert 102  Iowa,  188 628  6 

V.  Essex  Bank 8  Vt.  489 760,  761 

V.  Fields 78  Iowa,  748 II.  159 

V.  First  National  Bank  of  Jeffer- 

sonville 89  Ind.  302 720 

V.  Franklin  Bank  of  Columbus  .     10  Ohio,  91 716 

V.  Fuller 34  Conn.  280    ...     .      II.  141, 159 

V.  Casting 23  La.  An.  1609 II.  159 

V.  Gates 67  Mo.  139 421,  n.  21 

!'.  Haiglit 2  Vroom,  399 IL141/ 

V.  Hart 2  Vroom,  434 II.  141  / 

,;.  Hill 47  Neb.  450 804 

V.  Keeter 80  N.  C.  472 298 

V.  Lincoln  Savings  Bank    ...     14  Lea,  42 3 

?;.  Midland  State  Bank  .     .     .     .     52  Neb.  1 186  a 

V.  Morgan 35  La.  An.  293 298 

V.  Morris  R.  Co 3  N.  J.  360 43 

V.  Myers 64  Kan.  206 623 

V.  National  Bank  of  Baltimore  .  33  Md.  75      ....      II.  141  n,  144 

W.Newark 36  N.  J.  (10  Vroom)  380     .      IL  141  ^ 

V. 40N.  J.  (11  Vroom)  558    .     II.  141  9 

V.  Norris 15  S.  C.  241 290 


Xcii  TABLE    OF   CASES. 

[All  references  are  to  Sections.] 

State  V.  Sattley 131  N.  Y.  165 628 

V.  Seneca  Co.  Bank 5  Ohio  St.  171 761 

V.  Shove 76  Wis.  1 2i»8 

V.  State  Bank 42  Neb.  896 567  c,  590 

V.  Stimpson 4  Zabr.  9 172 

V.  Thomas 53  Neb.  464 590  e 

V.  Tomblin 48  Pac.  144 628  6 

V.  Van  Pelt 1  Cart.  304 27 

V.  Williams 8  Tex.  255 13 

V.  Wilson 7  Craneh,  164 6 

L\  Yetser 97  Iowa,  423 628  6 


State  Bank  v.  Aersten 3  Scam.  135 650 

V.  Armstrong 4  Dev.  519    ..     .    324,  327,  328,  340 

V.  Bank  of  the  Capitol  ....    41  Barb.  343 232 

V.  Byrne 97  Mich.  178 214 

V.  Chetwood 3  Halst.  1      ....    23,  33,  40,  42  c 

V.  Coquillard 6  Ind.  232 49 

V.  Fearing 16  Pick.  533 477 

,;.  Fox 3  Blatchf.  431 158 

V.  Kain 1  Breese,  45 174,  297 

V.  Lock 4  Dev.  529 19,  297 

V.  Napier 6  Humph.  270 230 

V.  State 1  Blackf.  279 760,  761 

V.  Van  Horn 1  South.  382 644 

V.  Wheeler 21  Ind.  90 158 

State    Board    of   Agriculture    v.    City 

Street  Railway  Co 47  Ind.  407 745 

State   of  Minnesota   v.    Bank   of   New 

England 70  Minn.  398 680 

State    National    Bank    v.   Freedmen's 

Savings  &  Trust  Co 2  Dill.  11 466 

V.  Reilly 3  III.  455 388 

V. 124  111.  464 186  a,  317 

State  Savings  Association  v.  Boatman's 

Savings  Bank 11  Mo.  App.  292   ....      522,561 

State  Treasurer  z;.  Mann 34Vt.  371 27 

Stearns  v.  Brown 1  Pick.  531 309 

V.  Lawrence     .......    83  Fed.  738 147  a 

Stebbins  v.  Lardner 2  S.  D.  127,  143    ...     .      166,  564 

V.  Phoenix  Fire  Ins.  Co.     ...    3  Binney,  394        713 

Steckel  j;.  First  National  Bank  of  Allen- 
town   93  Pa.  St.  376 145 

Steele  v.  Atkinson 14  S.  C.  154 317  o 

V.  Russell 5  Neb.  211 234 

Stein  V.  Richardson 37  L.  J.  Ch.  309 606 

Stephenson  v.  Mount .     19  La.  An.  295 454 

Sterling   v.   Marietta    &    Susquehanna 

Trading  Co 11  Serg.  &  R.  178      103,  144  179,  246 

Sterrett  v.  Rosencrantz 3  Phila.  54 421,  n.  14 

Stetson  V.  City  Bank 12  Ohio  St.  577 42 

V.  City  of  Bangor 56  Me.  274 II.  100 

V.  Exchange  Bank 7  Gray,  425 336 

V.  Kempton  ........    13  Mass.  282 43 


TABLE   OF   CASES.  XCiii 

[All  references  are  to  Sections.] 

Stevens  v.  Board  of  Education     ...     78  N.  Y.  183 565 

V.  Hill 29  Me.  133 120 

V. 5  Esp.  247 418 


V.  McNeil 26  Barb.  651 393,  425 

V.  Monongahela  National  Bank  .  88  Pa.  St.  157  .  128,  753,  763,  II.  130  6 

V.  Park 73  111.  387 373,  421,  546 

('.  Reeves 9  Pick.  198 9,  n.  3 

V.  Stevens 2  Hun,  470 608 

Stevenson  «.  Bank 118  N.  C.  488 591 

Stewart  v.  Fry 7  Taunt.  339 493 

I'.  Huntingdon 11  Serg.  &  R.  267 103 

V.    National     Union    Bank    of 

Maryland 2  Abb.  U.  S.  424   ..     .     750,  II.  129 

V.  Smith 17  Ohio  St.  82 442 

V.  State 42  Tex.  242 290 


Stiltz  i;.  Interweiler 1  Wilson  (Ind.),  507  .    .     .      II.  14W 

Stimpson  ;•.  Vroman 99  N.  Y.  74 647 

Stockton  V.  Mechanics  &  Laborers'  Sav- 
ings Bank 32  N.  J.  Eq.  1G3    .     .     .     .      566,  632 

Stoize  V.  Bank 67  Minn.  172 329 

Stone  V.  Bishop 4  Cliff.  593 610 

V.  Marsh Ry.  &  M.  364 435 

Stoney  v.  American  Life  Ins.  Co.      .     .     11  Paige,  635 98,  n.  35 

Strain  v.  Gourdin 11  N.  B.  Reg.  156 493 

Strange  v.  Lee 3  East,  490 29 

Straughan  v.  Fairchild 80  Ind.  598 600 

Straus  V.  Tradesmen's  National  Bank  .     36  Hun,  451 325 

Stressguth  v.   National  German-Amer- 
ican Bank 43  Minn.  50 272 

Stribbling  v.  Bank        5  Rand.  132 14 

Strong  V.  Grand  Trunk  R.  R.  Co,     .     .     15  Mich.  205 9,  n.  7 

V.  King 35  111.  9 421 

V.  Stewart 9  Heisk.  137 272 

Stuart  V.  Commonwealth 8  Watts,  74 334 

V.  Earl  of  Bute 3  Ves.  Jr.  212 606,  654 

V.  Hayden 72  Fed.  402 683 

V. 169  U.S.I IL  112  a 

Stufflebeam  v.  De  Lashmutt    ....    83  Fed.  449 675,  679 

Sturdy  v.  Henderson 4  B.  &  Aid.  592 636 

Sturges  V.  Bank  of  Circleville  ....  11  Oliio  St.  153     .     157, 160,  167   171 

V.  Burton 8  Ohio  St.  215 128 

V.  Fourth  National  Bank   ...     75  111.  595 406 

Sturtevant  v.  Foord 4  Scott  N.  R.  668 443 

Stuyvesant  Bank  i\  National  Mechan- 
ics' Banking  A.ssociation 7  Sandf.  97 351 

Suffell  V.  Bank  of  England       .     .     .     .     7  Q.  B.  D.  270 661 

Suffolk  Bank  v.  Lincoln  Bank      ...     3  Mason,  1 637,  646,  647 

Suffolk  Savings  Bank  t^.  Petitioner  .     .     149  Mass.  7 II.  141  y 

Sullivan  v.  Lewiston  Institution   ...     66  Me.  507 620 

V.  Sullivan 39  App.  D.  (N.  Y.)  99   .     .     .     .    614 

Sunderlin  v.  Mecosta  Co.  Savings  Bank     116  Mich.  281 493 

Supervisors  of  Albany  Co.  v.  Stanley    .     105  U.  S  305 II.  141  w 

Susquehanna  Ins.  Co.  v.  Perrine  ...    7  Watts  &  S.  348 43 


XCiv  TABLE   OF   CASES, 

[All  references  are  to  Sections.] 

Susquehanna  Valley  Bank  v.  Loomis    .     85  N.  Y.  207 422 

Sutcliffe  V.  McDowell 2  N.  &  M.  251 393 

Sutherland  v.  First  National  Bank  of 

Ypsilanti 31  Mich.  230 214,217 

Sutton  V.  Baldwin 146  Ind.  361 546 

,  I,.  Toomer 7  Barn.  &  Cr.  416 380 

Sutton's  Hospital 10  Co.  306 62 

Svendsen  v.  State  Bank 64  Minn.  40 458 

Swall  V.  Clark 51  Cal.  227 565 

Swan  V.  Scott H  Serg.  &  R.  164 747 

Swartwout  v.  Mechanics'  Bank    ...     5  Denio,  555 604 

Sweeny  v.  Boston  Five  Cents  Savings 

Bank  116  Mass.  384 608 

V  Easter 1  Wall.  166 583,  591,  593 

Sweet  u.  Barney 23  N.  Y.  335 179 

V.  Stevens 7  R.  I.  375 390 

V.Titus 4  Hun,  639 546 

Sweetser  v.  Hay 2  Gray,  49 19 

I'.  People's  Bank 69  Minn.  196 329 

Swett  V.  Colgate 20  Johns.  196 103 

Swift  r.  Tyson 16  Pet.  1 10,565 

Swink's  Administrator  v.  Snodgrass      .     17  Ala.  657 317  a 

Sydner  v.  Mt.  Sterling  Nat.  Bank     .    .    94  Ky.  233 H.  180  d 

Sykes  y.  Halloway 81  Fed.  432 II.  112  o 

Syracuse,  Binghampton,  &  New  York 

R.  R.  Co.  V.  Collins 57  N.  Y.  641 421 


T. 

Tabor  ..  Perrot 2  Gall.  565 249,265,272 

Taft  V.  Quinsigamond  Nat  Bank      .     .    172  Mass.  363 573 

Talbot  ..  Rochester 1  Hill,  295    .     .    .    248,395,474,476 

Talbott  y.  Silver  Bow  Co 139  U.  S.  438 II.  141s 

Talcott  V.  National  Bank 53  Kans.  480 290 

Talledega  Ins.  Co.  v.  Woodward  ...    44  Ala.  287 299 

Talmage  j;.  Pell 3  Seld.  328 59,73,77 

Talman  v.  Rochester  City  Bank  ...     18  Barb.  123 63 

Tancil  v.  Seaton 28  Gratt.  601 654 

Tankersly  v.  Graham 8  Ala.  247 576 

Tapley  f.  Martin 116  Mass.  276   .    33,  38,  II.  102,  106  a 

Tappan  V.  Merchants' National  Bank    .     19  Wall.  490 11-141/ 

Tassell  v  Cooper 9  C.  B.  509 343 

Tate  ^.  Bates 118  N.  C.  287 132,137 

„  Hilbert 2  Ves.  Jr.  118  .     .    400,  550,  611,  612 

V.  Leithead Kay,  650 550 

Tay  V.  Concord  Savings  Bank      ...     60  N.  H.  277 440  A 

Taylor  v.  Bank  of  Kentucky    .     .     .    .    2  J.  J.  Marsh.  568 33 

„.  Cook 14  Iowa,  501 639.  651 

V.  Dobbins 1  Strange,  399 365 

V.  Empire  State  Savings  Bank  .    66  Hun,  588 734  a 

V.  Griswold 2  Green  (N.  J.),  223 43 

i;.  Hutton 43  Barb.  195     ....      123,11.109 


TABLE   OF   CASES. 


XCV 


[All  references  are  to  Sections.] 


Taylor  v.  Manufacturing  Co 

V.  Miami  Exporting  Co 

V.  Moseiey 

V.  Scrivens 

V.  Sip  .     . 

V.  Williams 

^— ^  V.  Wilson 

Tecumseh  Nat,  Bank  v.  Russell 

Ten  Brook  v.  Brown    . 

Terhune  v.  Bank      .    . 

Terrell  i».  Branch  Bank 

Terry  v.  Merchants  &  Planters'  Bank   . 

Teutonia  National  Bank  of  New  Orleans 

V.  Loeb 27  La.  An.  5 

Thatcher  v.  Bank  of  State  of  New  York    5  Sandf .  121 


82  111.  579 234 

6  Hamm.  176 716 

6  C.  &  P.  273 481 

I  Beav.  571 .     395  A 

30  N.  J.  284 389,  421 

II  Met.  44 546 

11  Met.  51 240,  544 

50  Neb.  277 173  a 

17  Ind.  410 608 

34  N.  J.  Eq.  367     ...     .      569,  587 

12  Ala.  502 130,  179 

66  Ga.  177 14 


V.  West  River  National  Bank 


325 

3,  n.  20,  161,  174,  178, 
179,  557 

19  Mich.  196 II.  106  a 

Thayer  v.  Boston 19  Pick.  516 102,  n.  9 

The  Atlanta  Nat.  Bank  v.  Burke  ...    81  Ga.  600 472,  474  a 

The  City  of  Washington 92  U.  S.  31 9.  n.  16 

The  Distillery  Spirits 11  Wall.  356     ...     .  109,  134,  166 

The  Floyd  Acceptance 7  Wall.  666 565 

The  State  v.  Brobston 94  Ga.  99 338 

V.  Myers 64  Kans.  206 623 

Theological  Seminary  of  Auburn  v.  Cole     18  Barb.  360 76 

Third  National  Bank  v.  Allen  ....     39  Mo.  310 489 

V.  Blake 73  N.  Y.  260 II.  128 

i;.  Clark 23  Minn.  263 217 

y.  Harrison 3  McCrary,  316 136a 

Third    National   Bank  of  Baltimore  v.  \ 

Boyd 44Md.  27     ....   59,77,  IL  108a 

Third  National  Bank  of  Louisville  v. 

Vicksburg  Bank 61  Miss.  112 285 

Third  National  Bank  of  Philadelphia  v. 

Miller 8  Pa,  St.  241     ....  II.  130,  n.  55 

Thomas  v.  City  Nat.  Bank 40  Neb.  501 65,  144  /i 

V.  Exchange  Bank 99  Iowa,  202      ...     326  e,  329,  494 

V.  Farmers'  National  Bank     .     .     46  Md.  43 II.  144 

V.  Fenton 6  D.  &  L.  28 380 

V.  Hopper 5  Ala.  442 334 

V.  International  Bank    ....    46  111.  App.  461 360 

V.  Supervisors 115  N.  Y.  47 544,  546 

V.  Todd 6  Hill,  340 637,  659 

Thomas,  Administrator,  v.  Lewis      .     .     89  Va.  1 612 

Thomas  McGhee  v.  First  Nat.  Bank     .     40  Neb.  92 II.  130  6 

Thomasson  v.  Bank 45  S.  C.  570 298 

Thomaston  Bank  v.  Stinson      ....    21  Me.  195 74 

Thompson  v.  Bank 82  N.  Y.  1     .     .     .     .    322,  395  A,  414 

V. 3  Hill,  77 265 

V.  Bell 26  Eng.  L.  &  Eq.  536     .     .      98,  n.  20 

V.  Giles 2  Barn.  &  Cr.  422 583 

V.  Greeley 107  Mo.  577 128 

V.  Pitman 1  Fost.  &  F.  339 552 


X(,yi  TABLE   OP   CASES. 

[All  references  are  to  Sections.] 

Thompson  v.  Redman 11  M.  &  W.  487 335 

^,.  Riggs 6  Wall.  663  .      184,  193,  289,  312,  568 

„*  St.  Nicholas  Nat.  Bank      .     .     47  Hun  (N.  Y.),  621   .    .     .     .11.155 

V.  Young 2  Ham.  334 27 

Thorn  V.  Sinsheimer 66  HI.  App.  555 421  9 

Thorndike  y.  Stone 11  Pick.  183 50 

Thornton  ..  Lane 11  Ga.  459    .     .     .    670,676,679,687 

V  Marginal  Freight  Railway      .     12  Mass.  32 138 

i;.  Thornton 99  Ga.  585 4216 

Thorp  Grain  Cleaner  Co.  i;.  Smith    .     .     IION.Y.  183 511c 

Thorpe  v.  Owen 6  Beav.  224 610 

V  Wegetarth 56  Pa.  St.  82     ....     637,  IL  144 

Thrall  f.  Newell 19  Vt.  202 477 

Threlfal  ..  Giles 2  M.  &  Rob.  492    ..     .  289,  589,  629 

Thresher,  Administrator,  v.  Dyer,  Ex- 
ecutor       69  Conn.  404 551 

Thweat  v.  Bank  of  Hopkinsville  ...     81  Ky.  1 748 

Ticonic  Bank  v.  Johnson 21  Me.  426 334 

Tiernan  v.  Commercial  Bank   ....     7  How.  (Miss.)  648    .     .  265,  274,  285 

. ,-.  Jackson 5  Pet.  580 550 

Tiffany  v.  National  Bank  of  Missouri   .     18  Wall.  409 H.  130 

Tillinghast  y.  Bailey 86  Fed.  46    ....     IL  113  a,  150  d 

V.  Wheaton 8  R.  L  586 612 

Timmis  V.  Gibbins 14  Eng.  L.  &  Eq.  64 662 

Tinkham  i,-.  Hay  worth 81111.519 248,568 

Tippets  V.  Walker 4  Mass.  595 71 

Titus  V.  Mechanics'  National  Bank  .     .     35  N.  J.  L.  588  .     .     .     .  265,  272,  569 

Tobacco  Pipe  Makers  v.  Woodroffe  .     .    7  Barn.  &  Cr.  838 43 

Tobey  v.  Manufacturers'  Bank      ...     7  R.  I.  236 334 

Tockusch  V.  Towsey 51  Tex.  129 248 

Toll's  Appeal 91  Pa.  St.  434 715 

Tombigbee  R.  R.  Co.  y.  Kneeland      .     .    4  How.  (U.  S.)  16      ....     46,63 

Tomblin  V.  Higgini.- 53  Neb.  92 IL  130d 

Tomkins  v.  Saltmarsh 14  Serg.  &  R.  275 194 

Tomlinson  v.  Ellison 104  Mo.  105 611 

Thornslow  v.  State 95  Tenn.  196 II.  159 

Tootle  I'.  Caldwell 30  Kans.  125 219 

V.  Cook 4  Col.  App.  Ill 247 

Tourtelot  v.  Tmke 87  Fed.  840 686 

Tower  v.  Appleton  Bank 3  Allen,  387 648 

Towle  i..  Starr 67  Minn.  370 297,298 

Town  of  Concord  t-.  Concord  Bank  .     .     16  N.  H.  26 295 

Town  of  Eagle  ?;.  Kohn 84  111.292 565 

Town  of  East   Hartford  v.  American 

National  Bank 49  Conn.  539 317 

Town  of  Learcy  v.  Yarnall 47  Ark.  280 758 

Towne  v.  Rice 122  Mass.  67 12,  n.  18 

Townsend  v.  Bank  of  Racine   ....    7  Wise.  185 662 

^.BiUinge 1  Hilt.  353 393 

V.  Webster  Five  Cents  Savings 

Bank 9  N.  E.  R.  521  (Mass.)  ....    342 

Towson  V.  Havre  de  Grace  Bank      .     .     6  Har.  &  J.  47 14,  637 

Tracy  v.  Talmage 18  Barb.  462 72 


TABLE    OP   CASES.  XCVll 

[All  references  are  to  Sections.] 

Tracy  v.  Talmage 4  Kern.  162 757 

Traders' Bank  y.  Campbell       ....  14  Wall.  87  .     .     .     .     .     .     .11.152 

Tradesman's  Bank  y.  Merritt    ....     1  Paige,  302      .     .' 360 

Tradesman's  National   Bank  v.    Third 

I^ational  Bank 66  Pa.  435 466 

Trangiac  v.  Arden 10  Johns.  293 615 

Tremont  Bank  v.  Paine 28  Vt.  24 144 

Trentel  v.  Barandon 8  Taunt.  100 593 

Trimbey  v.  Vignier 1  Bing.  N.  C.  151       ...      12,  n.  13 

Trimble  o.  Reed 97  Ky.  713 147/ 

Trinidad  National  Bank  v.  Denver  Na- 
tional Bank 4  Dill.  290 252,  578 

Tripp  V.  Curtenius 36  Mich.  494      ....  299,  302,  303 

V.  Swanzey  Paper  Co 13  Pick.  291 305 

Troy  City  Bank  v.  Grant 77  N.  Y.  365 454 

True  V.  Thomas 16  Me.  36 359 

Trust  &  Savings  Bank  v.  Manufactur- 
ing Co 150  111.  8G6 578,  628  b 

Trustees  of  Dartmouth  College  v.  Wood- 
ward   4  Wheat.  636 6 

Tryon  v.  Oxley 3  G.  Green,  289 432 

Tucker  Manuf.  Co.  v.  Fairbanks  ...     98  Mass.  101 593 

Tueley  v.  Thomas 8  Car.  &  P.  104 9,  n.  16 

Tufts  V.  People's  Banking  &  Trust  Co.     69  N.  J.  L.  380 557  c 

Turnbull  v.  Bowyer 40  N.  Y.  456 477,  487 

Turner  v.  Bank  of  Fox  Lake    ....  23  How  Pr.  399,  3  Keyes,  425    .    240, 

247,  544,  567 

y.  First  Nat.  Bank  of  Keokuk    .  26  Iowa,  562      .     .     .     .  191,  II.  150  c 

Tuttle  y.  Frelinghaysen 38CSI.  J.  Eq.  12 626 

V.  Walton 1  Ga.  43 698 

Tweddie  v.  Atkinson 30  L.  J.  Q.  B.  265 499 

Twenty-Sixth  Ward  Bank  v.  Stearns    .     148  N.  Y.  515 134 

Twin  City  Bank  v.  Nebeker     .     .     .     .     167  U.  S.  196 II.  141 

Tygard  y.  McComb 54  Mo.  App.  85 Oil 

Tyson  v.  State  Bank 6  Blackf.  225     ....    52,  252,  272 

Tyson  &  Rawls  v.  Western  Nat.  Bank  .    ^7  Md.  412 217 


u. 

Uhl  y.  Harvey 78  Ind.  26 675 

Ullman  v.  Barnard 7  Gray,  554 576 

Ulster  Co.  Savings  Institution  v.  Nat. 

Bank 5  Silv.  (N.  Y.)  144 451 

Union  Bank  y.  City  of  Richmond      .     .     94  Va.  386 II.  141,  141  e 

y.  Clossey 11  Johns.  182 23,  24 

y.  Ellicott 6  Gill  &  J.  363 637,  641 

V.  Knapp 3  Pick.  96    .     .113,  290,  291,  294,  295 

y.  Johnson 9  Gill  &  J.  297 591 

y.  Laird 2  Wheat.  390     ..     .       699,  701,  713 

y.  Middlebrook 33  Conn.  100 408 

V.  Planters'  Bank 9  Gill  &  J.  439  .     .    .     .    9,  n.  17,  322 

y.  Ridgely 1  Har.  &  G.  413    .     .     .  16,  20,  27.  43 

VOL.  I.  — g 


Xcviii  TABLE   OF   CASES. 

[All  references  are  to  Sections.] 

Union  Gold  Hill  Mining  Co.  v.  Rocky 

Mountain  National  Bank 96  U.  S.  640 II.  129 

Union.  &c.  v.  Rocky 2  Col.  248 171 

Union  National  Bank  v.  Baldenwick      .    45  111.  375 489 

V.  Chambers 9  Pliila.  131 466 

V.  Desmond 33  111.  App.  102 208 

V.  Hunt 7  Mo.  App.  22 59,  77 

V  Mathews 98  U.  S.  626    48,  72,  750,  754, 755,  758, 

II.  128,  144 

V.  Ocean  Co.  Bank 80  111.  212     ..     .     875,  398,  494,  530 

V.  Railway 145  ill.  208 II.  130  d 

V.  Rowan 23  S.  C.  339 72 

„.  Sixth  National  Bank      ...    43  N.  Y.  452 454 

Union  Stock  Yards  Bank  v.  Gillespie    .     137  U.  S.  411 326/ 

Union  Trust  Co.  y.  Trumbull  .     .     .     .     137  111.146 324  e 

United  German  Bank  v.  Katz  ....    57  Md.  128 751 

United  Security  Life  Insurance  &  Trust 

Co.  V.  Central  Nat.  Bank 185  Pa.  St.  586      ....      473,  474 

United  Society  v.  Underwood  ....  9  Bush  (Ky.),  609  ...  128,  130 
United   States  v.  American  Exchange 

National  Bank 70  Fed.  232 479 

V.  Bank  of  Montreal      ....    21  Fed.  Rep.  236 4 

V.  Bartow 20  Blatchf.  351 II.  159 

V.  Book 2  Cranch  C.  C.  294 298 

V.  Britton 107  U.  S.  655 II.  159 

V.  Buchanan 8  How.  83,  102 9,  n.  5 

— V.  Cadwallader 59  Fed.  677 II.  159 

V.  Central  National  Bank  ...     15  Fed.  222 II.  141  w 

V. 24  Fed.  577 II.  141  v 

V.  City  Bank  of  Columbus     .     .  21  How.  356       152,  154,  159,  167,  171 

V.  Clinton  National  Bank  ...     28  Fed.  3-37 489 

y.  Cook  Co.  National  Bank    .     .  11  Leg.  News,  344     .     .     .      IL  150  c 

V. 9Biss.  55 IL  150  c 

V.  Cutts 1  Sumner,  1-33 713 

V.  Eckford 6  Wall.  484 632 

y.  First  Nat.  Bank 82  Fed.  410 316,  489  e 

V.  Fish 24  Fed.  585 II.  159 

V.  Kinney 90  Fed.  2.57 II.  159 

V.  Kirkpatrick 9  Wheat.  720         38,  489 

U.Knox 102U.  S.  422 IL  1126 

y.  Lee 12  Fed.  816 IL  159 

U.Mann 17Alb.  L.J.  85 11.200 

V.  National  Bank 6  Fed.  134 489 

V.  73  Fed.  379 ,207 

V.  Nat.  Bank  of  the  Republic     .    2  Mackey,  289 489 

t'.  Nat.  Exchange  Bank     .     .     .    45  Fed.  103 466  A,  487 

V.  Peters 87  Fed.  984 II.  159 

V.  Rhawn 33  Leg.  Int.  258 IL  200 

V.  State  Bank 96  U.  S.  30 690,  752 

V.  Taintor 11  Blatchf.  374 II.  159 

V.  Thompson 98  U.  S.  46 489 

V.  Warner 26  Fed.  616 IL  159 

V.  Wilson 106  U.  S.  020 II.  141  u 


TABLE   OF   CASES.  XCIX 

[AU  references  are  to  Sections.  ] 

United  States  Bank  v.  Westervelt     .     .     55  Neb.  425 219 

United  States  National  Bank  v.  Burton    58  Vt.  426 233,  255 

V.  First  Nat.  Bank 79  Fed.  296 144  j 

V.  Geer 55  Neb.  469 217 

Upham  V.  Lefavour 11  Met.  174       562 

Upton  V.  National  Bank  of  S.  Reading       120  Mass.  153 75  II.  128 

V.  Tribilcock 91  U.  S.  50 89 

Utica  Ins.  Co.  v.  Bartow 6  Cow.  290 13 

V.  Bloodgood 3  Wend.  652 743 

V.  Cadwell 3  Wend,  296 743 

y.  Kip .  8  Cow.  20,  3  Wend.  36  ....    743 

V.  Lynch .     .     11  Paige,  520 590 

V.  Scott 8  Cow.  709 13 

V. 19  Johns.  1 743 


Vail  V.  Newark  Savings  Inst 32  N.  J.  Eq.  627    ..    .  186,  629,  630 

Vaisey  v.  Reynolds 5  Russ.  12 606 

Valk  V.  Crandall 1  Sandf.  Ch.  179 144 

Vallett  V.  Parker 6  Wend.  615 745 

Van  Allen  v.  American  Nat.  Bank    .    .    52  N.  Y.  1 344,  567,  590 

V.  The  Assessors 3  Wall.  673 IL  141  d,  y 

Van  Amee  v.  Bank  of  Troy     ....    8  Barb.  312 599 

Van  Antwerp  v.  Hurlburd 7  Blatchf.  426,  8  id.  282     II.  116,  145, 

150  a 

Van  Bibber  v.  Bank  of  Louisiana      .     .  14  La.  An.  481  .     .     474,  494,  511,  536 

Van  Dyck  v.  McQuade 18  Hun,  376 632 

Van  Leuven  v.  First  National  Bank     .  54  N.  Y.  671      52,  144,  n.  10,  IL  108  b 

Van  Reemsdyk  v.  Kane 1  Gall.  371 10 

Van  Wart  v.  WooUey 3  Barn.  &  Cr.  439      .     .  252,  265,  277 

Vance  v.  Bank 1  Blackf.  80 14 

V.  Lowther 1  Ex.  D.  176 485 

V.  Mottley 92  Tenn.  310 172,  174 

Vanderberg  v.  Palmer 4  Kay  &  Johns.  204 610 

Vanderzee  i-.  Willis 3  Brown  C.  C.  21 325 

Van  Peet  v.  Gardner 54  Neb.  702 687 

Vansands  v.  Middlesex  Co.  Bank      .     .     26  Conn.  144 701 

Van  Wagenen  v.  Genesee  Falls  Savings 

Association 88  Hun,  43 179 

Van  Winkle  Gin  Co.  v.  Citizens'  Bank      89  Tex.  147 324 

Vanzant  v.  Arnold 31  Ga.  210 12,  n.  16 

Vaudor  ;;.  Roach 72  Cal.  614 611 

Vaughn  v.  Menlove 3  Bing.  New  Cas.  468    ....     194 

Veazie  Bank  v.  Fenno 8  Wall.  533 141,  IL  100 

V.  Winn 40  Me.  62 891,  421,  425 

Venango  National  Bank  v.  Taylor    ,.     56  Pa.  14 338 

Vere  v.  Lewis 3  T.  R.  182 370 

Ve^milye  v.  Adams  Express  Co.  ...    21  Wall.  139 9,  n.  9 

Vermont  &   Canada    Railroad   Co.   v. 

Vermont  Central  Railroad  Co.       .    .     34  Vt.  2 728 

Vernon  v.  Bovery 2  Show.  296 447 


C                                                 TABLE   OP  CASES. 

[All  references  are  to  Sections.] 

Vernon  v.  Ilankey 2  T.  E.  287 400  A 

Vickrey  v.  State  Savings  Association     .    21  Fed.  773 592 

Vidal  V.  Mayor 2  How.  128 76 

Viets  V.  Union  National  Bank  of  Troy      101  N.  Y.  563 344 

Vilas  Nat.  Bank  of  Plattsburg  v.  Strait     58  Vt.  448 144 

Village  of  Port  Jervis  v.  First  National 

Bank  of  Port  Jervis 96  N.  Y.  550 146 

Vining  v.  Bricker 14  Oliio  St.  331 734 

Virginia  Coupon  Cases 114  U.  S.  269,  234 51 

Voltz  y.  National  Bank 158X11.532 728 

Vose  f.  Grant 15  Mass.  505 717 

Voss  V.  German  American  Bank       .     .     83  111.  699 662 


w. 

Waco  National  Bank  u.  Rogers    .     .     .     51  Texas,  606 II.  141  s 

"Wade  V.  American  Colonization  Soc.   .     7  Sm.  &  Mar.  697 76 

?;.  New  Orleans  Canal  Co.      .     ,    8  Rob.  (La.)  140 649 

V.  Withington       1  Allen,  561 480 

Wade's  Case Rep.  Pt.  5,  14  a 447 

Wagner  v.  Crook 167  Pa.  St.  259 236  6 

V.  Howard  Savings  Institution  .     52  N.  J.  L.  225 620  d 

Wain  Wright  v.  Weber 11  Vt.  576 662 

Waite  V.  Dowlev 94  U.  S.  527 II.  141  A 

Walker  I..  Bank 9  N.  Y.  (5  Seld.)  582 252 

V.  British  Guaranty  Association      18  Q.  B.  277 42 

w.  Chapman 22  Ala.  116 19 

V.  Grand  Rapids  Co 70  Wise.  92 166 

1-.  Manhattan  Bank 25  Fed.  247 204.317 

«.  Rostron 9  M.  &  W.  411 313,398 

V.  St.  Louis  National  Bank     .     .    5  Mo.  App.  204 103 

r.  The  State  Trust  Co.      .     .    .  30  App.  D.  (N.  Y.)  55    .     .     .     319  A 

y.  Walker 91  U.  S.  704,  5  Heisk.  425  .     .     .     247 

Wall  V.  Provident  Institution  ....     3  Allen,  96 620 

Wallace  v.  Bank 89  Tenn.  630 172 

y.  Hood 89  Fed.  11 679,690 

y.  Kelsall 7M.  &W.  242 435 

V.  Lincoln  Savings  Bank   ...    89  Tenn.  630 137 

V.Stone    .........     65  N.W.  113 248 

Wallis  V.  Littell 5  Law  T.  Rep.  n.  s.  489    ..     .    390 

y.  Manhattan  Co 2  Hall,  495 319 

Walls  V.  Bailey 49  N.  Y.  464 9,  n.  12 

Walsh  V.  Gladstone 1  Phil-  Ch.  C.  294 554 

i;.  Rogers 12  Neb.  28 476 

Walsh's  Appeal 122  Pa.  St.  177 612 

Walter  y.  Dolan 26  Am.  Law  Reg.  25  (U.  S.)  .     .     590 

y.  Ford 74  Mo.  195 550 

Walters  v.  Brown 15  Md.  292 233 

Ward  V.  Johnson 95  111.  215     .     .     .      63,  186,  018,  750 

j;.  Northern  Bank 14  B.  Monr.  351 231 

V.  Smith 7  Wall.  447 214,  247,  637 

y.  Turner 2  Vei.  ben.  443 611 


TABLE    OP   CASES. 


CI 


[All  references  are  to  Sections.] 

Warden  i-.  Howell 9  Wend.  174 

Ware  v.  Street 2  Head,  609  . 

Warlius  V.  Bowery  Savings  Bank      .     .  21  N.  Y.  546 

Waring's  Admr.  v.  Edmonds     ....  11  Md.  424    . 

Warner  v.  De  Witt  Co.  National  Bank  4  III.  App.  305 

V.  Penoyer 91  Fed.  587  . 

V.  Sauk  County  Bank   ....  20  Wise.  492 

Warren  v.  Gilman 17  Me.  360    . 

— ■ V.  Shook 1  Car.  &  P.  59 

Warren  Bank  v.  Suffolk  Bank      ...  10  Cush.  583  (Mass. 


102,  n 


.  565 

644,  m-2, 

.    620 

.  608 

.  750 

.  116 

.  19;} 

.  233 

4 

17,  220, 


236,  265,  269 
Warrensburg  Co-operative  Building  As- 
sociation V.  Toll 83  Mo.  94 421 

Warwicke  i'.  Noakes Peake  N.  P.  98 395 

Wasliington  Bank  v.  Lewis 22  Pick.  24 103,  134,  136 

Washington  County  National  Bank  i-. 

Lee 112  Mass.  521 IL  106  a 

Washington  Nat.  Bank  y.  Pierce       .     .     6  Wash.  491 146/* 

Wasson  v.  Lamb 120  Ind.  514      ...     291,  291  b,  573 

Waterloo  Milling  Co.  J'.  Kuenster  &  Co.     158  111.61,259 274 

Waters  v.  Bank  of  Georgia R.  M.  Charlt.  193 649 

Waterson  y.  Masterson 15  Wash.  511 696 

Watervliet  Bank  v.  White 1  Den.  608 419 

Watriss  v.  First  National  Bank  of  Cam- 
bridge       124  Mass.  571 II.  144 

Watson  V.  Bennet 12  Barb.  196      ....  102,  n.  9,  169 

y.  Phoenix  Bank 8  Met.  217    .      291,294,295,311,322 

i-.  Poulson 7  Eng.  L.  &Eq.  585, 15  Jur.  1111    389 

V.  Russell 3  B.  &  S.  .34 398 

V.  Town  of  Fairmont    ....    38  W.  Va.  183 II.  141  h 

Watt  V.  Cans  &  Co.      . 114  Ala.  264 421  ft,  d 

Watts  1-.  Christie 11  Beav.  546     .     .    289,  313,  326,  338, 

458,  568 

y.  Wells 7  Mon.  L.  R.  (Q.  B.)  387    ...      65 

Wayne  v.  Commercial  National  Bank  .  52  Pa.  St.  343   ...     .      21,  37,  42  c 

Wear  y.  Lee 87  Mo.  358 421 

Weaver  v.  Nixon 69  Ga.  699 544 

Weber  y.  Spokane  Nat.  Bank   ....     50  Fed.  735 754,11.136 

y.  Weber 9  Daly,  211 610 

Webster  v.  Howe  Machine  Company     .     54  Conn.  394 748 

Weckler  y.  First  National  Bank    .     .     .  42  Md.  58      .     .     59,  77,  103,  II.  108  a 

Wedlake  v.  Hurley 1  C.  &  J.  83 493 

Weed  V.  Bond 21  Ga.  195 565 


V.  Panama  Railroad  Company 


Wegner  v.  Second  Ward  Savings  Bank 

Weinstock  v.  Bellewood 

Weisinger  y.  Bank 

Welch  y.  German  American  Bank     .     . 

V.  Goodwin 123  Mass.  71 

Seymour 28  Conn.  387 


17  N.  Y.  362 102 

76  Wise.  242 620  c 

12  Bush,  1.39 494,  532 

10  Lea,  330 290 

73  N.  Y.  424 472, 473 

464 

27 


Weld  V.  City  of  Bangor 59  Me.  416 II.  141  a 

V.  Gorham 10  Mass.  366 9,  n.  9 

Wellington  v.  Jackson 121  Mass.  157 468 


Cii  TABLE   OF   CASES. 

[All  references  are  to  Sections.'] 

Wells  I'.  Brigham 6  Cush.  6 372 

V.  Morrison 91  Ind.  51 546 

y.  Tucker 3  Binn.  366 608.611 


Welton  V.  Adams  &  Co 4  Cal.  37 299,  649 

Wendell  v.  French 19  N.  H.  213 309 

V.  Washington  &  Warren  Bank     5  Cow.  161 645 

Werk   V.  Mad    Kiver   Valley   Branch 

Bank 8  Ohio  St  301 421 

West  V.  American  Exchange  Bank   .     .     44  Barb.  175 599 

V.  Errol 58  N.  H.  233 752 

V.  First  Nat.  Bank  of  Elmira      .    20  Hun,  408 89 

V.  St.  Paul  Nat.  Bank    ....     54  Minn.  466 219 


West  Brancli  Bank  v.  Fulmer  ....  3  Barr,  390 227,  232 

West  St.  Louis  Savings  Bank  v.  Shaw- 
nee County  Bank 95  U.  S.  557      ....   156,  158, 169 

Western,  &c.  R.  R.  v.  Franklin  Bank    .  60  Md.  361 103 

Western  Bank  v.  Gilstrop 45  Mo.  419 159 

V.  Mills 7  Cusli.  539 746 

Western  Reserve  Bank  v.  Mclntyre      .  40  Ohio  St.  52 IL  144 

Western  Wheeled  Scraper  Co.  v.  Sodi- 

lek 50  Neb.  105 236  6 

Westfall  V.  Braley 10  Oliio  St.  188 662 

Westminster  Bank  v.  Wheaton     ...  4  R.  I.  30 380,  383,  385 

Weston  t'.  Barker 12  Johns.  276 499 

r.  Hight 17  Me.  287 611,612 

Wetherell  r.  O'Brien 140  111.146 186  6 

Wetherill  ;;.  Bank  of  Pennsylvania  .     .  1  Miles,  399  ; 246 

Weatherow  v.  Lord 41  App.  D.  (N.  Y.)  413      .   604  b,  608 

Weyer  y.  Second  Nat.  Bank  of  Franklin  57  Ind.  198 IL  112  a 

Wharton  v.  Morris 1  Dall.  125 299 

V.  Walker 4  Barn.  &  Cr.  163 185 

Wheatley  v.  Purr 1  Keene,  551 610 

V.  Strobe 12  Cal.  92 408,  495 

Wheeler  v.  Aiken  Co.  Bank      ....  75  Fed.  781 128, 140 

V.  Gould 20  Pick.  545 456 

V.  National  Bank 96  U.  S.  268 IL  130  c,  d 

Wheelock  v.  Freeman 13  Pick.  165 485 

V.  Kost 77  111.  296 II.  146,  150  d 

Whelan  v.  Childress 7  Humph.  303 299 

Whistler  v.  Forster 14  C.  B.  n.  s.  248  .     .     .  380,  482,  486 

Whitaker  v.  Bank  of  England      ...  6  Car.  &  P.  700     .    431,  458,  459,  507 

Whitbeck  v.  Mercantile  Bank  ....  127  U.  S.  193 IL  141  b 

White  V.  Ambler 8  N.  Y.  170 373 

V.  Continental  National  Bank    .  64  N.  Y.  320 476,  477 

V.  Cushing 88  Me.  339 374 

f.  Franklin  Bank 22  Pick.  181 .     .     .       51,  161,  298,  322 

r.  Howe 3  McLean,  111 128.652 

V.  Knox Ill  U.  S.  784 II.  145 

V.  National  Bank 102  U.  S.  658 326,  593 

V.  Sprin<;field  Bank 3  Sand.  S.  C.  222 565 

V.  Springfield  Institution   .     .     .  134  Mass.  232 474 

Whitehead  v.  Walker 10  Mees.  &  Wels.  696    ...     .    227 

Whitesides  v.  Northern  Bank   ....  10  Bush,  501 485 


TABLE   OF   CASES.  Clll 

[All  references  are  to  Sections.] 

Whitman  y.  Cox 26  Me.  335 688 

Whitmore  v.  Wilks 3  Car.  &  P.  364 480 

Whitnash  v.  George 8  Barn.  &  Cr.  556 42 

Whitney  v.  Butler 118  U.  S.  655 679 

. y.  Esson 99  Mass.  311     ...     .       9,  n.  8,  236 

V.  First  Nat.  Bank  of  Brattleboro    50  Vt.  388 48 

V. 55  Vt.  154 200,  202 

f.  Foster 117  Mich.  643 165  r 

Ragsdale 33  Ind.  107 II.  141  e 


Whitten  v.  Hayden 9  Allen,  408 246 

Whittington  v.  Farmers'  Bank      ...     5  Har.  &  J.  489 717 

Whitwell  I'.  Johnson 17  Mass.  452 220,  231 

Whitworth  v.  Adams 5  Rand.  333 49 

Wickliam  v.  Gatrill 2  Sm.  &  G.  353 42 

Wicks  i;.  Hatch 62  N.  Y.  535 272 

Widgery  v.  Monroe 6  Mass.  449 220 

Wienholt  v.  Spitta 3  Camp.  376 398 

Wiesser  y.  Denison 10  N.  Y.  68   .      291,463,467,468,472 

Wiggin  V.  Freewill  Baptist  Church  .    .     8  Met.  301 113 

Wilcox  V.  Onondaga  Co.  Savings  Bank     40  Hun,  297 440  B 

Wild  V.  Bank  of  Passamaquoddy       .     .  3  Mason,  505     98,  n.  10,  156,  157,  158, 

171 

Wildert;.  Union  National  Bank    .     .     .  12  Leg.  News,  75  (Biss.)     .      IL  157  c 

Wilderman  v.  Rogers 7  Eastern  Rep.  786 434 

Wiley  ?;.  First  Nat.  Bank  of  Brattleboro    47  Vt.  546 191 

?;.  Starbuck 44  Ind.  298 IL  130  d 

Wilkinson  v.  Griswold 12  Sm.  &  Mar.  669 267 

V.  Johnson 3  Barn.  &  Cr.  428      ...      476,  488 

V.  Lutwidge 1  Str.  648 463 

WiUetts  V.  Paine 43  111.  433     .      9,  n.  9,  312,  421,  n.  10 

V  Phoenix  Bank 2  Duer,  121     155,  370,  414,  n.  11,  418. 

443 

Williams  v.  American  Nat.  Bank  ...    85  Fed.  376 750 

V.  Cheney 3  Gray,  215 565 

V.  Cox 97  Tenn.  567 573 

y. 99  Tenn.  403 629a 

?;.  Barrier 135  Pa.  St.  445 171  7 

V.  Everett 14  East,  582 398,  493 

V.  Gillman 3  Green,  276 424 

V.  Griffith 5  M.  &  W.  300 327 

V.  Hadley 8  East,  378 751 

V.  Hood 1  Phil.  205 422 

V.  Kelsey 6  Ga.  365 295 

V.  Mechanics'  Bank 5  Blatchf .  C.  C.  59     .     .     .      701,  709 

V.  Meloy 97  Wise.  561 693 

V.  Riley 34  N.  J.  Eq.  398 173 

. V.  Rogers 14  Bush,  788 289 

V.  State 51  Neb.  630 II.  159 

V.  Union  Bank 2  Humph.  339 14 

V.  Weaver 75  N.  Y.  30 II.  141  r 

V.  Williams 55  Wise.  300 604 

Williamson  v.  Johnson 1  Barn.  &  Cr.  149 439 

V.  Williamson L.  R.  7  Eq.  542 292 


civ  TABLE   OF   CASES. 

[All  references  are  to  Sections.] 

Willing  V.  Consequa 1  Pet.  301 113 

Willis  &  Co.  V.  Finley 173  Pa.  St.  28 424 

Wilmot  V.  Hurd 11  Wend.  584 335 

Wilson  i;.  Book 13  Wasli.  676 687,696 

V.  Craven     . ' 8  M.  &  W.  584 29 

y.  Dawson 52  Ind.  513 186,  207,  562 

w.  Foree 6  Johns.  110 289 

V.  Goodwin Wriglit  (Oliio),  219 553 

V.  Holmes 5  Mass.  543 217,  593 

v.V&yxXy 72  Fed.  129 146t 

L'.  Smith 3  How.  (U.  S.)  763    250,272,591,599 

V.  Wysar 4  Taunt.  288 743 

Wincock  V.  Turpin 96  111.  135 692 

Wing  V.  Merchant 57  Me.  383 608 

Wingate  v.  Mechanics'  Bank    ....  10  Barr,  104      .     .    218,  252,  283,  295 

V.  Orchard 75  Fed.  241 691 

Winsor  v.  Lafayette  Co.  Bank      ...     18  Mo.  App.  665 169 

Winter  v.  Bank  of  New  York  ....     2  Caines,  337 181 

V.  Belmont 53  Cal.  428 710 

V.  Drury 1  Seld.  525 493,  523 

V.  Winter 101  Eng.  C.  L.  997 608 

Winters  v.  Armstrong      ......     37  Fed.  508 670 

Winthrop  Savings  Bank  v.  Jackson      .     67  Me.  570 335 

Winton  V.  Little 94  Pa.  St.  64 144,  n.  13 

Wirebach  v.  First  National  Bank      ..     97  Pa.  543 392 

Wisconsin    Marine  &   Fire  Ins.  Co.  v. 

Bank  of  British  North  America     .     .  21  Upper  Canada  Q.  B.  284    .     .    225 

Wisner  v.  Schopp 34  App.  D.  (N.  Y.)  199  ....     546 

Wiswell  r.  Starr 48  Me.  401 693,696 

Witte  V.  Vincenot 43  Cal.  325 290 

Witters  V.  Sowies 32  Fed.  Rep.  130   ..     .  130,  166,  686 

Wittkowski  v.  Smith 84  N.  C.  671 230 

Witzel'sCase 2  Bradf.  386 610 

Wolfe  V.  Simmons 75  Miss.  539 132 

Wolff  i;.  State 79  Ala.  206 317  a 

Wolstenholm  v.  Sheffield  Union  Bank- 
ing Co 54  Law  T.  R.  746 325 

Wolverton  v.  Exchange  Nat.  Bank  .    .     77  Wash.  94 II.  130 

Wood  V.  Boylston  National  Bank      .     .     129  Mass.  358 326,  597 

V.  Dummer 3  Mason  C.  C  308 693 

V.  Merchants'  Savings,  Loan,  & 

Trust  Co 41111.267 557 

V.  Wallace 24  Ind.  226 506 

V.  Warner 15  N.  J.  Eq.  81 12,  n.  7 

V.  Wood 1  Car.  &  P.  59 9,  n.  4 


Woodin  «.  Frazee 38  N.  Y.  Sup.  Ct.  190    •.     ...     421 

Woodman  v.  Thurston 8  Cush.  157 425 

Woodruff  V.  Erie  Railroad  Co.     ...    93  N.  Y.  618 730 

V.  Hill 116  Mass.  310 12,  n.  13 

V.  Merchants'  Bank 25  Wend.  673   .     9,  n.  9,  380,  381,  S87 

V.  Munroe 33  Md.  158 464,  468 

y.  Plant 41  Conn.  344 421,425 

Woods  w.Legg 91  Ala.  513 317  a 


TABLE    OP   CASES.  CV 
[All  references  are  to  Sections.] 

Woods  V.   People's  National   Bank   of 

Pittsburg 83  Pa.  St.  57 II.  128 

V.  Schroeder 4  Har.  &  J.  276 393 

V.  State 10  Mo.  698 19 

V.  Thiedeman 1  H.  &  C.  478    .     .     .     .  225,  474,  557 

Woolen  V.  New  York  &  Erie  Bank   .     .     12  Blatclif.  359 224 

Woolfolk  V.  Bank  of  America  ....     10  Busli,  504 485 

WooUey  v.  Louisville  Banking  Co.    .     .     87  Ky.  527 325 

Worcester  County  Bank  v.  Dorchester, 

&e.  Bank 10  Cusli.  488 652 

Work  V.  Tatman 2  Houst.  304 383 

Wray  v.  Tuskegee  Ins.  Co 84  Ala.  58 666 

Wright  V.  Boyd 3  Barb.  523 170 

V.  Douglas 10  Barb.  97 76 

V.  Field 7  Ind.  376 693 

y.  First  Nat.  Bank  of  Greensburg     18  Alb.  L.  J.  115 11.180 

V.  Georgia  R.  R.  &  Banking  Co.     34  Ga.  330 89 

y.  Laing 3  Barn.  &  Cr.  165 327 

V.  Merchants'  National  Bank      .  3  Cent.  Law  J.  351     ....    II.  146 

V.  Reed 3  T.  R.  554 637 

V.  Russell 2  Black,  934 27 

V.  Wilcox 19  Wend.  343 102,  n.  9 

Wroten  v.  Armat 31  Gratt.  228 11.  128 

WyckofE  V.  Anthony 90  N.  Y.  442 325 

Wyer  y.  Dorchester,  &c.  Bank      .     .     .     11  Cush.  51 662 

Wylie  V.  Northampton  Bank    .     .     .     .     19  U.  S.  861 56,  202 

Wyman  v.  Citizens'  National  Bank  .     .    29  Fed.  734 754 

V.  Colorado  National  Bank    .     .     5  Col.  30 594 

V.  Hallowell  &  Augusta  Bank    .  14  Mass.  58  .    89,  98,  n.  22,  102,  n.  29, 

765 


Yardley  v.  Wilgus 56  Fed.  965 679 

Yeaton  v.  Bank  of  Alexandria  ....  6  Cranch,  49 220 

York  Railway  Co.  v.  Hudson    ....  19  Eng.  L.  &  Eq.  361     ....     125 

Young  V.  Adams 6  Mass.  182  ....     .  289,  464,  669 

V.  Axtell       24  Black,  242 131 

V.  Godbe 15  Wall.  562 12 

V.  Grote 4  Bing.  253 480 

V.  Hudson 99  Mo.  102 159  rf 

Youngs  V.  Lee 18  Barb.  187 657,  599 


z, 

Zantzingers  v.  Gunton 19  Wall.  32 II.  150 

Zelle  V.  German  Savings  Inst 4  Mo.  App.  401 329 

Zeller  v.  Jordan 105  Cal.  143 548 

Zimmerman  v.  Rote 75  Pa.  St.  188 480 

Zinck  V.  Walker 2  W.  Bl.  1154 325 


BANKS  AND  BANKING. 


[All  references  are  to  sections,  throughout  the  book  ;  those  of  Part  11., 
upon  National  Banks,  being  pi-eceded  by  II. ;  the  Second  Part  contains  a 
table  (II.  0),  by  means  of  which  ready  reference  may  be  had  to  the  por- 
tions of  this  book  that  concern  any  given  section  of  the  Revised  Statutes 
of  the  United  States;  and  the  cases  that  construe  the  words  of  a  given 
section  of  the  banking  law  may  always  be  found  by  turning  to  that  sec- 
tion of  Part  II.  whose  number  is  100  plus  the  number  of  the  said  section 
of  the  banking  law. 

The  analysis  at  the  head  of  each  chapter  is  intended  as  something 
more  than  an  index.  Wherever  the  treatment  of  a  subject  in  the  text 
is  expansive,  great  care  has  been  taken  to  put  an  accurate  and  compressed 
statement  of  the  law  of  that  subject  in  the  analysis.  It  will  be  found 
useful  always  to  refer  to  the  analysis  as  well  as  the  text  in  seeking  the 
solution  of  a  problem  in  banking  law,  for  very  often,  by  reason  of  their 
having  been  drafted  from  different  points  of  view,  they  mutually  eluci- 
date each  other ;  and  the  references  in  the  analyses  to  sections  kindred 
in  subject  matter  or  principle  will  also  be  found  of  value.] 


CHAPTER  I. 

PRELIMINARY. 

§  0.  Analysts. 

§  1.  Scope  of  the  Book. 

Definitions. 
§  2.         General  definition  and  essentials. 
§  3.  Savings  Bank. 

§  4.         United  States  tax  definition. 
§  5.  State  and  National  Banks. 

Sources  of  the  Law  of  Banking. 
§  6.    Charter. 

n.  1.   Articles  of  association  equivalent  to. 
n.  2.    When  invalid. 

n.  .3.   State  cannot  alter  or  repeal,  unless  power  is  reserved. 
n.  4.  Bank  has  no  powers  beyond  those  given  by  the  charter,  and  their 
incidents. 
VOL.    I.  —  1  1 


PRELIMINARY. 

§  7.   Statutk  Law. 

State  Bank  and  United  States  statutes. 
State  Bank  and  State  statutes. 
National  Bank  and  State  statutes. 
National  Bank  and  United  States  statutes. 
§  8.   Common  Law. 

§  9.  Usage,  and  what  is  necessary  to  make  it  legally  binding, 
(a)  Great  care  is  necessary  in  relying  on  usage. 
{b)  Tlie  real  question  is,  what  is  it  fair  to  presume  the  parties  intended. 

(c)  Valuable  rights  not  waived  without  assent. 

(d)  Usages  in  the  nature  of  contract  between  other  parties  are  extrin- 

sic, unless  clearly  intended  to  govern  the  transaction. 

(e)  Relation  of  the  parties,  as  selecting  the  bank  and  taking  advantage 

of  its  facilities,  or  merely  brought  into  contact  with  it  by  act  of 
another.     §  9,  n.  19,  20. 
Foreseeing  that  the  bank  will  be  a  factor  in  the  transaction. 
No  one  is  bound  by  a  usage,  who  has  no  reason  to  contemplate  that 

he  will  be  brought  within  its  operation.     §  9  ^  ;  §  243. 
Mode  of  dealing  between  the  parties. 
Actual  knowledge  of  a  usage. 
General  usage  of  the  banks  of  a  city. 

Usage  of  a  single  bank.     §  9,  n.  21 ;  §  9  e  ;  §  9,  n.  19  ;  §  9  A  to  F. 
Change  of  usage.     §  9,  n.  1  c. 
Distinction   between  binding  usage  and   a   series  of   courtesies. 

§  9,  n.  1  c  ;  §  583. 
Louisiana  definition  of  usage.     §  9,  n.  1. 
Proof  of  usage.     §  9,  n.  1  h,  and  n.  1.3 ;  §  222, 
A  usage  cannot  be  built  up  out  of  a  series  of  acts,  each  done  under 

special  authority.     §  97  (7). 
In  this  it  bears  a  resemblance  to  prescription ;  authority  by  usage 
is  authority  by  a  sort  of  prescription. 
Effect  of  Usage.    See  §  221. 

As  against  one  ignorant  of  the  usage.     §  9,  n.  3. 

As  in  favor  of  one  ignorant  of  the  usage.     §  9,  n.  3. 

GeneraUty  of  usage  only  affects   the  question   of  knowledge.     §  9, 

n.  18. 
A  usage  to  perform  an  act  is  not  equivalent  to  performance.     §  9, 

n.  17. 
A  usage  may  determine  the  question  of  negligence.     §  9,  n.  16. 
Usages  varying  Kules  of  Law.    §  9,  n.  9. 
Held  illegal  if  against  the  rules. 

(1)  demand  paper  has  grace. 

(2)  bank  must  pay  depositors  in  good  money. 

(3)  recovery  on  one  half  of  bank  bill. 

(4)  over-due  paper  subject  to  equities. 

(5)  money  paid  by  mistake  can  be  recovered. 
Held  legal,  though  against  rules. 

(1)  as  to  demand,  §  231,  notice,  §  233,  protest,  §  231. 

(2)  as  to  powers  of  bank  officers  and  agents. 

2 


ANALYSIS. 

(3)  that  collecting  bank  cannot  receive  anything  but  money. 

(4)  tliat  a  banker  must  know  the  signature  of  his  customers. 

(5)  as  to  negotiability  of  paper, 
(tij  as  to  what  constitutes  dehvery. 

(For  other  examples  of  Usage,  see  Index,  Usage.) 
The  essential  principles  in  tiie  matter  of  Usage  are  three. 

(1)  Contemplation. 

Tlie  usages  of  a  bank  or  group  of  banks,  contemplated  as  a 
factor  in  the  agreement  at  the  time  of  contract,  form  a 
part  of  it.  But  if  an  institution  or  set  of  institutions  not 
within  the  contemplation  of  the  parties  at  the  time  of 
contracting  as  entering  into  the  agreement,  or  having  any 
part  to  perform  in  connection  with  it,  the  usages  of  such 
institution  or  institutions  form  no  part  of  said  contract. 
As  regards  the  usages  of  a  single  bank,  however,  this 
principle  must  be  received  in  connection  with  two  others 
following. 

(2)  Adoption. 

One  who  makes  use  of  the  facilities  of  a  bank  must  be  held 
by  its  usages,  particular  and  general ;  he  adopts  the  bank, 
usages,  and  all ;  he  cannot  expect  to  act  otherwise  than 
in  its  own  accustomed  manner,  and,  knowing  that  banks 
are  apt  to  have  their  special  methods  of  business,  it  is 
his  own  fault  if  he  does  not  inquire  into  them  before 
selecting  the  bank.  One  who  voluntarily  goes  on  board 
of  a  ship  bound  upon  its  usual  course  cannot  complain 
if  it  does  not  take  him  to  the  port  he  wished ;  he  should 
have  inquired  of  the  proper  authorities  whither  it  was 
going. 

(3)  Adverse  Position. 

Where  A.  contracts  with  B.,  the  usages  of  B.  or  of  his  agents 
cannot  affect  A.,  unless  he  has  knowledge  of  them  at  the 
time  of  contract,  or  they  are  so  general  that  A.  must  be 
presumed  to  know  them.  In  respect  to  banks,  the  usages 
general  among  those  of  a  particular  locality  are  presumed, 
under  this  principle,  to  be  known,  but  not  the  special  usage 
of  each  single  bank.  So  that,  in  any  dealing  between  third 
parties,  if  the  bank  can  be  placed  distinctly  on  one  side  of 
the  agreement,  its  particular  usages  will  not  bind  the  other 
side  unless  known  to  it. 

For  example,  when  A.  takes  a  check  from  B.  upon  the  bank 
with  which  B.  deals,  B.  is  bound  by  the  special  usages  of 
the  bank,  under  principle  (2),  but  A.  is  not,  for  to  him 
(3)  applies.  So,  if  a  note  is  payable  at  bank  C,  the  usages 
of  C.  in  collecting  affect  the  maker,  under  (2)  ;  but  if  a 
note  is  drawn  generally,  not  as  payable  at  a  particular 
bank,  and  the  holder  puts  it  in  bank  0.  for  collection,  the 
holder  is  bound  by  the  usages  of  C,  particular  as  well 
as   general,  but  the   maker  is  only  bound  by  the  general 

3 


PRELIMINARY. 

usages,  even  though  he  knows  the  special  usages ;  for 
although  tlie  group  of  banks  in  the  place  where  the  note 
was  payable  was  contemplated  as  a  probable  factor  in 
the  collection,  the  special  bank  C.  was  not  contemplated, 
and  its  peculiar  usage  did  not  enter  the  agreement  at  the 
time  of  contract. 

In  brief,  if  I  employ  a  bank  to  act  for  me,  or  authorize  you 
to  employ  it  to  act  against  me,  I  am  bound  by  its  usage, 
whether  known  to  me  or  not. 

But,  in  other  cases,  where  I  come  in  contact  with  the  bank, 
merely  because  I  have  a  demand  against,  or  it  has  a  de- 
mand against  me,  I  will  not  be  .bound  by  its  usage,  unless 
at  the  time  of  entering  into  the  contract  from  which  the 
claim  arises,  (1)  The  bank  was  contemplated  as  a  factor, 
and  (2)  I  either  knew  its  custom,  or  it  is  just  to  presume 
knowledge,  because  it  was  my  duty  to  inquire ;  and  this 
last  question  will  always  depend  for  its  answer  upon  the 
facts  of  each  new  class  of  cases  as  they  arise,  and  the 
judge's  sense  of  what  is  fair  and  just  under  the  circum- 
stances and  knowledge  will  not  be  presumed  so  as  to  take 
away  the  substance  of  valuable  legal  rights  without 
actual  consent,  but  only  where  the  effect  of  the  usage  is 
confined  to  varying  the  formal  law.  §  223. 
§  10.  Conflict  between  State  and  Federal  Courts. 
Force  of  State  decisions. 

Federal  courts  are  free  on  questions  of  general  commercial 
law,  construction  of  contracts,  extra-territorial  matters, 
and  from  State  decisions  that  are  clearly  unjust. 
Discharge  under  foreign  bankruptcy,  n.  4. 

Whether  the  bank  is  a  holder  for  value  of  a  note  is  a  question 
of  general  commercial  law,  upon  which  State  decisions 
do  not  conclude  the  Federal  courts,  n.  7. 
§§  11  and  12.   Conflict  of  the  Laws  of  different  Sovereignties. 
Remedy  is  governed  by  the  Lex  Fori. 

Practice,  Pleading,  Admissibility  of  Evidence,  Burden  of 
Proof,  Latent  or  Patent  Ambiguity,  Competency  of  Wit- 
nesses, Hearsay,  Parol  to  affect  writing,  and  what  facts 
the  admitted  evidence  proves  ;  but  the  legal  effect  of  such 
facts  proved  may  depend  on  other  law,  as  that  of  the 
place  of  performance,  n.  2. 

Statute  of  Limitations,  n.  2. 

Statute  of  Frauds,  n.  2. 

Interpretations  of  Documents,  n.  3. 

Realty,  the  effect  of  contracts  upon,  n.  4. 

Distinction  between  the  contract  as  a  contract,  and  its  effect 
on  property,  n.  5. 

One  domiciled  in  State  E.  may  be  estopped  in  another 
State  to  oppose  a  transaction  valid  by  the  law  of  E., 
n.  8,  9. 

4 


SCOPE   OF   BOOK.  §  1 

Movables,  effect  of  contract  upon,  n.  9,  10. 

(5)  Capacity  to  contract. 

(6)  Form  of  contract. 

(7)  Place  of  performance  governs  the  construction  and  validity 

of  a  contract. 
Place  of  payment  decides  usually. 

Seat  of  a  continuous   business  governs  the  obligations  of 
him  who  carries  on  the  business  arising  in  the  course 
of  the  business. 
Of  two  possible  laws,  that  most  favorable  to  the  contract  is 

applied. 
Seat  of  a  casual  contract. 

Place  where  a  contract  is  made  is  its  seat,  when  this  is  not 
otlierwise  determinable,  and  the  place  of  delivery,  not  the 
place  of  siyning  or  dating,  is  the  place  of  making,  except 
as  to  bona  fide  parties  without  notice. 
The  law  governing  bills  and  notes,  liability  of  maker, 
drawer,  indorser,  acceptor,  grace,  demand,  protest,  no- 
tice. 
(Note    7)  Equity  will  compel  a  good  contract  to  be  made  in  some 

cases. 
(Note  15)  Interest  may  be  governed  by  the  law  of 
the  place  of  payment, 
the  place  of  making  the  contract, 
the  place  of  using  the  money. 

the   place   of  suit   as   to  interest    recovered   as   dam- 
ages. 
In  some  States,  the  Lex  Fori  governs  as  to  this   kind  of 
interest. 

§  1.  Scope  of  the  Book. — The  subject  of  this  volume  is 
that  portion  of  Substantive  ^  Law  which  relates  to  Banks  and 
Banking. 

In  its  narrowest  sense  this  would  include  only  such  part  of 
the  law  as  oives  its  existence  to  Banks  and  Banking,  We 
should  consider  those  combinations  of  fact  in  which  a  bank 
is  an  essential  ^  element,  and  by  comparing  the  consequences 

^  §  1.  With  procedure  we  have  little  to  do  except  incidentally  in  the 
notes,  the  windows  of  the  book  through  which  we  may  look  upon  the 
world  of  law  beyond  its  limits. 

2  Essential  =  necessary  to  the  consequence  ;  the  cause  or  a  part  cause 
of  the  legal  consequence  belonging  to  the  combination  of  facts  into  which 
it  enters,  in  such  sense  that  if  it  were  absent,  or  replaced  in  the  combina- 
tion by  any  fact  outside  of  banking,  the  consequence  would  not  be  the 
same. 


§  2  PRELIMINARY. 

attached  by  the  law  to  the  facts  in  such  cases,  derive  by  induc- 
tion the  law  peculiar  to  banking. 

In  its  widest  sense  our  subject  would  include  all  law  appli- 
cable to  banks,  and  we  should  have  to  note  the  legal  conse- 
quences linked  to  every  combination  of  circumstances  into 
which  a  bank  could  enter  as  a  factor. 

While  the  first  method  would  be  the  proper  one  if  the  book 
were  part  of  a  complete  and  connected  treatment  of  the  whole 
law,  it  would  exclude  very  much  that  is  of  every-day  use  in 
banking,  and  of  which  a  text-book  intended  to  be  used  by 
itself  should  speak.  Yet,  if  the  book  were  written  upon  the 
second  plan,  it  would  be  a  cyclopedia  of  law.  The  sensible 
plan  seems  to  be,  to  group  in  one  volume  the  law  peculiar 
to  banks,  and  such  further  matter  as  is  of  frequent  appli- 
cation in,  or  has  a  very  important  bearing  upon,  their  busi- 
ness. 

This  we  shall  do,  first  defining  our  terms  and  noting  the 
sources  of  banking  law,  then  considering  the  law  of  Banks 
and  Banking  in  general,  and  finally  giving  our  attention  in 
Part  II.  to  the  national  banking  laws  and  their  construc- 
tion. 

Definitions. 

General  definition  of  a  Commercial  Bank     ...  §  2. 

Definition  of  Savings  Bank §  3. 

United  States  tax  definition  of  a  Bank    ....  §  4. 

State  Banks  and  National  Banks  defined      ...  §  5. 

§  2.  A  Bank  is  an  institution,  usually  incorporated,  with 
power  to  issue  its  promissory  notes  intended  to  circulate  as 
General  defi-  moncy  (kuown  as  bank  notes)  ;  or  to  receive  the 
Commerctai  ^oney  of  others"  on  general  deposit  (§  288),  to 
Bank  form  a  joint  fund  that  shall  be  used  by  the  institu- 

tion for  its  own  benefit,  for  one  or  more  of  the  purposes 
(§46  A)  of  making  temporary  loans  and  discounts,  of  deal- 
ing in  notes,  foreign  and  domestic  bills  of  exchange,  coin, 
bullion,  credits,  and  the  remission  of  money  ;  or  with  both 
these  powers,  and  with  the  privileges,  in  addition  to  these 
6 


DEFINITION    OF    BANK.  §  2 

basic  powers,  of  receiving  special  deposits,  and  making  col- 
lections for  the  holders  of  negotiable  paper,  if  the  institution 
sees  fit  to  engage  in  such  business. 

(Historically,  receiving  special  deposits  is  the  root  of  the 
banking  business,  but  it  is  now  of  little  importance  compared 
with  the  great  tree  that  looms  against  the  sky  of  nineteenth- 
century  civilization.) 

a.  "  Others  on  deposit."  A  man  using  his  own  funds 
to  discount  business  paper,  or  to  buy  exchange,  is  not  a 
banker  in  any  proper  sense;  nor  is  he  any  more  a  banker 
because  he  borrows  money  from  another,  and  uses  it  in 
the  same  way  ;  it  is  essential  that  there  should  be  a  place 
tvhere,  as  a  regular  business,  the  money  of  others  is  re- 
ceived on  general  deposit.  There  must  be  a  combination 
of  moneys,  a  joint  fund,  as  a  primary  condition  of  the  exist- 
ence of  a  bank  or  banker,  or  the  transaction  of  a  banking 
business. 

Practically,  a  bank  is  a  place  where  deposits  are  received 
and  paid  out  on  checks,  and  money  is  loaned  on  security. 
If  the  institution  has  the  additional  power  of  issuing  its 
promissory  notes  to  circulate  as  money,  it  is  called  a  "  bank 
of  issue." 

Generally,  the  bank  must  hold  itself  ready  at  any  time  to 
pay  the  amount  of  a  deposit  to  a  depositor  or  his  order,  but 
this  may  be  varied  by  agreement,  (as  to  give  one  or  more 
days'  notice,  or  not  to  draw  for  a  certain  time,  or  to  leave 
always  a  certain  sum  to  tlie  depositor's  credit,)  and  is  not 
an  essential  to  the  definition. 

But  it  is  essential  that  the  fund  should  be  used  in  prose- 
cuting some  of  the  functions  recognized  by  long  usage,  or  by 
explicit  statutory  enactment,  or  both,  as  belonging  to  the 
business  of  banking.  If  simply  used  to  make  investments 
of  other  kinds,  the  depositary  resembles  a  trustee  or  a  specu- 
lator rather  than  a  banker. 

The  definitions  of  the  words  Bank,  Banker,  and  Banking, 
in  Worcester's  Dictionary,  are  too  deficient  in  precision  to 
be  of  any  use  for  legal  purposes.  Those  given  by  Webster 
are   likewise  certainly  open  to  criticism;    but  as   they  are 

7 


§2 


PRELIMINARY. 


the  best  there  are,  we  give  the  pertinent  portions  of  them,  as 
follows :  — 

"  Bank.  —  4.  By  analogy.  A  collection  or  stock  of  money,  de- 
posited by  a  number  of  persons,  for  a  particular  use ;  that  is,  an 
aggregate  of  particulars,  or  a  fund;  as  to  establish  a  bank,  that 
is,  a  joint  fund." 

"6.  A  company  of  persons  concerned  in  a  bank,  whether  a 
private  association  or  an  incorporated  company  ;  the  stockholders 
of  a  bank  or  their  representatives,  the  directors  acting  in  their 
corporate  capacity." 

^^ Banker.  One  who  keeps  a  bank;  one  who  traffics  in  money, 
receives  and  remits  money,  negotiates  bills  of  exchange,  &c." 

^^ Banking.  The  business  or  employment  of  a  banker;  the 
business  of  establishing  a  common  fund  for  lending  money,  dis- 
counting notes,  issuing  bills,  receiving  deposits,  collecting  the 
money  on  notes  deposited,  negotiating  bills  of  exchange,  &c." 

Of  these  definitions,  the  second  is  both  the  least  satisfactory 
and  the  most  important.  For  the  question  will  often  arise, 
especially  in  reference  to  taxation,  whether  or  not  a  person 
or  firm  doing  business  on  his  or  her  own  account,  and  not  as 
a  corporation  or  association,  is  a  banker  or  a  banking  firm. 
Clearly  the  fact  of  trafficking  in  money  does  not  suffice  to 
convey  this  legal  character.  Otherwise  every  pawnbroker 
might  assume  the  dignified  title  of  banker. 

Bouvier  says,  "  A  bank  is  an  institute,  generally  incorpo- 
rated, authorized  to  receive  deposits  of  money,  to  lend  money, 
and  to  issue  promissory  notes  (usually  known  as  bank  notes), 
or  to  perform  some  one  or  more  of  these  functions." 

This  is  clearly  faulty :  an  institution  may  have  power  to 
lend  money  and  not  be  a  bank ;  e.  g.  a  partnership,  or  a  loan 
and  trust  company. 

In  Oulton  V.  Savings  Institution,^  Clifford,  J.  said  :  "  Banks 
„  .    ,  „        in  the  commercial  sense  are  of  three  kinds,  —  of 

United  States  r^   •    • 

general  deti-   dcposit,  of  discount,  and  of  circulation.     Origmally 

the  banking  business  consisted  in  receiving  depositSy 

such  as  bullion,  plate,  and  the  like,  for  safe  keeping,  until  the 

1  §  2.    Oulton  V.  Savings  Institution,  17  Wall.  109-118. 


DEFINITION    OF   SAVINGS    BANK.  §  3 

depositor  should  see  fit  to  withdraw.  Later,  bankers  began 
to  loan  by  discounting  bills  and  notes,  or  on  mortgage,  pawn, 
or  other  security.  And,  at  a  still  later  period,  to  issue  notes 
of  their  own,  intended  to  circulate  as  money  instead  of  gold 
and  silver.  Modern  banks  frequently  exercise  any  two,  or 
even  three,  of  those  functions ;  but  it  is  still  true  that  an 
institution  prohibited  from  exercising  any  more  than  one  of 
them  is  a  bank  in  the  strictest  sense." 

Now  this,  as  to  the  second  function  considered  alone,  is  open 
to  the  same  objection  as  Bouvier's  definition,  and  the  Judge's 
language  is  more  sweeping  than  the  case  called  for,  as  the 
question  before  him  was  whether  an  institution  having  the 
first  power  was  a  bank.^ 

§  3.  A  Savings  Bank  ^  is  an  institution  in  the  nature  of  a 
bank,  but  differing  as  follows  :  — 

First.  The  fund  formed  by  the  deposits  is  not  used  in 
discounting  and  loaning  on  personal  security,  <fec.,  except  to 
a  limited  amount  to  the  depositors,  or  as  a  means  of  invest- 
ing surplus  moneys,  but  in  mortgages,  bonds,  and  stocks, 
designated  in  the  statute  ^  under  which  the  bank  is  organized. 

Second,  and  chiefly.  The  deposits  must  he  invested  for  the 
benefit,  not  of  the  bank,  but  of  the  depositors;  this  is  the 
cardinal  distinction.  Money  deposited  in  a  bank,  unless 
agreed  to  the  contrary,  becomes  the  property  of  the  bank,  to 

2  A  loan  association  organized  under  special  charter  with  power 
to  receive  deposits,  loan  money,  discount  notes,  etc.,  is  a  corporation, 
within  §  12  of  the  Illinois  Banlcing  Act.  Henderson  Loan  Association  v. 
People,  163  111.  196;  45  N.  E.  141. 

1  §  3.  See  Huntington  v.  Savings  Bank,  96  U.  S.  388.  "  A  savings 
bank  is  defined  to  be  an  institution  in  the  nature  of  a  bank,  formed  or 
established  for  the  purpose  of  receiving  deposits  of  money  for  the  benefit 
of  the  persons  depositing,  to  accumulate  the  produce  of  so  much  thereof 
as  shall  not  be  required  by  the  depositors,  their  executors  or  administra- 
tors, at  compound  interest,  and  to  return  the  whole  or  any  part  of  such 
deposit,  and  the  produce  thereof,  to  the  depositors,  their  executors  or 
administrators, —  deducting  out  of  such  produce  so  much  as  shall  be 
required  for  the  necessary  expenses  attending  the  management  of  such 
institution,  but  deriving  no  benefit  whatever  from  any  such  deposit  or 
the  produce  thereof."     Grant  on  Banking,  4th  ed.,  262. 

2  See  for  Massachusetts  law,  R.  L.  c.  113,  §  26. 

9 


/ 


§  3  PRELIMINARY. 

be  used  for  its  profit,  and  if  lost  it  is  the  bank's  loss ;  but 
money  deposited  in  a  savings  bank  remains  the  property  of 
the  depositor,  and  the  increase  is  his,  the  bank  having  no 
claim  except  for  the  expense  of  management,  and  if  lost  it  is 
the  depositor's  loss,^  unless  occasioned  by  the  negligence  of 
the  bank. 

Third.  A  bank  pays  out  deposits  on  checks,  while  the 
usual  method  with  savings  institutions  is  to  pay  only  to  the 
person  producing  the  pass-book. 

Whether  a  bank  is  actually  a  savings  bank  or  not  must  be 
determined,  not  by  its  name,  but  by  considering  if  its  charter* 
gives  it  the  characteristics  above,  the  second  being  essential. 
A  savings  bank  is  simply  a  trustee ;  all  moneys  received 
under  the  charter  are  trust  moneys,  and  the  depositors  stand 
in  the  same  relation  to  the  bank  as  the  stockholders  of  an 
ordinary  bank.  This  fact  is  of  cardinal  import  in  cases  of 
insolvency.^ 

§  4.  United  States  Definition  for  Purposes  of  Taxation.  R.  S. 
3407.  —  In  1866,  the  Congress  of  the  United  States  thus 
defined  a  bank  or  banker : — 

"Every  incorporated  or  other  bank,  and  every  person,  firm,  or 
company  having  a  place  of  business  where  credits  are  opened  by 
the  deposit  or  collection  of  money  or  currency,  subject  to  be  paid 
or  remitted  upon  draft,  clieck,  or  order,  or  where  money  is  ad- 
vanced or  loaned  on  stocks,  bonds,  bullion,  bills  of  exchange,  or 
promissory  notes,  or  where  stocks,  bonds,^  bullion,  bills  of  ex-, 
change,  or  promissory  notes  are  received  for  discount  or  for  sale, 
shall  be  regarded  as  a  bank  or  banker." 

This  enactment  does  away  with  the  necessity  of  a  joint 
stock,  and  of  the  combination  of  funds  through  the  medium 
of  general  deposits.  It  would  in  most  cases  render  private 
money-lenders  bankers.  Its  intent,  however,  is  not  to  have 
this  force  generally,  but  only  for   the  specific  and  narrow 

'  Osborn  v.  Byrne,  43  Conn.  155. 

*  That  any  one  whose  deposit  reaches  .3100  may  at  his  option  have  it 
converted  into  stock,  does  not  prove  the  institution  a  savings  bank. 
State  V.  Lincoln  Savings  Bank,  14  Lea,  (Tena.)  42. 

5  32  N.  J    Eq.  163. 

10 


BANK    DEFINED    FOR   TAXATION.  §  4 

purpose  of  taxation.  Every  money-making  occupation  is  to 
be  taxed;  a  few  broad  lines  arc  drawn,  and  the  whole  com- 
munity is  marshalled  into  the  various  areas  by  means  of  this 
and  similar  imperative  defiuitions.  The  act  does  not  say  a 
private  money-lender  is  a  banker,  but  simply  that  he  shall  be 
taxed  as  such ;  probably  for  the  reason  that  his  business  is 
more  nearly  akin  to  banking  than  to  anything  else.  But  for 
purposes  of  strict  legal  construction,  in  all  questions  arising 
beyond  the  control  of  the  provisions  of  this  act,  these  arbitrary 
boundary  lines  are  valueless.  A  private  money-lender  could 
not  have  been  taxed  as  a  banker  in  the  absence  of  this  express 
legislation  ;  and  it  was  to  remedy  this  that  the  legislation  was 
deemed  necessar\^ 

In  construing  this  statute,  the  Supreme  Court  of  the  United 
States  adopt  the  definition  of  a  banker  therein  given  (Act 
1864,  §  79),  and  say  generally :  "  Having  a  place  of  business 
where  deposits  are  received  and  paid  out  on  checks,  and  where 
money  is  loaned  upon  security,  is  the  substance  of  the  busi- 
ness of  a  banker."  ^  It  will  be  observed  that  the  statute  uses 
the  disjunctive  and  the  court  the  conjunctive  particle.  The 
statute  says :  "  Where  credits  are  opened  by  deposit  .  .  .  or 
where  money  is  advanced,"  &c.  The  court  speak  of  the 
depositing  '■'•and''''  loaning.  For  all  general  purposes,  beyond 
the  artificial  influence  of  the  act,  the  court  is  clearly  the  more 
correct. 

R.  S.  3407  applies  to  a  Chicago  branch  of  a  Canada  bank,''* 
but  not  to  a  corporation  whose  business  is  confined  to  invest- 
ment of  its  capital  in  bonds  secured  by  mortgage  on  real 
estate,  and  to  negotiation,  sale,  and  guaranty  of  them.^ 

1  §  4.    Warren  v.  Shook,  91  U.  S.  704. 

2  United  States  v.  Bank  of  Montreal,  21  Fed.  Rep.  236. 

'  The  company  did  not  receive  deposits  of  money  to  be  paid  or 
remitted  on  draft  or  check,  nor  make  discounts,  nor  issue  notes  (clause  1)  ; 
nor  does  it  come  under  clause  2,  for  the  loan  is  really  on  the  mortgage  of 
real  estate,  and  the  bond  is  only  evidence  of  the  debt ;  nor  under  clause 
3,  for  not  those  who  keep  their  oicn  stocks  and  bonds  for  sale  are  bankers 
(if  so  nearly  all  companies  are),  but  those  receiving  bonds,  stock,  or  bills 
helonging  to  others,  for  discount  or  sale,  the  company  being  only  the  agent 
of  the  owner,  while  in  this  case  when  the  company  took  the  bonds  they 

11 


§  6  PRELIMINARY. 

§  5.  A  State  Bank  is  one  organized  under  State  law,  or  a 
charter  granted  by  a  State  legislature,  and  derives  its  power 
from  State  sovereignty. 

A  National  Bank  is  one  organized  under  the  national 
banking  laws,  and  derives  its  existence  and  powers  from  the 
Federal  sovereignty.^ 

Sources  of  the  Law  of  our  Subject. 

§  6.  The  Charter,^  or  act  of  incorporation,  or  the  general 
law  under  which  the  bank  is  organized,  so  far  as  valid,^  is 

became  its  property.  It  could  sell  or  not;  if  it  sold,  it  sold  its  own, 
and  not  another's,  as  a  bank  does.  Selden  v.  Equitable  Trust  Co.,  94 
U.  S.  419. 

1  §  5.  "  Regularly  organized  bank,"  as  used  in  a  city  ordinance,  con- 
templates a  bank  organized  under  State  law,  or  an  act  of  Congress,  but  not 
a  private  bank  owned  by  an  individual.  City  of  Du  Quoin  v.  Kelly,  176 
111.218;  52  N.  E.  919. 

1  §  6.  This  word  is  often  used  as  equivalent  to  "  organic  law,"  though 
the  bank  may  be  organized  under  a  general  statute. 

The  articles  of  association  of  a  national  bank,  which  specify  the  objects 
of  the  association,  and  may  contain  any  provisions  for  the  conduct  of  its 
business  that  are  not  inconsistent  with  law,  when  signed  by  the  persons 
forming  the  company,  and  approved  by  the  comptroller,  are  in  the  nature 
of  a  charter. 

2  It  is  invalid  if  it  conflicts  with  the  United  States  Constitution  (as 
it  may  do  by  infringing  on  former  grants  to  others),  or  with  the  laws  of 
Congress  valid  under  it,  or  if  it  is  beyond  the  powers  of  the  granting 
sovereignty  under  the  State  constitution ;  or  if  it  is  in  derogation  of  the 
essential  powers  of  future  legislatures,  as  those  of  police  regulation, 
eminent  domain,  and  perhaps  the   power  to  tax. 

The  right  of  a  State  to  take  the  property  of  a  citizen  when  necessary 
Eminent  do-  ^^^  public  use,  ou  payment  of  its  value,  is  inherent  in  sover- 
main.  eigntj',  and  no  legislature  can  take  it  out  of  the  people,  or 

give  it  away.     2  Parsons  on  Contracts,  521. 

So  with  police  regulation ;  and  the  best  opinion  Is,  that  the  power  of 
taxation  is  an  essential,  and  that  no  legislature  has  power  to 

Police  regu-  ....  i     •  i         j:    i  i      • 

lation  and  Surrender  or  limit  it  so  as  to  control  or  abridge  luture  legis- 
taxation.  lation  Under  it.     The  legislature  may  exercise  the  power  of 

taxing  or  not,  but  cannot  give  it  away.  Piscataqua  Bridge  v.  New 
Hampshire  Bridge,  7  N.  H.  69 ;  Debolt  v.  Ohio  l.ife  Ins.  &  Trust  Co., 
1  Ohio  St.  563. 

The  Federal  doctrine  is,  "  the  relinquishment  of  such  a  power  is  never 

12 


SOURCES   OF   BANKING   LAW.  §  7 

its  supreme  law,^  within  wliich  it  is  secure,  beyond  *  which 
it  cannot  go. 

§  7.  Statute  Law,  SO  far  as  not  inconsistent  with  valid  ^ 
charter  rights,  controls  the  bank. 

State  Banks  are  absolutely  subject  to  all  applicable  laws 
of  Congress  valid  under  the  Constitution,  even  though  passed 
after  the  charter  was  granted  ;  the  State  and  all  its  acts  are 
controlled  by  such  laws,  and  charter  rights  are  valid  only 
when  in  accord  with  them.  But  a  State  may  grant  charter 
rights    inconsistent    with    its  own  existing   statutes,  or  may 

to  be  assumed.  We  will  not  say  a  State  may  not  relinquish  it ;  that  a 
consideration  sufficiently  valuable  to  induce  a  partial  release  of  it  may 
not  exist."     Providence  Bank  v.  Billings,  4  Peters,  561. 

And  in  State  of  New  Jersey  v.  Wilson,  7  Cranch,  164,  an  agreement 
that  the  lands  "shall  not  hereafter  be  subject  to  any  tax"  was  held 
valid  ;  but  the  right  of  the  legislature  to  exempt  from  taxation  so  as  to 
bind  succeeding  legislatures  was  not  raised,  and  is  not  relevant  to  the 
case,  for  the  transaction  was  in  the  nature  of  a  treaty  with  the  Indians, 
rather  than  a  contract  between  a  State  and  its  citizens. 

3  Unless  there  is  an  express  reservation  of  the  right  in  the  chartei", 
or  in  general  statute  existing  at  the  time  the  charter  is  granted  (and 
therefore  applying  to  it  unless  the  charter  is  expressly  put  out  of  its 
control),  the  legislature  cannot,  without  consent  of  the  bank,  repeal  or 
modify  the  rights  and  franchises  granted,  except  in  the  way  of  police 
regulation,  eminent  domain,  or  other  power  inherent  in  the  nature  of 
government,  which  are  really  not  exceptions,  but  the  boundary  lines  of 
the  rights  granted,  implied  reservations  in  every  contract  made  by  the 
State;  e.  g.  if  a  bank  has  charter  power  to  sell  and  transfer  negotiable 
paper,  a  law  taking  away  this  power  is  void,  as  impairing  the  obligation 
of  contracts.  Planters'  Bank  v.  Sharp,  6  How.  301  ;  Claghorn  v.  CuUen, 
13  Pa.  St.  133;  People  v.  Manhattan  Co.,  9  Wend.  (N.  Y.)  351. 

But  Mechanics  and  Traders'  Bank  v.  Debolt,  1  Ohio  St.  591,  holds  that 
a  charter  is  not  a  contract,  but  a  laio  subject  to  amendment  and  repeal, 
and  that  a  bank  is  a  public  institution,  appointed  solely  for  public  uses, 
and  subject  to  public  control  by  enlargement  or  limitation  of  its  powers 
and  duties,  or  withdrawing  its  franchise  entirely.  This,  of  course,  will 
not  weigh  against  the  decisions  of  the  United  States  Supreme  Court  on 
this  question  arising  under  the  Constitution.     See  §  10. 

*  A  corporation  is  a  creature  of  the  law,  and  possesses  only  those 
properties  which  the  charter  of  its  creation  confers  upon  it.  Mar- 
shall, C.  J.,  in  Trustees  of  Dartmouth  College  v.  Woodward,  4  Wheat. 
636. 

1  §  7.   See  §  6,  notes. 

13 


§  9  PRELIMINARY. 

pass  laws  subsequent  to  the  charter  and  conflictmg  with  it; 
in  these  cases  subject  to  the  above  limitations,^  the  State  stat- 
utes must  give  way  to  the  charter. 

National  Banks  are  the  creatures  of  the  National  Banking 
Act,  which  may  be  amended,  altered,  or  repealed  at  any  time. 
They  are  under  the  entire  control  of  Congress,  and  their 
rights  cannot  be  determined  by  State  legislation,  except  where 
Congress  has  so  ordered,-  or  allowed.^ 

§  8.  The  Common  Law  supplies  the  law  we  seek,  where  not 
superseded  by  charter  or  statute.  Especially  to  the  princi- 
ples relating  to  Usage,  Conflict  of  Laws,  Principal  and  Agent, 
and  Contracts  in  general,  concern  us.^ 

§  9.    A   Usage  ^    that   is    applicable,^   known  ^   actually    or 

2  See  as  to  interest,  Part  TI.  §  30. 

3  E.  g.  Congress  could  prohibit  the  States  from  taxing  national  banks, 
but  if  it  does  not  exert  this  power  they  are  not  exempt.  See  Part  II.  §  41. 
If  a  State  could  bind  national  hanks  further  than  above,  it  could  legislate 
them  out  of  existence,  as  by  a  discriminating  tax,  making  State  law 
supreme,  instead  of  Federal  law,  as  the  Constitution  provides. 

1  §  8.  The  principles  of  Contract  and  Agency  are  so  woven  into  the 
very  tissue  of  banking  law  that  to  state  them  as  preliminary  would  be 
almost  to  make  banking  law  preliminary  to  itself,  but  Usage  and  Conflict 
can  with  great  advantage  to  clearness  be  dwelt  upon  slightly  before  pass- 
ing to  the  main  subject. 

^  §  9.  (a)  The  Louisiana  Code  defines  customs  as  follows:  "  Customs 
result  from  a  long  series  of  actions  constantly  repeated,  which  have  by 
such  repetition,  and  by  uninterrupted  acquiescence,  acquired  the  force  of 
a  tacit  and  common  consent."     Art.  3,  ch.  1. 

(b)  The  proof  of  a  usage  must  be  by  instances,  not  opinion,  and  gen- 
erally one  witness  is  not  enough  ;  several  should  testify  to 
vrhat  is,  by  their  observation,  the  uniform  manner  among  them- 
selves and  others. 

Usage  proved  by  Parol  Testimony.  —  The  custom  or  usage  of 
banks  generally,  or  of  an  individual  bank,  may  be  sufficiently  proved  by 
parol  testimony.  (Renner  v.  Bank  of  Columbia,  9  Wheat.  587;  Mills  v. 
Bank  of  United  States,  11  id.  431.  Indeed,  in  a  large  proportion  of  the 
cases  cited  in  this  chapter,  parol  evidence  has  been  admitted  without 
objection.)  It  is  not  necessary  that  the  witnesses  who  are  relied  upon 
should  be  experts  in  the  banking  business,  or  in  any  manner  engaged  in 
the  same,  or  connected  with  any  bank  whose  individual  usage  is  to  be 
shown.  If  they  have  had  any  dealings  which  have  brought  the  custom 
or  usage  within  their  observation  and  cognizance,  so  that  they  actually 
14 


USAGE.  §  9 

constructively,   certain,*  uniform,^   established,^  continuous,^ 
peaceable,'''    reasonable,^    not   contrary  to  enacted  law,^  nor 

know  it  as  a  matter  of  fact,  they  are  competent  to  testify  to  it,  and  it  may 
be  established  by  their  testimony  alone.    Griffin  v.  Rice,  1  Hilt.  (N.  Y.)  184. 

It  is  a  question  for  the  jury  how  uniform,  how  long,  where,  when,  be- 
tween whom,  and  if  actually  known. 

For  the  court,  whether  given  facts  established  a  custom,  and  whether 
it  is  reasonable  and  not  contrary  to  law,  or  to  expressed  intent  of  parties, 
see  note  5. 

(c)  Usage  having  been  once  found  and  sanctioned  by  the  courts,  evi- 
dence to  disprove  its  existence  becomes  thereafter  inadmissible.    But  this 
refers  only  to  its  existence  at  that  time  at  which  the  decision    change  of 
found  the  fact  of  its  existence.     For  a  usage  is  sustained  by    proper,1fnot 
the  court,  not  because  it  is  in  itself  law,  but  generally  in  spite    arbitrary. 
of  the  fact  that  in  itself  it  is  not  law,  and  because  it  is  the  uniform  prac- 
tice of  the  community  which  the  judiciary  from  motives  of  policy  will 
refrain  from  interfering  with.     But  if  at  any  time  it  ceases  to 
become  the  practice  of  the  community,  it  will  no  longer  be   usage  is  cre- 
judicially  recognized  as  binding.     For  all  transactions  occur-    one^ndir 
ring  during  the  period  that  it  remained  unchanged  it  must    governed  by 
alM'ays  be  law,  but  transactions  occurring  after  the  change    rules, 
will  not  be  affected  by  it.     Evidence  of  the  fact  of  a  change  is  therefore 
admissible  to  show  that  the  previous  decisions  have  ceased  to  be  control- 
ling precedents,  and  to  indicate  the  true  rule.     Cookendorfer  v.  Preston, 
4  How.  (U.  S.)  317. 

Arbitrary  Alteration  by  a  Bank  of  its    Usages    or   Rules. 
—  A  bank  cannot,  by  an  arbitrary  change  in  any  of  its  rules  or  usages, 
injuriously  affect  the  rights  or  interests  of  any  dealer  with  it, 
who  has  previously  had  knowledge  of  such  rules  and  usages,    vors  fore-  * 
without  bringing  home  to  him  positive  notice  of  the  change,    oue'wh^^acts 
Until  he  has  been  sufficiently  notified  to  the  contrary,  he  has   on  tiie  basis 

,         .    ,  , .  r     1      T  1  "^  uniform- 

tne  right  to  expect  the  ordmary  course  of  dealing  to  be  con-   ityinthe 
tinned.     Barnes  r.  Ontario  Bank,  19  N.  Y.  152;  Gumming  v.    oniyfoimda- 
Shand,  5  Hurl.  &  N.  95;  29  L.  J.  Exch.  129.     But  to  enable   *^°?A°'" (°T 

'  sight),  shall 

the  customer  to  take  advantage  of  this  doctrine,  he  must  show  notbepreju- 

that  the  alteration  has  taken  place  in  an  actual  rule  or  bona  sudden 

fide  usage,  in  the  legal  sense  of  the  latter  phrase,  of  the  bank,  ugagfi)? 

The  usage  need  not  be  a  qeneral  usas:e  of  the  bank  ;  it  may  be  which  he  has 

°        _  "^  °  '  *'  no  notice, 

one  which  is  only  good  as  between  himself  and  the  bank,  unless  the 

For  usages  of  this  limited  nature  may  exist,  and  a  bank,  by  were  merely 

its  course  of  dealing  with  a  single  customer,   may   assume  Ah^dred 

special  obligations  towards   him  individually  which    do   not  gifts  bmid 

,.,.,,  *^  no  right  to 

bind    it    as   towards    anybody  else.     Hotchkiss  i;.    Artisans'    another. 
Bank,  42  Barb.  (N.  Y.)  517. 

15 


§  9  PRELIMINARY. 

well-settled  principles  of  morality,  justice,  and  policy,  nor  to 
the   clearly   expressed   or   implied    intent^''    of    the  parties, 

In  the  cited  case  of  Gumming  v.  Shand,  the  bankers  had  taken  up  cer- 
tain bills  for  a  customer  upon  the  security  of  the  proceeds  to  be  expected 
from  certain  consignments  ;  at  the  same  time,  they  had  been  accustomed 
to  let  him  continue  his  drafts  upon  his  deposit  account,  or  account  current, 
■with  them.  It  appearing  that  this  was  the  established  course  of  dealing 
between  them  and  this  customer,  it  was  held  that  they  could  not  suddenly, 
without  express  notice  to  him,  interfere  with  this  course,  charge  him  with 
the  amount  of  advances  before  the  proceeds  from  the  consignments  could 
be  realized,  and  so  cause  his  account  to  appear  overdrawn. 

But  it  must  be  supposed  that  there  is  a  difference  between  an  established 
course  of  dealing  of  such  a  character  that  the  customer  is  entitled  to  de- 
mand its  continuance  until  due  notice  has  been  given  him  of  an  intention 
to  discontinue,  and  a  mere  gratuitous  habit  on  the  part  of  the  bank  to 
allow  privileges  or  favors  of  such  a  character  that  the  customer  ought  to 
be  aware  that  they  are  concessions  purely  voluntary,  and  revocable  at  any 
time,  at  the  bank's  convenience  and  option.  In  other  words,  there  is  a 
distinction  between  a  usage  involving  an  implied  agreement,  and  a 
habit  of  frequently  extending  a  courtesy  or  favor  altogether  without 
consideration. 

It  is  of  course  impossible  to  draw  an  accurate  line  of  demarcation  be- 
tween the  usages  of  the  former  class  and  the  habits  which  fall  within  the 
latter  description.  In  each  instance  the  appropriate  character  will  be  con- 
ferred by  a  combination  of  all  the  many  minute  circumstances  which  can 
be  adduced  to  interpret  the  true  nature  of  the  transactions. 

2  Pertaining  to  the  business,  relating  to  the  transaction.  A  usage  of 
weavers  is  not  applicable  to  banking,  nor  does  a  usage  in  banking  to  do 
an  act  for  one  purpose  apply  to  sustain  doing  the  act  for  a  different  pur- 
pose. To  the  nicety  of  organization  of  which  banking  admits  is  due  the 
great  strictness  and  accuracy  with  which  banking  customs  must  be 
proved,  aud  will  be  construed.  So  far  from  its  being  permissible  to 
make  the  slightest  approach  to  a  generalization  or  to  an  argument  from 
the  closest  of  analogies,  the  tendency  of  the  courts  has  been  to  trim  the 
usage  to  its  very  narrowest  proportions,  and  to  require  the  most  perfect 
adaptation  of  the  facts  of  the  case  to  these.  That  two  acts  are  essen- 
tially dependent  for  their  lawful  exercise  upon  power  of  precisely  the  same 
description,  that  one  is  a  natural  corollary  of  the  other,  that  one  is  con- 
veniently exercised  in  conjunction  with  the  other,  will  not  sufBee  to  au- 
thorize the  doing  of  the  second  when  the  right  to  do  the  first  is  dependent 
upon  a  custom.  Even  power  to  do  a  certain  act  arising  from  a  custom  to 
do  it  for  a  particular  purpose  or  under  particular  circumstances,  does  not 
imply  or  include  power  to  do  the  same  act  for  a  very  slightly  different 
pui-pose  or  under  very  slightly  different  circumstances.  Supporting  au 
16 


USAGE.  §  9 

nor  extrinsic  "  (i.  e.  so  aside  that  one  of  ordinary  prudence 
and  foresight  would  not  contemplate  it  as  a  factor  in  the 

act  upon  proof  of  a  banking  usage  is  a  matter  of  very  delicate  and  minute 
accuracy.     Mussey  v.  Eagle  Bank,  9  Met.  (Mass.)  306. 

3  No  one  can  take  advantage  of  a  usage  of  vyliich  he  was  ignorant  at 
the  time  of  contract,  for  he  did  not  contract  in  reference  to  it.  Fowler  v. 
Pickering,  119  Mass.  33;  Nouotuck  Silk  Co.  u.  Fair,  112  Mass.  ^^  .^  ^^^^^ 
354.     But  this  of  course  cannot  apply  to  usage  that  has  be-   of  one  iguo- 

rant. 

come  fixed  as  a  part  of  the  common  law,  and  it  may  be  doubted 
if  it  can  apply  without  limitation  to  other  usages;  for  if  D.  employs  a 
banker  or  physician,  and  injury  results  by  reason  of  neglect  of  customary 
precautions,  D.  could  surely  take  advantage  of  the  usage  indirectly  as 
bearing  on  the  question  of  negligence. 

One  who  actually  knows  of  a  particular  bank's  usages,  and  is  reason- 
ably aware  that  the  bank  will  be  a  factor  in  the  transaction,  is  bound  by 
them ;  but  one  who  is  in  fact  ignorant  will  not  be  bound  by  a  Against  one 
usage  peculiar  to  the  bank,  unless  he  employs  tlie  bank  to  act  'suorant. 
for  him,  though,  as  to  a  usage  general  to  the  banks  of  a  given  city,  every 
one  who  enters  into  a  transaction  which  involves  a  dealing  with  or  through 
the  banks  of  that  place  is  held  to  have  notice ;  if  he  is  in  fact  ignorant  of 
it,  and  loses  thereby,  it  is  his  own  loss,  and  he  can  hold  the  bank  to  the 
same,  and  will  not  be  affected  disadvantageously  by  a  different  special 
custom  of  a  particular  bank,  unless  he  employs  that  bank  or  actually 
knows  its  habit.  Of  course  no  one  can  allege  ignorance  of  usage  that  has 
become  law. 

The  law  presumes  knowledge  of  ancient,  general,  widely  known  usage. 
Loud  V.  Hall,  106  Mass.  404;  Ober  v.  Carson,  62  Mo.  209.  A  person 
entering  into  a  contract  is  not  bound  by  the  usage  of  a  particular  business, 
unless  he  actually  knew  of  it,  or  it  is  so  general  as  to  furnish  a  presump- 
tion of  knowledge.     Stevens  v.  Reeves,  9  Pick.  (jMass.)  198. 

A  usage  of  the  factories  of  a  neighborhood,  that  all  employed  shall  be 
held  to  work  a  fortnight  after  they  give  notice  of  intent  to  quit,  does  not 
bind  one  who  did  not  know  of  the  custom.  "  The  usage  is  a  particular 
one,  and  not  a  general  custom,  and  it  should  have  appeared  that  the  de- 
fendant knew  of  the  usage  when  he  entered  on  the  work,  or  before  he  left 
it.  It  is  so  with  the  usage  of  banks,  and  all  other  usages  not  of  so  general 
a  nature  as  to  furnish  a  presumption  of  knowledge."  Parker,  C.  J.,  ia 
Stevens  v.  Reeves,  9  Pick.  (Mass.)  193. 

*  Not  vague  and  indefinite.  Oelricks  v.  Ford,  23  IIow.  49 ;  Bassett  i;. 
Lederer,  1  Hun  (N.  Y.),  274.  A  usage  to  return  goods  sent  for  inspec- 
tion, some  saying  within  three  days,  others  within  a  week  or  a  month,  is 
not  certain  and  uniform  enough  to  be  binding.  Wood  v.  Wood,  1  Car. 
&  P.  59. 

VOL.   I.  — 2  17 


R  9  PRELIMINARY. 

O 

transaction),   binds ^^  the   parties,   on  the  theory  that  they 
contracted  in  reference  to  it. 

6  Not  fluctuating  and  occasional.    Cope  v.  Dodd,  13  Pa.  St.  33;  United 
States  V.  Buchanan,  8  How.  83,  102. 

What  lapse  of  time,  or  how  many  instances  actually  occurring,  are 
requisite  to  establish  a  custom,  is  one  of  those  questions  attended  with  such 
an  intrinsic  and  essential  indefiniteness  as  prevents  the  possibility  of  any 
accurate  answer.     Certainly  a  usage  must  have  a  beginning.     But,  in  its 
early  stages,  it  is  no  more  a  complete  usage  in  the  eye  of  the  law,  having 
the  legal  attributes  thereof,  than  a  boy  in  his  nonage  is  a  man,  having  the 
leo-al  rights  of  a  man.     Twenty-one  years  is  the  arbitrary  limit  which 
distinguishes  the  legal  infant  from  the  legal  man.     But  no  number,  either 
of  years  or  of  recurrent  acts  and  instances,  can  be  arbitrarily  set  to  mark 
accurately  the  transition  period  when  the  usage  ceases  to  be  embryonic  and 
becomes  perfect.    The  understanding,  arrangement,  or  directions  of  bank 
officers,  that  a  certain  method  shall  thereafter  be  observed  as  the  usage  of 
the  bank  for  the  transaction  of  a  certain  class  of  acts,  does  not  render  this 
method  a  legal  usage  of  the  bank  as  towards  any  outside  party,  until  time 
and  practice  shall  suffice  to  give  it  that  character  which  it  does  not  and 
cannot  derive  from  the  intention  of  the  officials.     But  time  and  practice 
bring  in  their  train  acquiescence  and  notoriety,  and  from  these  the  law 
will  draw  the  inference  of  knowledge  on  the  part  of  the  public,  if  the 
usage  is  that  of  the  banks  generally ;  or  on  the  part  of  the  parties  dealing 
with  the  bank,  if  the  usage  is  that  of  an  individual  bank  only.    Especially, 
if  the  custom  is  in  derogation  of  the  common  law,  a  short  time  and  a  few 
instances  of  practice  under  it  will  be  insufficient  to  obtain  its  recognition. 
Duvall  V.  Farmers'  Bank,  9  Gill  &  J.  (Md.)  31;  Adams  v.  Otterback,  19 
How.  U.  S.  539.     But  a  single  instance  of  practice  under  a  usage,  though 
it  would  be  utterly  worthless  to  establish  the  fact  of  the  custom,  is  yet 
amply  sufficient  to  bring  home  notice  of  the  existence  of  an  already  estab- 
lished custom  to  the  persons  dealing  with  the  bank  and  having  knowledge 
of  such  single  instance.    Dorchester  &  Milton  Bank  v.  New  England  Bank, 

I  Cush.  (Mass.)  177. 

®  See  note  5. 

'  A  custom  must  be  generally  acquiesced  in  (not  disputed  at  law  or 
otherwise)  by  persons  acting  within  the  scope  of  its  operations. 

eacea  e.  -^y^^j.^  -^  ^g  ^j^^  subject  of  contention,  and  only  submitted  to 
under  protest,  and  to  avoid  litigation,  it  does  not  have  that  basis  of  common 
consent  upon  which  the  authority  of  usage  is  built.    Arthur  r.  Bokenham, 

II  Mod.  161 ;  Strong  v.  Grand  Trunk  R.  Co  ,  1.5  ]\Iich.  206;  McMastersw- 
Pennsylvania  R.  Co.,  69  Pa.  St.  374;  Dixon  v.  Dunham,  14  111.  324.  But 
though  a  usage  must  be  generally  assented  to.  as  well  as  asserted,  it  need 
not  receive  universal  consent.  Desha  v.  Holland,  12  Ala.  513.  There 
must  be  opposition  before  or  at  the  time  of  the  transaction,  and  not 

18 


USAGE.  §  9 

It  is  sometimes  said  a  usage  must  be  general.  See  note  18  c. 
Change  of  usage.     See  note  1  b. 

merely  the  subsequent  denial  of  the  defendant,  to  break  the  current  of 
acquiescence. 

8  A  custom  must  be  reasonable,  which  is  not  the  case  if  it  is  such  as 
honest  and  right-minded  men  would  deem  unfair  and  unrighteous;  as  to 
put  all  the  good  berries  on  top,  and  bad  at  the  bottom,  or  to  charge  the 
original  cost  of  articles  used  at  a  funeral,  though  the  same  may  be  used  at 
other  funerals.  Paxton  v.  Courtnay,  2  Fost.  &  Fin.  131.  General  usage 
is  strong  proof  of  reasonableness.  Prudent  men  would  not  otherwise  con- 
tinue it,  or  allow  others  to,'  without  protest.  A  custom  of  banks  to  honor 
occasional  overdrafts  of  customers  whose  standing  is  good  is  reasonable. 
Lancaster  Bank  v.  Woodward,  18  Pa.  St.  357.  And  so  a  usage  not  to 
rectify  mistakes  unless  discovered  before  leaving  the  room.  Gallatin  v. 
Bradford,  1  Bibb  (Ky),  209.  It  is  not  a  reasonable  usage  to  send  a  draft 
Cwhich  the  bank  has  for  collection)  to  the  drawee,  to  collect  for  himself. 
Chapman,  C.  J.,  Whitney  v.  Esson,  99  Mass.  308. 

^  A  usage  must  not  be  contrary  to  enacted  law,  morality,  religion,  or 
settled  principles  of  justice  and  public  policy;  but  portions  of  the  com- 
mon law  that  are  not  founded  on  justice  and  policy  directly,  but  are  formal, 
and  originated  in  usage  and  convenience,  may  be  changed  by  usage. 

No  custom  can  influence  the  construction  of  a  contract,  or  vary  the 
rights  of  parties,  if  the  custom  is  illegal,  as  if  it  is  contrary  to  religion, 
morality,  or  public  policy  ;  Barnard  v.  Kellogg,  10  Wall.  383,  390;  Col- 
lender  V.  Dinsmore,  55  N.  Y.  200-208 ;  or  if  it  is  opposed  to  a  well-settled 
rule  of  law  ;  Greene  v.  Tyler,  39  Pa.  St.  361 ;  as  if  the  words  have  received 
a  judicial  interpretation,  it  is  not  competent  to  show  a  contrary  meaning 
by  usage.  So  a  usage  for  a  factor  to  pledge  generally  his  principal's  goods 
is  bad,  as  opposed  to  settled  law.  Newbold  v.  Wright,  4  Rawie  (Pa.), 
195.  So  a  usage  to  take  usurious  interest  is  bad.  Greene  v.  Tyler,  39 
Pa.  St.  361,  So  where  a  bank  posted  a  notice  that  all  indorsers  of  notes 
to  it  would  be  required  to  waive  demand  and  notice,  and  D.,  for  several 
years  a  customer  of  the  bank,  indorsed  to  it  without  any  waiver  written 
on  the  note,  it  was  held  that  parol  evidence  of  the  usage  of  the  bank  and 
assent  of  the  indorser  could  not  be  received  to  change  the  settled  rule  of 
law  on  the  indorsement.  Piscataqua  Exchange  Bank  v.  Carter,  20  N.  H. 
246. 

Usage  cannot  be  shown  to  absolve  a  bank  from  a  positive  and  essential 
duty.  The  omission  of  any  material  portion  of  a  transaction  which  it  un- 
dertakes to  perform  cannot  be  excused  on  the  ground  of  a  custom  to  omit 
Buch  portion.  What  the  bank  undertakes  to  do,  it  must  do;  it  is  only  the 
manner  of  the  doing,  not  the  doing  itself,  that  can  be  the  proper  subject 
of  a  custom.     Borup  v.  Nininger,  5  Minn.  523. 

No  act  which  practically  amounts  to  a  wrongful  appropriation  or  an 

19 


§  9  PRELIMINARY. 

(a)  The  greatest  care  must  be  taken  in  each  case  to  ex- 
amine the  usage  in  reference  to  each  of  the  requisites,  and  in 

improper  use  of  the  corporate  funds  can  be  sanctioned  by  a  usage.  Thus, 
a  usage  to  honor  the  occasional  overdrafts  of  customers,  whose  general 
standing  and  repute  is  good,  is  bad  at  law.  Proof  of  such  a  usage  will 
not  protect  the  corporation,  or  any  of  its  officers  concerned  in  the  transac- 
tion, from  the  natural  and  ordinary  results  of  its  wrongfulness.  Lancaster 
Bank  v.  Woodward,  18  Pa.  St.  357. 

Laws  regulating  legal  tender  cannot  be  affected  by  any  local  usages  to 
disregard  them  prevailing  among  banking  houses.  Marine  Bank  Cases, 
27  111.  525  ;  28  id.  90,  463 ;  29  id.  248. 

It  is  a  matter  of  ordinary  occurrence  for  persons  using  printed  blanks 
for  checks  to  cancel  some  portion  of  the  printed  matter  which  does  not 
suit  their  temporary  convenience ;  and  banks  are  wont  to  disregard  the 
fact  of  such  cancellation  as  matter  of  suspicion,  and  to  assume  that  it  was 
done  by  the  proper  and  authorized  person.  But  the  banks  do  this  at  their 
peril,  and  are  not  to  be  saved  from  a  consequent  loss  simply  because  they 
can  show  a  custom  on  their  part  to  regard  erasures  of  printed  matter  as 
no  evidence  of  unauthorized  alteration,  when  the  same  erasure  of  written 
matter  would  be  so.  Such  a  custom,  said  the  court  in  Connecticut,  has 
not  existed  so  long,  or  become  so  general,  as  to  be  a  part  of  the  law  mer- 
chant, and  no  person  will  be  affected  by  it  unless  he  be  positively  shown 
to  have  had  knowledge  of  such  a  usage  on  the  part  of  the  bank  and  to 
have  acquiesced  in  it.  Mahaiwe  Bank  v,  Douglass,  31  Conn.  170.  The 
habit  is  certainly  somewhat  older  now  than  it  was  when  that  decision  was 
rendered  ;  but  mere  age  will  hardly  give  it  authority  in  the  courts.  It  is 
a  usage  containing  intrinsic  objections,  which  may  very  probably  prevent 
it  from  ever  receiving  recognition  except  upon  proof  of  direct  assent  to  it 
by  the  parties  concerned. 

It  is  a  general  principle,  that  no  custom  among  banks,  however  uni- 
versal, or  long  established,  or  uniform  it  may  appear  to  be,  can  give  va- 
lidity to  any  transaction  upon  their  part  which  conflicts  with 
trary^o""  a  positive  statutory  enactment.  But  though  the  doctrine  in 
statute.  ^Yiis  shape  is  clearly  sound,  it  has  been  thus  far  illustrated 

only  by  cases  arising  under  the  usury  laws.  Banks  have  often  sought  to 
evade  the  restrictions  of  these  laws  under  cover  of  a  customary  course  of 
dealing.  But  all  such  efforts  at  evasion  have  thus  far  been  rigorously  de- 
feated by  the  courts.  Niagara  County  Bank  v.  Baker,  15  Ohio  St.  68  ; 
Protection  Ins.  Co.  v.  Harmer,  2  id.  452  ;  New  York  Firemen's  Ins.  Co. 
V.  Ely,  2  Cow.  (N.  Y.)  707  ;  Dunham  v.  Gould,  16  Johns.  (N.  Y.)  367, 
per  Chancellor  Kent.  An  apparent  exception  to  this  statement  might  be 
supposed  to  be  found  in  the  custom  of  banks,  when  discounting,  to  deduct 
the  interest  in  advance,  thereby  securing  to  themselves  interest  upon  this 
intere.st  for  the  period  for  which  the  discounted  paper  runs,  and  so  actu- 
20 


USAGE.  §  9 

the  light  of  decided  cases  in  the  State  to  whose  law  the  matter 
is  subject ;   for  the  courts  do  not  agree,^^  the  cases  are  not 

ally  receiving  a  fraction  of  one  per  cent  more  than  the  regular  rate.  But 
this  should  be  regarded  rather  as  an  express  power  conferred  by  charter 
or  organic  law,  than  as  an  exception  based  solely  upon  usage.  Power  "  to 
discount  "  is  usually  in  terms  given  in  all  such  charters  and  laws.  If  not 
given,  it  must  be  regarded  as  one  of  the  essential  elements  of  the  banking 
business,  which  must  be  enjoyed  by  every  banking  institution  by  virtue 
of  its  general  character  and  the  objects  for  which  it  exists.  Now  "  dis- 
counting "  means  a  loan  of  money  upon  business  paper  where  the  interest 
is  thus  "counted  off "  or  deducted  beforehand  ;  the  deduction  in  this 
shape  is  a  part  of  the  definition  of  the  word,  an  essential  element  in  the 
transaction  itself.  Fleckner  v.  Bank  of  the  United  States,  8  Wheat.  338; 
Niagara  County  Bank  v.  Baker,  15  Ohio  St.  69  ;  Farmers  &  Mechanics' 
Bank  v.  Baldwin,  23  Minn.  198.  A  corporation  therefore  entitled  to  con- 
duct the  general  business  of  banking,  a  fortiori  a  corporation  especially 
empowered  "  to  discount,"  has  legislative  authority  to  compute  interest  in 
this  peculiar  manner.  The  habit  of  doing  so  must  unquestionably,  in  its 
origin  in  time  past,  have  been  recognized  as  a  usage.  But  since  then  it 
has  come  to  be  an  inherent  part  of  the  transaction  of  discounting,  and 
whenever  discounting  is  done  under  legislative  permission,  this  com- 
putation may  be  made  by  virtue  of  the  same  permission  and  as  part 
thereof.  The  exception  to  the  usury  laws  is  not,  therefore,  based  on  the 
solitary  fact  of  a  usage,  but  of  a  usage  incorporated  into  and  sanctioned 
by  legislative  enactment,  and  it  is  the  latter,  not  the  former,  ground  that 
must  be  relied  upon  as  really  authorizing  the  taking  of  usurious  interest. 
McLean  v.  Lafayette  Bank,  3  IMcLean,  587. 

Customs  must  be  moral ;  a  usage  of  "  bundling,"  i.  e.  for  those  courting 
to  sleep  together,  will  not  excuse  connivance  of  a  father  in  an    ^sage  con- 
action  by  him  for  his  daughter's  seduction.     Seagar  v.  Sliger-   trary  to 

•'  °  o  a  morality. 

land,  2  Caines  (N.  Y.),  219. 

Usages  against  legal  rules  rejected  :  — 

1.  The  rule  that  negotiable  paper  not  payable  on  demand  is  entitled  to 
grace,  otherwise  not ;  a  usage  in  opposition  to  this  would  over-    xjsage  con- 
turn  the  whole  law  as  to  bills  of  exchange.     Woodruff  v.  Mer-   j^^^f^*" 
chants'  Bank,  25  Wend.  (N.  Y.),  673. 

2.  The  rule  that  bank  must  pay  depositor  an  equal  sum  in  good 
money.     Willetts  v.  Paine,  43  111.  433. 

3.  The  rule  that,  where  the  holder  of  a  bank  bill  has  cut  it  in  two  to 
send  by  mail,  if  one  part  is  lost,  he  can  recover  the  full  value  by  presenting 
one  half  and  showing  loss  of  the  other;  contrary  custom  rejected.  Bank 
of  the  U.  S.  V.  Sill,  5  Conn.  106. 

4.  The  rule  that  the  purchaser  of  overdue  negotiable  paper  takes  it 

21 


§  9  PRELIMINARY. 

reducible  to  harmony.  This  is  where  the  law  is  growing,  and 
tlie  crystals  are  nearer  completion  in  those  States  whose  social 
life  is  most  saturated  with  commerce. 

subject  to  the  equities  against  the  party  he  takes  it  from.  Vermilye  v. 
Adams  Express  Co.,  21  Wall.  139. 

5.    The  rule  that  money  paid  under  mistake  of  fact  can  be  recovered. 

A  bank  cannot  arbitrarily  make  by-laws  or  institute  usages  which  shall 
injuriously  affect  the  rights  of  third  parties.  If  any  person  deliberately 
assents  to  such  by-laws  or  usages,  it  becomes  a  different  matter,  and  there- 
after, as  a  mutual  understanding  or  agreement,  the  bank  might  doubtless 
enforce  it  as  towards  this  individual.  But  such  assent,  implying  the 
■waiver  of  valuable  rights,  will  never  be  presumed  simply  because  the  bank 
has  insisted  upon  laying  down  the  rule  for  its  own  conduct.  Thus,  a  by- 
law or  usage  requiring  all  errors  in  payments  over  the  counter,  or  in  receipts 
or  entries  in  a  depositor's  bank-book,  to  be  corrected  by  the  party  before 
leaving  the  banking-rooms,  are  absolutely  devoid  of  any  effect  whatsoever. 
That  as  a  matter  of  fact  the  party  did  count  his  money,  or  did  examine 
the  writing  or  entry  before  he  left  the  rooms,  and  that  he  then  made  no 
objection  to  the  accuracy  of  the  transaction,  might  be  admissible  in  evi- 
dence to  sustain,  so  far  as  it  could,  the  presumption  of  correctness.  But 
it  would  be  strictly  as  circumstantial  evidence;  and  the  further  and 
independent  fact  that  it  was  the  law  or  usage  of  the  bank  to  refuse  to 
make  any  adjustment  unless  this  process  was  observed  would  have  noth- 
ing whatsoever  to  do  with  the  matter,  and  would  doubtless  not  be  ad- 
mitted in  evidence,  by  reason  of  its  entire  impertinence.  Neither  can 
this  power,  which  the  directors  could  not  claim  at  common  law,  be 
asserted  by  virtue  of  the  authority  given  them  by  legislative  enactment 
to  regulate  the  conduct  of  the  business  and  affairs  of  the  bank.  Such 
authority  does  not  empower  them  to  make  rules  which  shall  wrongfully 
affect  the  rights  of  outside  dealers  with  the  corporation.  Farmers  & 
Mechanics'  Bank  v.  Smith,  19  Johns.  (N.  Y.)  115;  Gallatin  v.  Bradford, 
1  Bibb  (Ky.),  209. 

Banking  and  other  usages  altering  legal  rules  have  been  admitted:  — 

1.  The  general  rules  of  law  as  to  the  time  and  place  and  mode  of  mak- 
ing demand  and  giving  notice  of  bills  and  notes,  as  notice  by  mail  where 
Usages  held  ^  P^rty  live  in  the  same  town;  Chicopee  Bank  v.  Eager,  9  Met. 
good,  through /]^jg^gg\  584.  Qrinman  t-.  Walker,  9  Iowa,  426;  or  notice  on  a 

altering  rules  v  ^  ' 

of  formal  law.  day  earlier  or  later  than  the  legal  day;  Peirce  v.  Butler,  14 
Mass.  303  ;  or  demand  on  fourth  day  of  grace  ;  Bank  of  Washington  v. 
Triplett,  1  Pet.  25 ;  or  on  a  day  previous  to  what  is  not  a  legal,  but 
only  a  customary  holiday.  City  Bank  v.  Cutter,  3  Pick.  (Mass.) 
414. 

2.  The  rule  that  a  bank  receiving  a  check  for  collection  has  till  the 
close  of  banking  hours  on  the  next  business  day  in  which  to  present 

22    . 


USAGE.  §  9 

(V)  The  question  always  to  be  answered  is,  What  is  it  fair 
to  presume  the  parties  intended  ?     The  business  must  be  done 

it.     Rickford  v.  Ridge,   2   Camp.   537 ;  Mohawk  Bank  v.  Broderick,  13 
Wend.  (N.  Y.)  133. 

3.  Tlie  rule  that  a  bank  to  whom  a  note  is  sent  for  collection  need  not 
notify  all  the  indorsers.  Smedes  v.  Bank  of  Utica,  20  Johns.  (N.  Y.) 
372. 

4.  Commencement  day  at  Harvard  College  (situated  three  miles  from 
Boston)  is  not  a  legal  holiday,  upon  which  by  statute  the  Boston  banks 
would  be  authorized  to  close.  But  it  has  long  been  their  usage  to  do  no 
business  upon  that  day,  and  to  make  demand  and  give  notice,  &c.  upon 
commercial  paper  upon  the  day  preceding,  in  like  manner  as  in  case  of 
Sundays  and  the  like.  The  courts  of  Massachusetts  have  recognized  the 
custom  as  good.     City  Bank  i\  Cutter,  3  Pick.  (Mass.)  414. 

5.  A  country  bank  in  the  State  of  New  York  was  wont  to  send  paper 
left  with  it  for  collection  in  New  York  City  by  the  captain  of  a  steamboat 
plying  to  the  city,  instead  of  sending  by  mail.  It  was  also  wont  to  send 
only  once  a  week,  except  in  cases  of  an  unusual  accumulation  of  paper. 
The  steamer  arrived  in  the  city  early  in  the  evening  of  the  same  day 
on  which  it  started.  The  court  held  that  the  custom  was  not  inopera- 
tive as  being  unreasonable,  or  as  wanting  any  of  the  requisites  of  a 
good  custom ;  and  that,  at  least  as  towards  all  persons  affected  with 
knowlege  of  it,  it  was  valid  and  binding.  Bridgeport  Bank  v.  Dyer,  19 
Conn.  13G. 

6.  Rules  of  law  as  to  the  powers  of  bank  officers  and  agents  are  affected 
by  usage,  as  where  the  usage  is,  that  in  the  absence  of  the  cashier  the 
president  signs  drafts  and  checks,  the  president's  signature  under  such 
circumstances  binds  the  bank.  Palmer  o.  Yates,  3  Sandf.  Super.  (N.  Y.) 
137. 

7.  Paper  not  negotiable  by  general  law  may  be  so  by  custom  of  a 
locality.     Rindskoff  v.  Barrett,  11  Iowa,  172. 

8.  The  rule  that  collecting  bank  has  no  right  to  receive  anything 
but  money.  Levi  v.  Nat.  Bank,  7  Cent.  L.  J.  (Mo.)  247.  See  note 
19  a. 

9.  The  rule  that  a  banker  must  know  the  signature  of  his  customer, 
and  pays  a  forged  check  at  his  peril.  As  where  it  was  customary  for  a 
bank  receiving  a  check  on  another  bank  to  make  inquiries  as  to  the 
genuineness  of  the  signature,  the  drawee  bank  receiving  the  check  from 
such  bank  is  protected  as  to  it  in  assuming  that  such  inquiries  have  been 
made.     Ellis  v.  Ohio  Life  Ins.  &  Trust  Co.,  4  Ohio  St.  628. 

10.  A  custom  of  common  carriers  and  messengers  to  leave  parcels  or 
notices  directed  to  a  particular  officer  of  the  bank  at  some  especial  desk, 
or  with  some  officer  other  than  the  one  named,  may  be  shown;  and  deliv- 
ery made  in  accordance  with  such  custom  will  be  a  sufficient  discharge  of 

.      23 


R  9  PRELIMINARY. 

in  sotne  way,  and  it  is  more  probable  they  intended  a  usual 
than  an  unusual  method.     See  note  12. 

his  duty  on  the  part  of  the  carrier  or  messenger.     Ilotchkiss  v.  Artisans' 
Bank,  42  Barb.  (N.  Y.)  517. 

11.  An  established  custom  that  notices  intended  for  the  directors 
shall  be  left  upon  the  cashier's  desk,  will  bind  any  director  whose  own 
notes  may  happen  to  come  into  the  bank.  "Weld  v.  Gorham,  10  Mass. 
366. 

1°  No  usao-e  can  be  set  up  against  the  clear  intent  of  the  parties.  The 
whole  idea  of  the  law  is,  that  when  the  parties  say  nothing  about  the 
manner  in  which  the  contract  is  to  be  performed,  or  the  precise  mean- 
ing they  attach  to  the  terms  employed,  or  acts  done,  their  meaning  and 
intent  may  be  arrived  at  by  looking  to  the  usual  manner  of  doing  such 
business,  and  the  usual  meaning  and  obligations  attached  to  such  words 
and  acts. 

The  theory  is  that  the  parties  knew  the  custom,  and  acted  in  reference 
to  it,  but  if  they  express  a  contrary  intent  the  theory  fails.  Barnard  v. 
Kellogg,  10  Wall.  383  ;  CoUender  v.  Dinsmore,  55  N.  Y.  200. 

"  A  usage  of  a  bank  cannot  bind  a  party  who  has  no  occasion  to  be- 
lieve he  will  be  brouglit  within  its  operation.  Mohawk  Bank  v.  Brod- 
erick,  13  Wend.  (N.  Y.)  133. 

If  there  is  no  intimation  whatsoever  upon  a  note,  that  the  maker  in- 
tended or  expected  that  it  would  be  negotiated  at  a  particular  bank,  he 
is  not  bound  by  the  fact  that  he  has  positive  knowledge  of  the  usage  of 
such  bank  in  regard  to  notice,  &c.  upon  such  notes.  For  it  does  not 
appear  that  he  anticipated  that  his  note  would  ever  come  into  this  bank, 
and  therefore  that  this  usage  would  be  applied  to  this  particular  note. 
The  case  of  the  Lime  Rock  Bank  v.  Ilewett,  52  Me.  531,  furnishes  an 
unusually  excellent  illustration  of  this  doctrine.  Two  notes  were  sued 
upon  in  that  case,  and  the  same  person  was  an  indorser  upon  each.  One 
of  them  was  made  payable  at  the  bank,  and  was  indorsed  over  by  him 
to  the  bank.  The  other  was  not  made  payable  at  the  bank,  and  was  in- 
dorsed by  him  generally ;  indeed,  there  were  subsequent  indorsers  before 
the  note  came  into  the  possession  of  the  bank.  The  indorser  was  shown 
to  be  personally  conusant  of  a  usage  of  the  bank  in  notifying.  Upon 
the  first  note  it  was  held  that  he  was  bound  by  this  usage ;  that  the  cir- 
cumstances constituted  a  conclusive  presumption  of  his  assent,  and  would 
have  been  equally  conclusive  of  his  knowledge  had  this  not  been  other- 
wise expressly  shown.  But  upon  the  second  note  he  was  held  not  bound 
by  the  usage.  For  though  he  knew  it,  yet  it  was,  as  regarded  this  note, 
a  mere  abstract  fact,  there  being  nothing  whatsoever  to  show  that  he 
ever  contemplated  that  the  note  should  pass  into  the  possession  of  this 
especial  bank,  or  he  subjected  to  the  effect  of  any  of  its  usages.  A 
usage  cannot  directly  affect  parties  between  whom  there  is  no  privity  of 
24 


USAGE.  §  9 

(c)  But  the  law  will  not  presume  an  intention  to  waive 
valuable  rights  ^*  unless  tiiere  is  an  agreement  or  understand- 

con tract.  Daun  v.  City  of  London  Brewery  Co.,  L.  R.  8  Eq.  15.5.  But 
it  is  hardly  correct  to  say  it  cannot  affect  them  indirectly ;  there  being 
no  contract  between  tliose  parties,  it  cannot  take  effect  as  part  of  such  a 
contract. 

But  contracts  and  usages  between  A.  and  B.  are  far  from  being  without 
effect  on  the  rights  of  C.  and  B.,  though  the  latter  have  not  contracted 
with  each  other.  For  example,  a  by-law  or  usage  of  a  bank,  securing  a 
lien  on  shares  of  a  ptockholder,  S.,  may  affect  S.'s  assignee  in  insolvency, 
or  an  attaching  creditor. 

A  by-law  of  a  bank,  or  even  its  usage,  if  the  usage  be  known  to  the 
stockholders,  of  refusing  to  allow  any  stockholder  to  transfer  his  stock  so 
long  as  he  is  indebted  to  the  bank,  is  valid  and  binding.  The  bank  has 
a  lien  upon  the  shares  for  the  amount  of  its  claim,  at  least  as  against 
the  shareholder  himself,  or  against  his  assignees  under  a  voluntary  as- 
signment for  the  benefit  of  creditors.  Morgan  v.  Bank  of  North  America, 
8  Serg.  &  R.  (Pa.)  73  ;  McDowells.  Bank  of  AVilmington,  1  Harr.  (Del.) 
3G9  ;  Child  v.  Hudson's  Bay  Co.,  2  P.  Wms.  207.  But  whether  or  not 
the  lien  of  the  bank  would  be  good  as  against  an  assignee  in  bankruptcy, 
or  an  attaching  or  execution  creditor,  is  a  different  question,  which 
might  perhaps  receive  a  different  answer.  In  Massachusetts  the  point 
has  been  considered  doubtful.  Nesmith  v.  Washington  Bank.  6  Pick. 
(Mass.)  329;  Plymouth  Bank  v.  Bank  of  Norfolk,  10  id.  454.  So  usage 
bears  on  negligence. 

In  the  Duan  case,  A.  and  B.  contracted.  A.  afterward  contracted  with 
C,  subject  to  his  contract  with  B.  B.  attempted  by  usage  Real  ground 
to  hold  A.'s  funds  as  against  C.  to  a  greater  amount  than  the  Durnei'sf  ^ 
express  terms  of  the  agreement  between  A.  and  B.  warranted,  should  rest. 
Such  a  usage  might  affect  A.,  but  was  too  remote  to  be  reasonably  pre- 
sumed within  C.'s  contemplation. 

12  Usage  may  explain  doubtful  words,  or  even  add  terms  to  a  contract. 
Carter  v.  Phil.  Coal  Co.,  77  Pa.  St.  286;  Lyon  i-.  Culbertson,  83  111.  33  ; 
Miller  v.  Burke,  68  N.  Y.  615  ;  Stevens  v.  Reeves,  9  Pick.  (I\Lass.)  198. 
A  contract  for  excavation  of  certain  lots  was  silent  as  to  who  should 
have  the  sand,  &c.  taken  out,  and  an  established  usage  giving  such  ma- 
terials to  the  excavator  was  allowed  to  add  this  term  to  the  contract. 
Cooper  V.  Kane,  19  Wend.  (N.  Y.)  386. 

"Where  parties  have  not  entered  into  any  express  and  specific  con- 
tract, a  presumption  nevertheless  arises  that  they  meant  to  contract  and 
to  deal  according  to  the  general  usage,  practice,  and  understanding,  if  any 
such  exists,  in  relation  to  the  subject  matter."  2  Stark.  Ev.  §  258,  259; 
1  Phil.  Ev.  420,  421.  But  if  the  usage  is  narrow,  the  presumption  may  be 
rebutted  by  proof  of  one  party  that  he  was  ignorant  of  it,  and  did  not 

25 


§  9  PEELIMINAEY.  -' 

ing  to  that  effect,  nor  will  it  ever  enforce  a  usage  that  is 
unreasonable  or  contrary  to  positive  law. 

(t7)  And  if  the  usage  is  in  the  nature  of  a  contract  be- 
tween other  parties,  as  in  the  case  of  clearing-house  ^^ 
usages  and  by-laws, ^^  it  will  not  enter  into  any  transactions 
except  those  of  members  or  parties  to  the  usage,  unless  it  is 
shown  that  the  contract  was  actually  with  reference  to  such 
usage. 

One  who  employs  a  member  of  the  clearing-house  cannot 
claim  the  advantage  of  such  usage  nor  be  prejudiced  by  it. 
It  is  deemed  extrinsic  unless  brought  in  by  the  parties. 

So  with  by-laws  and  usages  of  the  bank  for  its  internal 
affairs. 

Though,  of  course,  in  such  cases,  third  parties  may  be  in- 
directly ^^  affected,  as  in  respect  to  the  question  of  authority 
of  bank  officers.  And  usage  often  affects  parties  between 
whom  there  is  no  contract,  by  determining  the  question  of 
negligence.^" 

impliedly  assent  to  it.  Sawtelle  v.  Drew,  122  Mass.  228;  Farmers  & 
JMechanics*  Bank  v.  Sprague,  52  N.  Y.  605  ;  Walls  v.  Bailey,  49  N.  Y. 
464. 

Two  banks  entering  into  a  contract  must  be  presumed  to  do  so  with 
the  expectation  and  implied  agreement  that,  in  the  transaction  of  the 
business  provided  for  by  that  contract  each  will  act  according  to  well 
known  and  established  rules  and  customs  in  such  business.  Bank  v. 
Davis,  114  N.  C.  345  ;  Bank  v.  Bank,  75  id.  534  ;  Marine  Bank  v.  Fulton 
Bank,  2  Wallace  (U.  S),  252. 

13  Some  judges  are  inclined  to  follow  the  early  English  decisions,  others 
the  later  ones,  which  are  far  more  liberal  in  admitting  evidence  of  usage 
than  the  former.  At  first,  usage  was  permitted  to  explain  doubtful  terms, 
afterward  it  was  further  conceded  power  to  add  terms  to  contracts 
though  in  writing,  i.  e.  usage  in  reference  to  which  the  contract  is 
presumably  made  is  a  part  of  the  contract. 

"  See  note  9. 

1*  See  note  11  and  §  346.     See  By-laws,  §  43  b. 

i«  See  note  11. 

Judge  Story  says  in  his  work  on  Bailments,  §  11,  that  in  every  com- 
munity negligence  is  to  be  judged  of  by  the  actual  state  of  society,  the 
habits  of  business,  the  general  usages  of  life,  and  the  dangers  as  well  as 
the  institutions  peculiar  to  the  age. 

A  hotel  guest  leaves  the  key  in  his  door.  The  usage  of  guests  at  that 
26 


USAGE.  §  9 

A  usage  to  do  a  thing  cannot  have  the  same  effect  as  a 
performance,^"  if  in  fact  the  thing  was  not  done. 

(e)  When  there  are  several  methods  of  different  degrees 
of  usualness,  it  often  becomes  difficult  to  decide  which  shall 
control  the  transaction.  In  such  cases,  the  relation  of  the 
parties^  and  their  actual  knowledge,  are  of  importance  in 
determining  whether  the  more  special  usage  shall  outweigh 
the  more  general. 

A  general  usage  of  merchants,  judicially  ascertained  and 
established,  becomes  a  part  of  tlie  common  law  that  all  are 
held  to  know,  whether  they  do  or  not ;  but  in  the      Law  mer- 
case  of  usages  peculiar  to  a  single  baulc,  or  to  the     ^'•1^"*. 
banks  of  a  city  or  locality,  the  above  points  must  be  regarded. 

A  course  of  dealing  ^^  between  the  bank  and  a  single  per- 

hotel  is  relevant  to  the  question  of  negligence.     Berkshire  Woollen  Co. 
V.  Proctor,  7  Cush.  (Mass.)  417. 

So  drivers  of  horses  and  wagons  on  the  highway's,  and  masters  and 
pilots  of  boats,  not  passing  each  other  in  the  usual  way,  are  negligent, 
unless  there  is  good  reason  for  the  variance.  Turley  v.  Thomas,  8  Car.  & 
P.  104;  The  City  of  Washington,  92  U.  S.  31. 

"  Piscataqua  Exchange  Bank  v.  Carter,  20  N.  H.  246,  and  Central  Bank 
V.  Davis,  19  Pick.  (Mass.)  373,  rest  on  the  ground  that  a  usage  for  an  in- 
dorser  to  waive  demand  and  notice  is  not  equivalent  to  a  waiver,  if  he  in  fact 
does  not  in  a  given  transaction  waive  it.  If  a  by-law  requires  a  person 
having  a  certain  transaction  with  a  bank  to  perform  a  certain  act,  and  he  in 
fact  does  not  perform  it,  he  cannot  be  affected  with  the  legal  consequences 
of  a  performance  on  the  ground  that  it  was  a  usage  of  the  bank  to  require 
performance,  that  he  knew  the  usage,  and  must  be  assumed  to  have  in- 
tended to  conform  to  it.  It  was  said,  that  the  usage  claimed,  if  proved, 
would  be  only  a  usage  for  the  customer  to  make  such  an  agreement.  By 
strict  construction,  therefore,  it  would  not,  even  if  fully  shown,  have  any 
effect  upon  a  transaction  in  which  the  agreement  was  distinctly  not 
made. 

18  (a)  Hotchkiss  v.  Artisans'  Bank,  42  Barb.  (X.  Y.)  517. 

(h)  Presumptions  Established  by  Course  of  Dealing.  —  The 
course  of  dealing  between  two  banks  may  be  given  in  evidence  for  the 
purpose  of  raising  a  presumption  from  it.  This  is  not  precisely  a  usage ; 
that  is  to  say,  it  is  not  always  necessary  that  it  should  bind  the  banks  as 
an  arbitrary  rule  for  the  conduct  of  their  affairs  with  each  other.  There- 
fore the  inference  based  upon  it  is  not  absolutely  conclusive,  but  is 
capable  of  being  rebutted  by  proof  that  the  habitual  course  of  dealing  had, 
in  the  particular  instance,  been  departed  from.     It  is  strictly  as  a  habit, 

27 


S  9  PRELIMINARY. 

son  may  establish  obligations  as  to  its  continuance,  and,  if 

nothing  is  provided  to  the  contrary,  will    govern 

hlli'^benveen''  Subsequent  transactions,  of  the  same  nature,  between 

the  parties.        ^j^^^^^_ 

The  usage  of  a  single  bank  will,  by  reason  of  the  relation 
of  the  parties,  bind  all  who  selecf^^  that  bank  to  act  for  them, 

which  gives  ripe  to  certain  natural  suppositions,  not  as  a  legal  usage 
which  imperatively  establishes  those  suppositions  as  facts,  that  such 
evidence  is  admitted.  Thus,  that  two  banks  are  wont  to  exchange 
accounts  at  short  intervals,  and  each  promptly  to  object  to  the  account 
rendered  by  the  other,  if  it  claims  any  error  therein, —  and  that  such 
accounts  have  been  rendered  covering  a  point  subsequently  disputed,  but 
not  objected  to  within  the  usual  time,  —  are  acts  admissible  in  evidence, 
as  going  to  show  actual  correctness,  and  that  the  correctness  has  been 
acknowledged.  But  the  same  evidence  would  be  incompetent  to  establish 
a  usage  between  the  banks  of  objecting  promptly,  which  should  have  the 
effect  of  estopping  the  bank  which  had  failed  so  to  object  from  afterwards 
claiming  the  correction  of  the  error.  Union  Bank  v.  Planters'  Bank,  9 
Gill  &  J.  (Md.)  439. 

(c)  It  is  only  as  affecting  the  question  of  notice  that  the  generality  of 
a  usage  is  material  ;  for  a  practice  may  exist  between  two  only,  and  yet 
bind  them  in  all  subsequent  dealings,  unless  abrogated  by  both.  Hotch- 
kiss  V.  Artisans'  Bank,  42  Barb.  (N.  Y.)  517. 

w  (a)  Boston  Bank  v.  Hodges,  9  Pick.  (Mass.)  420;  Bank  of  Columbia 
V.  Magruder,  6  liar.  &  J.  (Md.)  172  ;  Lincoln  &  Kennebec  Bank  v. 
Page,  9  Mass.  155  ;  Cohea  t'.  Hunt,  2  Sin.  &  M.  (Miss.)  227;  Smith  v. 
Whiting,  12  Mass.  8  ;  Mills  v.  Bank  of  the  United  States,  11  Wheat. 
431;  Chicopee  Bank  v.  Eager,  9  Met.  (Mass.)  584;  Lime  Rock  Bank  r. 
Hewett,  52  Me.  531 ;  Gindrat  v.  Mechanics'  Bank,  7  Ala.  325.  In  Mills 
V.  Bank  of  the  United  States  it  was  ruled  that,  where  a  note  is  made  for 
the  purpose  of  being  negotiated  at  a  bank  whose  custom  it  is  to  demand 
payment  and  give  notice  on  the  fourth  day  of  grace,  that  custom  binds 
the  parties  whether  they  knew  of  it  or  not.  By  implication  they  agree  to 
be  governed  by  the  usage  of  the  bank  at  which  they  have  chosen  to  make 
the  security  negotiable.  A.  sent  a  note  to  bank  C  to  collect;  D.,  the 
debtor,  paid  a  certificate  of  deposit  of  C.  to  it  to  satisfy  the  note.  A.  was 
held  bound  by  the  custom  of  C.  to  take  its  certificates  of  deposit  in  lieu 
of  cash,  and  D.  was  discharged,  although  the  bank  became  insolvent,  and 
never  remitted  to  A  ,  and  in  spite  of  the  rule  of  law  that  an  agent  can 
take  nothing  but  money.  British  &  American  Mortgage  Co.  v.  Tibballs, 
63  Iowa,  468;  19  N.  W.  319,  Reed,  J.  dissenting. 

In  Bank  of  Utica  v.  Smith,  18  Johns.  (N".  Y.)  230,  a  note  payable  at 
the  Mechanics'  Bank  was  presented  fifteen  minutes  after  bank  hours  for 

28 


USAGE    OF   A    SINGLE   BANK.  ^  \) 

as  one  who  is  a  customer  of  the  bank,  or  making  use  of  the 
facilities  it  holds  out.     A  depositor  in  a  bank,  or  one  who 
gives  a  note  to  a  bank  to  collect,  or  makes  his  notes    ^^^^.^  ^^^^_ 
payable  there,  is  properly  held  imperatively  to  an   [^'^'^^^'^  °"® 
implied   knowledge  of   its  legal  usage  in   dealing 
with    depositors,    collecting   or    paying   such    notes.     So   an 

other  business;  but  it  appeared  that,  according  to  the  usual  course  of 
business  at  this  bank,  such  presentments  were  made  at  this  time,  and  the 
defendant  should  have  informed  himself  of  it. 

(b)  But  the  fact  that  one  is  the  holder  of  a  check  drawn  upon  a  bank, 
or  the  debtor  upon  a  note  held  by  it  for  collection,  or  is  the  payee  of  paper 
made  payable  at  its  office,  does  not  bring  such  person  within  either  the 
reason  or  the  language  of  these  decisions.  He  is  not  a  customer,  nor,  in 
the  sense  in  which  the  word  is  used  in  these  cases,  is  he  one  dealing  with 
the  bank.  He  is  therefore  held  to  no  knowledge  of  any  peculiar  habit  of 
this  individual  bank.  He  must  assume,  unless  he  has  positive  knowledge 
to  the  contrary,  that  it  conducts  its  transactions  like  the  other  banks  in  the 
same  place ;  and  its  usage  to  conduct  them  differently  in  any  respect  must 
be  specially  brought  home  to  him  before  it  can  affect  him  disadvanta- 
geously.  But  the  custom  of  the  single  bank,  once  known,  enters  into  all 
subsequent  contracts  and  dealings  with  it.  Patriotic  Bank  v.  Farmers' 
Bank,  2  Cranoh,  C.  C.  560;  Renner  v.  Bank  of  Columbia,  9  Wheat.  582  ; 
City  Bank  v.  Cutter,  3  Pick.  (Mass.)  4U ;  Bridgeport  Bank  v.  Dyer,  19 
Conn.  13G.  The  doctrine  is  very  clearly  put  by  Mr.  Justice  Story  in 
Mills  V.  Bank  of  United  States.  If  a  note  is  made  payable  at  a  particular 
bank,  there  is  no  ground  for  demanding  that  the  bank  shall  depart  from 
"  general  commercial  usage  "  for  any  other  purpose  than  that  of  conform- 
ing to  its  own  individual  usages.  Evidence  of  the  usage  of  any  number  of 
other  banks  not  amounting  to  "general  commercial  usage"  is  inad- 
missible to  fix  the  duties  of  this  especial  bank,  unless  conformity  to  this 
particular  usage  and  adoption  of  it  can  also  be  brought  home  to  this  bank. 
It  cannot  be  supposed  that  "  the  particular  usage  of  other  banks  not  men- 
tioned in  the  contract  "  ever  fell  within  the  contemplation  of  the  parties 
to  that  contract.     Camden  v.  Doremus,  3  How.  515. 

(c)  Usages  of  a  bank  actually  known  bind  dealers  with  it.  Lincoln  & 
Kennebec  Bank  v.  Page,  9  Mass.  155  ;  Jones  v.  Fales,  4  Mass.  252.  If 
there  is  a  general  usage  applicable  to  a  business,  one  employing  an  indi- 
vidual of  that  profession  contracts  in  reference  to  the  usage.  Walls  v. 
Bailey,  49  N.  Y.  464 ;  Ford  v.  Tirrell,  9  Gray  (Mass.),  401  ;  Lowe  v. 
Lehman,  15  Ohio  St,  179;  Carter  i;.  Philadelphia  Coal  Co.,  77  Pa.  St.  286  ; 
Sewell  V.  Corp,  1  Car.  &  P.  392.  The  fact  that  a  depositor  in  a  savings 
bank  was  illiterate,  and  could  not  read  the  rules  in  his  bank-book,  did  not 
excuse  his  non-compliance  with  a  reasonable  rule  requiring  notice  of  loss 
of  the  book,     Burrill  v.  Dollar  Savings  Bank,  92  Pa.  St.  134  (1879). 

29 


§  9  PRELIMINAET. 

indorser   of   a  note  payable  at  the  bank,  for  he  selects  or 
adopts  as  to  subsequent  parties,  and  as  to  the  bank. 

But  the  holder  of  a  check  on  the  bank,  or  payee  of  a  note 
payable  there,  or  debtor  on  a  note  held  by  it  for  collection, 
did  not  choose  that  bank  to  act  for  him,  and  has  a  right  ^o  to 
assume  that  it  transacts  its  affairs  like  other  banks  in  the 
same  place,  unless  he  has  actual  knowledge  of  its  peculiar 
custom;  then  he  is  bound  by  it,  if  the  bank  entered  as  a 
factor  into  the  transaction  within  the  contemplation  of  the 
parties- 
No  one,  however,  is  held  to  a  bank's  usage,  though  he  knows 
it,  if  that  bank  was  not  contemplated  as  connected  with  the 
business.     Such  knowledge  is  extrinsic.     See  note  11. 

It  might  be  thought  that,  whenever  a  person  enters  into  a 
transaction  in  which  he  is  reasonably  aware  a  particular  bank 
will  enter  as  a  factor,  he  should  be  held  by  its  customs,  known 
to  him  or  not ;  but  though  this  principle  is  recognized  in  re- 
gard to  usages  one  degree  superior  in  generality,  the  above 
distinction  breaks  in  upon  it  in  respect  to  single  usage. 

The  general  usage  of  all  or  a  majority  of  the  banks  in  a 
place,  town,  city,  or  county,  is  held  to  be  known  to  all  in  the 
General  particular  community,  and  all  who,  though  dwell- 

usage.  ^jjg  elsewhere,  enter  into  transactions  which  they 

must  be  presumed,  as  men  of  ordinary  foresight,  to  know  will 
involve  a  dealing  with  or  through  the  banks  of  said  place.^i 

2"  It  is  very  proper  that  one  who  deliberately  employs  a  bank  should 
be  held  to  adopt  it,  usages  and  all,  so  far  as  they  are  legal  and  reasonable, 
&c. ;  and  also  that  one  who,  like  the  holder  of  a  check,  has  nothing  to  do 
with  choosing  the  bank,  and  for  whom  the  bank  is  not  acting,  should  be 
held  to  less  diligence  in  informing  himself  of  its  usages  ;  and  in  case  of  a 
debtor  on  a  note  the  bank  holds  for  collection,  it  may  often  occur  that  the 
debtor  had  no  reason  to  suppose  that  particular  bank  would  transact  the 
business.     See  note  19  b. 

21  Generally  speaking,  it  cannot  be  presumed  that  a  person  is  acquainted 
with  the  customs  of  doing  business  which  obtain  among  the  banks  of  any 
place  distant  from  that  in  which  he  himself  lives  and  deals.  But  if  he 
enters  into  any  transaction  which  he  is  aware  must  reasonably  be  expected 
to  involve  a  dealing  with  or  through  the  banks  of  the  distant  place,  his 
knowledge  of  and  assent  to  their  customs  will  be  implied.  This  is  only 
a  slight  extension  of  the  principle  which  declares  every  person  dealing 

30 


KNOWLEDGE   OP   USAGE.  §  9 

A.  Cases  on  Usage.  —  The  usage  of  a  bank,  known  to  per- 
sons dealing  with  it,  binds  them.^^ 

A  usage  known  to  the  defendant  is  proper  evidence  for  the 
jury  as  to  the  contract  of  the  pai-ties.^^ 

The  common  law  and  the  general  law  merchant  are  in  many- 
cases  controlled  by  usage.^^ 

In  Connecticut,  D.,  the  holder  of  a  check,  got  it  cashed  at 
the  B.  Bank,  whose  custom  it  had  been  for  years  to  send 
checks  to  New  York  (where  this  was  payable)  by    Timeof  for- 

.  warding 

the  captain  of  a  boat,  once  a  week,  instead  oi  by   check, 
mail.     The  jury  found  that  D.  knew  of  this  usage,   and  the 
court  held  him  bound  by  it.^^ 

So,  where  an  iiidorser,  for  whom  a  note  was  discounted  by 
the  City  Bank,  knew  of  its  custom  to  regard  Har-   Time  of  de- 
vard  Commencement  as  a  holiday,  he  was  bound  by   notice. 
the  usage.^^ 

B.  Those  who  deal  with  a  bank  by  drawing  and  indors- 
ing notes  payable  at  the  bank,  and  negotiating  notes  for 
discount  there,  are  bound  by  its  usages  known  to  them.^''  In 
this  case  an  indorser  of  a  note  payable  to  himself  at  the 
L.  and  K.  Bank  was  held  by  its  particular  customs  known 
to  him. 2'' 

C.  Where  a  note  was  payable  in  the  District  of  Colum- 
bia, the  general  usage  of  the  banks  there  being  to  make 
demand  on  iho,  fourth  day  after  the  time  limited  in  the  note 
for  its  payment,  and  a  bank  there  discounted  it,  the  indorser, 
who  knew  of  the  custom,  was  bound  by  it.^^ 

Where  a  note  was  payable  to  Mills,  at  the  United  States 

■with  a  bank  to  be  affected  with  knowledge  of  its  usages,  and  is  supported 
by  the  cases  which  assert  that  doctrine.  Bank  of  Washington  v.  Triplett, 
1  Pet.  25. 

22  Lincoln  &  Kennebec  Bank  v.  Page,  9  Mass.  155. 

28  Johns  V.  Fales,  4  Mass.  252. 

24  Halsey  v.  Brown,  3  Day  (Conn.),  346. 

25  Bridgeport  Bank  v.  Dyer,  19  Conn.  136  (1848). 

26  City  Bank  v.  Cutter,  3  Pick.  (Mass.)  418  (1826). 

2''  Lincoln  &  Kennebec  Bank  v.  Page,  9  Mass.  155  (1812)  ;  Smith  v. 
Whiting,  12  Mass.  8. 

28  Kenner  v.  Bank  of  Columbia,  9  Wheat.  582  (1824).     A  strong  case. 

31 


§  9  PRELIMINARY. 

Bank,  and  Mills  indorsed  it,  he  was  bound  by  the  usage  to 
make  demand  on  the  fourth  day,  though  he  had  no  knowledge 
of  it.  The  court  said  :  "  Upon  the  principles  and  reasoning 
of  the  former  case  (Renner's)  we  have  come  to  the  conclusion 
that,  when  a  note  is  made  payable  or  negotiable  at  a  bank 
whose  invariable  usage  it  is  to  demand  payment  and  give  no- 
tice on  the  fourth  day  of  grace,  the  parties  are  bound  by  that 
usage,  whether  they  have  a  personal  knowledge  of  it  or  not. 
In  the  case  of  such  a  note,  the  parties  are  presumed  by 
implication  to  agree  to  be  governed  by  the  usage  of  the 
bank  at  which  they  have  chosen  to  make  the  security  itself 
negotiable."  ^^ 

D.  In  Alabama,  it  was  held,  following  11  Wheaton,  that, 
where  a  bill  appears  on  its  face  to  be  payable  at  a  particular 
Notice  bv  bank,  the  particular  usage  of  such  bank,  of  giving 
mail,  notice  through  the  mail,  instead  of  personally, 
though  the  party  is  in  the  same  place,  binds  the  parties  liable 
on  such  bill  (indorsers  in  this  case),  though  the  usage  was 
unknown  to  them.^'^ 

E.  "Where  it  was  the  custom  of  a  particular  bank  to 
devote  fifteen  minutes,  after  the  close  of  banking  hours  for 
the  general  business,  to  paying  notes  made  payable  at  that 
bank,  and  a  note  so  payable  was  presented  in  those  fifteen 
minutes,  it  was  held  a  good  presentment.  The  indorser  of 
the  note  payable  at  the  bank  should  have  informed  himself 
of  its  usages.^^ 

F.  Evidence  of  usage  is  not  considered  as  breaking  in 
on  the  rule  that  parol  shall  not  be  admitted  to  vary  a  written 
contract.  The  usage  is  considered  as  a  part  of  the  contract, 
and  the  evidence  is  admitted  to  explain  the  meaning  of  the 
parties.^^ 

G.  The  head-note  to  an  Illinois  case  would  seem  to 
break  in  on  the  views  advanced  in  the  analysis  at  the  head 

29  jNIills  V.  Bank  of  the  United  States,  11  Wheat.  438  (1826). 

30  Gindrat  v.  Mechanics'  Bank,  7  Ala.  333  (1845). 

31  Bank  of  Utica  v.  Smith,  18  Johns.  (N.  Y.)  230(1820). 

3'-2  Ilnl.sey  v.  Brown,  3  Day  (Conn.),  316;  Reuner  v.  Bank  of  Colum- 
bia, 9  AVheat.  582. 

32 


FORCE   OP   STATE   DECISIONS.  §  lO 

of  this  chapter.  It  says  :  "  The  fact  that  the  city  bank,  which 
was  not  the  correspondent  of  the  liome  bank,  in  pursuance 
of  instructions  from  that  bank,  and  in  the  line  Usage. 
of  custom  of  the  city  banks,  deposited  the  money  deposits, 
(left  with  it  for  transmission  to  the  home  bank)  with  an- 
other city  bank  which  was  the  correspondent  of  the  homo 
bank,  will  not  exempt  it  from  liability,  where  the  original 
depositor  is  unacquainted  with  such  custom  and  instruc- 
tions." 

The  fact  was,  that  the  court  said  :  "  It  is  not  necessary  in 
this  case  to  determine  the  effect  to  be  given  to  that  general 
usage  among  city  banks." 

The  decisive  consideration  was,  that  the  depositary  bank 
sent  the  money  to  the  correspondent  of  the  home  bank  with- 
out any  notice  of  the  true  ownership,  so  that  it  was  applied 
on  the  debt  of  the  home  bank  to  said  correspondent,  and  lost 
to  the  depositor,  the  home  bank  being  insolvent.^ 

§  10.  Conflict  between  State  and  Federal  Courts  as  to  Com- 
mercial Questions.  —  Under  the  Judiciary  Act,^  except  where 
the  Constitution,  treaties,  or  statutes  of  the  United  States 
otherwise  provide,  the  laws  of  the  several  States  shall  be 
regarded  as  rules  of  decision  in  trials  at  common  law  in 
the  United  States  courts,  in  cases  where  they  apply. 

But  this  has  no  application  to  questions  of  the  validity  2  or 
impairment  of  contracts,  or  of  general  commercial  laiv^  or  any 
extra-territorial  ^  matter,  nor  does  it  compel  the  United  States 

83  Drovers'  National  Bank  v.  O'Hare,  18  Brad.  (111.)  3G0  (1887). 

1  §  10.     1789,  c.  20,  §  31. 

2  If  a  contract  is  valid  under  the  decisions  of  the  State  at  the  time  of 
the  contract,  it  will  be  held  good  in  the  Federal  courts,  although  a  subse- 
quent decision  of  the  State  declares  the  former  judgment  erroneous  and 
the  contract  bad.     Gelpecke  v.  Dubuque,  1  Wall.  176. 

*  2  Story  on  the  Constitution,  551 ;  The  Gloucester  Ins.  Co.  v.  Younger, 
2  Curt.  338.  In  Austen  v.  Miller,  5  McLean,  154,  a  certificate  of  deposit 
was  held  a  promissory  note,  in  spite  of  a  contrary  Ohio  decision,  it  being 
a  question  of  general  commercial  law. 

*  A  discharge,  under  Rhode  Island  bankrupt  laws,  from  all  debts  and 
contracts,  does  not  affect  a  contract  to  be  executed  in  a  foreign  country. 
Van  Reimsdyk  v.  Kane,  1  Gall.  371.     "  I  apprehend  a  limitation  of  the 

VOL.  I.  — 3  33 


§  10  PRELIMINARY. 

courts  to  enforce  manifest  injustice.  The  United  States  Su- 
preme Court  is  the  highest  authority  on  all  questions  of  general 
commercial  law. 

The  rule  is  confined  to  matters  strictly  intra-tcrritorial  hy 
the  law  of  nations,  local  statutes,  and  usages,  as  those  affect- 
intra-territo-  ing  only  citizcus  of  the  State,  or  real  estate,  and 
Limitations.'  iutcrcsts  of  a  fixcd  and  permanent  nature,^  and 
the  decisions  of  the  State  court  of  last  resort  upon  such  mat- 
ters, and  the  construction  of  such  statutes,  will  be  binding  on 
the  Federal  courts,  subject  to  two  limitations :  1st.  No  State 
decision  on  general  commercial  law,"  nor  as  to  what  is  a  valid 
contract,  or  what  is  impairing  the  obligation  of  a  contract, 
binds  the  United  States  courts.^  If  it  did,  the  States  could 
set  at  naught  the  constitutional  prohibition  against  de- 
struction of  contract  rights.  2d.  State  judgments  are 
only  rules  of  decision,  not  exclusive  or  peremptory  injunc- 
tions,^ and  will  not  be  followed  in  the  face  of  justice  and 
good  faith. 

rule  giving  effect  to  State  decisions  must  arise  whenever  the  subject  mat- 
ter is  extra-territorial." 

^  Van  Reimsdyk  v.  Kane,  1  Gall.  371 ;  Bragg  v.  Meyer,  1  IMcAll.  411. 
If  applied  beyond  this,  it  would  enable  the  State  legislature  to  dry  up  the 
sources  of  Federal  jurisdiction. 

6  The  words  of  Story  in  1  Gall.  371,  saying  further,  "  If  a  State  were 
to  declare  that  no  action  would  lie  on  a  contract  between  a  citizen  thereof 
and  a  foreigner,  or  a  citizen  of  another  State,  under  any  circumstances, 
or  were  to  say  that  interest  reserved  on  such  a  contract,  though  good  at 
the  place  of  contract,  should  be  void,  it  would  hardly  be  binding  on  the 
United  States  courts."  This  language  applies  only  to  extra-territorial 
matters  by  its  terms ;  but  the  whole  tone  of  the  Federal  decisions  is,  that 
they  will  not  enforce  manifest  injustice  in  any  case,  merely  because  a  State 
court  has  sanctioned  it. 

■^  Story  in  Swift  v.  Tyson,  IG  Pet.  1.  And  see  Robinson  ii.  Common- 
wealth, 3  Sum.  220.  In  Brooklyn  Gity,  &c.,  R.  R.  Co.  v.  National  Bank 
of  Republic,  22  Albany  L.  J.  189,  a  note  was  given  as  collateral  on  a 
pre-existing  debt,  to  a  bank  in  New  York  by  a  citizen  of  New  York. 
The  question  was  if  the  bank  was  a  holder  for  value.  New  York  de- 
cisions said  no ;  but  the  United  States  court  remarked  that  it  was  a 
question  arising  out  of  the  usage  of  the  commercial  world,  and,  not  hav- 
ing been  modified  by  local  statute,  the  Federal  courts  had  equal  powers 
with  the  State  courts  to  determine  such  questions. 

u 


CONFLICT    OP   LAWS.  §  12 

State  statutes  or  decisions  affecting  rights  wliicli  are  neither 
between  citizens  of  the  State  and  derived  under  that  State, 
nor  are  governed  by  the  lex  rei  sitce  under  the  law  Extra-ternto- 
of   nations,^   do   not   control   the   Federal    courts,  "''^  wiitttrs. 
though  recognized  as  entitled  to  respectful  consideration. 

Further,  on  questions  of  general  commercial  law,  i,  e. 
commercial  questions  not  dependent  on  local  statutes  or  local 
usage,  but  which  must  be  decided,  in  whatever  court  thej 
arise,  on  the  general  principles "'  to  the  commercial  law  and 
the  custom  of  merchants,  the  Federal  courts  are  not  bound  by 
State  decisions.  "  When  the  State  courts  are  called  General  com- 
on  to  perform  the  like  functions  as  ourselves,  i.  e.  '"*^''"'*'  *'^^- 
to  determine  on  general  reasoning  and  legal  analogies  what  is 
the  true  exposition  of  the  contract,  or  what  is  the  construction 
just  rule  furnished  by  the  principles  of  commercial  ^^  contract. 
law  to  govern  the  case,  the  rule  of  the  Judiciary  Act  does  not 
apply."  7 

§  11.  The  Conflict  of  Laws.  —  It  would  not  be  proper  to 
attempt  any  complete  statement  of  the  principles  of  private 
international  law  in  a  work  of  this  kind,  but  a  few  points  of 
chief  interest  to  us  may  be  noted,  and  a  caution  entered,  never 
to  omit  in  any  transaction  either  of  the  questions,  "  By  what 
system  of  law  is  this  matter  controlled?"  and,  "What  has 
that  law  to  say  on  the  subject?"  In  banking  and  all  mer- 
cantile business  that  continually  runs  its  roots  and  branches 
beyond  State  and  national  lines,  it  is  of  the  utmost  import  to 
keep  in  mind  the  effect  of  the  various  and  often  conflicting 
laws  that  may  apply  to  the  transaction. 

§  12.    Contracts  ^  are  governed,  — 

1.    As  to  remedy,^  by  the  lex  fori. 

^  §  12.  For  the  law  of  this  subject  reference  must  be  made  to  the 
works  of  Wharton  and  Story,  from  which  it  is  chiefly  derived  by  an  in- 
tellectual process  of  condensation.  The  indexes  of  those  books  will 
enable  any  point  to  which  no  reference  is  here  attached  to  be  verified 
as  well  as  if  all  the  many  sections  bearing  upon  it  were  quoted  by  me. 
For  a  later  and  well  arranged  treatise,  see  Minor's  Conflict  of  Laws,  pub- 
lished in  1901. 

2  The  law  of  the  court  in  which  suit  is  brought  governs  in  all  that 
relates  to  practice,  pleading,  burden  of  proof,  admissibility  of  evidence 

35 


§  12  PRELIMINARY. 

2.  As  to  the  interpretation,^  bj  the  law  and  usage  the 
parties  had  in  contemplation, 

(including  the  competency  of  witnesses,  and  the  great  rules  of  exclusion, 
as  those  regarding  hearsay,  parol  evidence  to  affect  written  contracts  or 
explain  patent  ambiguities,  involving,  of  course,  the  determination  of 
what  is  a  patent  ambiguity),  and  the  determination  of  the  question  what 
facts  are  proved  by  the  evidence  admitted.  But  the  legal  effect  of  the 
facts  proved  by  the  evidence  admitted  may  depend  on  other  law,  to  which 
the  construction  of  the  contract  is  subject.     See  text,  nos.  3,  4,  7. 

If  a  Statute  of  Limitation  of  a  State  (I.)  only  says  no  action  shall 
be  brought  for  the  goods  or  debt  after  a  certain  period  (P.),  it  belongs  to 
the  remedy,  and  an  action  may  be  brought  in  another  State  (where  the 
period  is  longer)  for  the  debt  or  goods,  though  the  parties  both  lived  in  I. 
the  full  time  (P-)-  But  if  the  statute  of  I.  changes  the  title,  or  extinguishes 
the  debt,  then  as  to  debts  due  citizens  domiciled  in  I.,  and  as  to  property 
within  its  territory,  the  statute  once  taking  effect  will  not  be  disturbed 
elsewhere. 

If  a  Statute  of  Frauds  of  a  State  (I.)  merely  provides  that  no  action 
shall  be  brought  on  certain  contracts  unless  in  writing  or  conforming 
to  other  requirements,  it  is  of  the  remedy,  and  such  a  contract  (though 
made  in  a  foreign  country,  F.,  where  it  is  valid  and  enforceable,  there 
being  no  such  law  there),  will  not  been  forced  in  I. ;  but  such  contract 
made  in  I.  may  be"  enforced  in  F.  If,  however,  I.'s  statute  of  frauds 
makes  the  contract  void,  it  acts  on  the  contract  itself,  and  not  the  remedy; 
and  in  such  case,  so  far  as  the  statute  of  frauds  is  concerned,  a  contract 
valid  where  made  is  valid  everywhere,  and  invalid  where  made  is  invalid 
everywhere,  except  that  (1)  the  lex  situs  controls  the  forms,  &c.,  of  the 
transfer  of  property  with  few  exceptions,  and  (2)  contracts  made  casually 
in  I.,  and  not  in  accord  with  its  law,  are  not  thereby  void  in  the  domicil 
of  the  parties,  or  the  country  where  the  contract  is  to  be  performed.  See 
text,  Nos.  6,  7. 

3  Any  court  that  has  to  interpret  a  document,  i.  e.  discover  the  mean- 
ing of  the  parties,  will  look  for  that  purpose  to  any  law  or  usages,  as  well 
as  any  facts,  the  author  or  parties  are  shown  to  have  had  in  mind.  Usu- 
ally the  parties  think  and  speak  in  the  terms  of  the  place  where  the  con- 
tract is  made ;  but  if  only  casually  there,  (as  travellers  on  a  railroad  or 
persons  coming  to  a  half-way  point  to  negotiate),  it  is  more  likely  they 
contemplate  the  law  and  usage  of  their  domicil,  or  of  the  place  of 
performance. 

In  case  of  a  contract  by  correspondence,  the  usage  of  the  place  of  the 
writer  who  first  employs  controverted  terms  decides  their  meaning,  for  he 
is  supposed  to  use  them  in  the  sense  with  which  he  is  familiar,  and  the 
other  accepts  that  meaning  by  adopting  the  words. 

It  is  to  be  distinctly  noted,  however,  that  the  question  whether  any 

36 


CONFLICT    OF   LAWS.  §  12 

3.    As  to  direct^  action  upon  real  estate  (as  in  all  other 

matters   touching   immovables,   even   to    the   question   what 

property  is  real),  the  lex  rei  sitce  controls.*     But  the  word 

direct  is  very  important  in  this  connection,  for  there  is   a 

clear  distinction  ^  between  the  effect  of  a  contract  as  creating 

a  lien  or  transferring  title  to  specific  property,  and 

its  effect  considered  simply  as  creating  obligations   rem  distinc- 
tion. 
between  the  parties.     For  example,  a  conveyance 

not  in  accord  with  the  law  of  Illinois,  where  the  land  is, 

but  valid  by  the  law  of  Massachusetts  where  it  is  executed, 

though  it  does  not  of  itself  change  the  title  to  the  land,  and 

an  Illinois  creditor  of  the  assignor  or  vendor  attaching  the 

land  after  the  conveyance  will  hold  against  the  conveyee ;  yet 

as  between  vendor  and  vendee  the  transaction  may  base  a 

evidence  cat  all  of  the  meaning  of  the  parties  concerning  the  point  in  dis- 
pute is  to  be  received,  is  a  preliminary  question  for  the  lex  fori;  and  also 
that,  if  there  is  conflict  between  what  the  author  really  meant  and  the 
meaning  attached  to  the  words  he  has  used  by  the  law  to  which  the  con- 
struction of  the  document  is  subject,  the  latter  controls. 

4  Titles  by  prescription,  grant,  devise,  descent,  marriage;  easements, 
servitudes;  liens;  incumbrances;  assignments  for  benefit  of  creditors; 
forms  of  conveyance  and  devise,  and  their  construction  ;  legitimacy  of  one 
claiming  as  heir;  capacity  to  acquire  or  convey  in  any  way.  Realty  can- 
not be  touched,  transferred,  or  incumbered  in  any  way  except  in  conformity 
to  the  lex  situs ;  but  it  is  a  general  principle  of  the  lex  situs  in  all  civilized 
countries  to  give  effect  to  acts  done  in  other  sovereignties  and  valid  there, 
unless  they  are  contrary  to  the  positive  law,  or  the  ideas  of  morality,  jus- 
tice, and  public  policy  existing  in  the  situs. 

The  title  of  a  bank  to  land  must  be  determined  by  the  law  of 
the  state  in  which  the  land  is  situated,  and  if  a  mortgage  to  it  is  not 
made  in  good  faith  by  the  State  law,  the  bank  gets  no  title.  Chipman  c. 
McClellan,  159  Mass.  363  (.34  N.  E.  379)  (1893). 

*  The  validity  of  a  mortgage  as  a  lien  on  the  land  is  controlled  by  the 
lex  situs ;  but  the  legality  of  the  contract  to  wliich  the  mortgage  is  collat- 
eral is  determined  by  the  law  of  the  place  where  the  contract  is  made, 
unless  it  is  to  be  performed  elsewhere,  then  by  that  law. 

A  contract  illegal  by  the  law  of  its  place  is  inoperative,  though  secured 
by  a  mortgage  on  land  in  a  State  where  such  a  contract  would  have  been 
good;  Pine  v.  Smith,  11  Gray  (Mass.),  38;  and  if  the  contract  is  good  by 
its  law,  it  is  not  invalid  because  the  mortgage  is  subject  to  the  law  of  a 
State  by  which  such  contract  would  be  bad  against  creditors.  Iloyt  v. 
Thompson,  19  N.  Y.  207. 

37 


I  12  PRELIMINARY. 

judgment  for  damages^  against  the  vendor  if  he  refuses  to 
make  a  truly  valid  deed,  or  for  a  decree  of  the  chancellor  ^ 
to  compel  him  to  do  so. 

Further  it  must  he  remembered  that  a  person  domiciled  in 
Massachusetts  would  be  estopped,^  as  it  were,  to  deny  the 
Estoppel  bj'  validity  of  a  transaction,  good  by  the  laws  of  that 
domicii.  State,  unless  ^  the  reason  for  holding  the  act  invalid 

6  See  Wharton,  Confl.  of  Laws,  §  377;  Minor,  Confl.  of  Laws,  §  11, 
p.  31. 

■^  Where  there  is  an  equity  between  the  parties,  a  court  of  chancery  (if 
the  defendant  is  domiciled  in  its  jurisdiction,  or  the  contract  is  perforra- 
able  there,  and  relief  can  be  obtained  by  the  personal  obedience  of  the  par- 
ties, witliout  direct  action  on  the  property,  and  justice  cannot  otherwise 
be  done),  will  conapel  the  party  to  take  specific  action  in  regard  to  the 
foreign  property,  as  to  deed  the  land  in  conformity  to  the  law  of  the 
silus.  But  no  bill  can  be  entertained  which  calls  for  direct  action  on 
the  land,  as  for  partition,  or  settlement  of  boundary.  Wharton,  Confl. 
of  Laws,  §  288;  Story,  Confl.  of  Laws,  §  515;  INlinor,  Confl.  of  Laws,  §  11, 
p.  32;  McCurdy's  App.,  65  Pa.  St.  291;  Wood  v.  Warner,  15  N.  J. 
Eq.  81 ;  Muller  v.  Dows,  94  U.  S.  444. 

8  An  assignment  in  New  York,  good  there,  is  valid  against  a  subse- 
quent attachment  by  a  citizen  of  New  York  of  property  in  Massachusetts, 
though  such  assignment,  as  against  creditors  resident  elsewhere  than  at 
the  place  of  domicii  of  the  assignor,  would  have  been  invalid  in  Massa- 
chusetts.    Burlock  V.  Taylor,  1(3  Pick.  (Mass.)  335. 

9  Green  v.  Van  Buskirk,  7  Wall.  139.  The  owner,  mortgagee,  and 
attaching  creditor,  D.,  were  all  domiciled  in  New  York.  D.  attached  the 
property  (iron  safes)  in  Illinois.  The  United  States  Supreme  Court  held 
the  attachment  good  against  the  mortgagee,  though  New  York  had  held 
the  contrary.  The  parties  to  the  mortgage  had  not  conformed  to  the 
registry  laws  of  Illinois,  and  the  reason  for  holding  that  an  incumbrance 
invalid  in  such  a  way  has  no  effect  against  one  without  notice  applies 
strongly  to  every  case,  whether  the  creditor  attaching  be  a  citizen  of  the 
locus,  or  of  the  State  where  the  contract  was  made,  or  of  a  third  State; 
namely,  the  great  uncertainty,  confusion,  and  insecurity  that  would  result 
if  the  record  title  where  tangible  property  is  located  could  not  be  depended 
on.  If  a  purchaser  had  to  search  the  records  of  every  State  in  which  the 
owner  may  have  dwelt  or  made  a  contract,  it  would,  to  say  the  least,  make 
the  obtaining  of  a  clean  title  somewhat  expensive,  and  men  would  prob- 
ably give  their  land  away  rather  than  undertake  to  make  a  good  title.  It 
seems  very  doubtful  if  the  mere  fact  of  domicii  is  ever  a  solid  rea.son  in 
any  of  these  cases  for  refusing  what  would  otherwise  be  admitted  justice. 
The  argument  that  by  choice  of  domicii  a  party  (D.)  submits  himself  to 

38 


CONFLICT   OF   LAWS.  §  12 

in  Illinois  applies  to  the  case  of  such  a  person,  as  well  as  to 
that  of  a  citizen  of  Illinois. 

4.  As  respects  direct  action  upon  movables,  the  forms  of 
transfer  and  creating  liens  ^  positively  prescribed  by  the  lex 
situs  must  be  conformed  to,  and  all  claims  of  the  lex  situs  ^^ 
satisfied,  in  order  to  sustain  a  right  to  the  property  in  the 
courts  of  the  situs,  subject  to  the  same  distinctions  personam 
rem,  and  estoppel  by  domicil,  as  above. 

5.  Capacity  of  dealing  with  realty  is  determined  by  the  lex 
situs;  capacity  of  doing  business  is  determined  by  the  law 
of  the  place  of  the  transaction  plus  the  law  of  the  domicil  of 
the  actor,  whichever  most  favors  the  capacity  and  so  sustains 
the  transaction. 

6.  The  formal  of  contracts  depends   on  the  lex  situs  of 

its  law,  is  not  more  weighty  than  the  counter  claim,  or  rather  has  its  true 
limits  disclosed  by  the  counter  proposition,  that  he  submits  to  that  law  so 
far  as  it  extends,  but  does  not  contemplate  its  reaching  an  arm  between 
him  and  the  measure  of  justice  secured  to  men  in  general  under  the  law 
of  another  State  where  he  may  be,  or  where  property  he  claims  is  situated. 
If  the  law  of  the  situs  rests  on  reasons  of  abstract  justice  and  general  con- 
venience, D.  should  have  the  benefit  of  it.  If  the  provisions  of  the  situs 
are  merely  defensive,  only  for  self-preservation,  by  preferring  the  claims 
of  citizens  to  those  of  foreigners,  D.  does  not  fall  within  the  reason  of 
the  law. 

If  a  lien  attaches  to  a  vessel  in  England,  valid  there,  but  invalid  by 
Louisiana  law  as  not  giving  possession  to  the  mortgagee,  and  the  vessel 
afterwards  comes  to  New  Orleans,  where  persons  without  notice  supply 
materials  to  the  ship,  the  Louisiana  courts  hold  the  lien  of  the  latter  prior 
to  the  English  incumbrance.  Wharton,  Confl.  of  Laws,  §§  323,  345,  357; 
Minor,  Confl.  of  Laws,  §  G,  p.  10. 

But  under  United  States  statutes  a  duly  recorded  mortgage  on  a  vessel 
has  priority  over  a  lien  under  the  law  of  one  of  the  States  where  the  vessel 
may  subsequently  be,  for  materials  and  supplies  furnished  it.  Harrison 
V.  Sterry,  5  Crauch,  298. 

10  Such  as  taxes,  and  the  claims  of  local  creditors  in  case  of  foreign 
bankruptcy. 

The  situs  of  a  debt,  so  far  as  concerns  its  taxability,  is  the  domicil  of 
the  creditor,  for  there  the  fund  will  go;  and  also  so  far  as  concerns  its 
assignability,  for  it  is  a  personal  right,  and  governed  by  his  personal  law. 
Wharton,  Confl.  of  Laws,  §§  363,  394;  Minor,  Confl.  of  Laws,  §  123, 
p.  281. 

1^  Form  of  Deeds,  Contracts,  &c.  —  So  far  as  the  direct  effect  on 

39 


§  12  PRELIMINARY. 

property  to  be  affected,  so  far  as  it  has  positive  provisions, 
in  other  respects  on  the  lex  loci  actus,  so  far  as  imperative 
and  applicable,  and  beyond  both  these  lines  on  the  law  of  the 
situs,  actus,  domicil,  place  of  performance,  or  other  law  with 
reference  to  which  it  can  be  shown  the  parties  acted. 

7.  In  all  respects,  not  covered  by  the  above,  tbe  law  of 
the  "  seat "  of  the  obligation,  i.  e.  its  place  of  performance, 
controls,  as  being  the  law  the  parties  presumably  had  in  mind, 
and  if  there  is  more  than  one  obligation  in  a  contract,  to  be 
performed  in  different  places,  each  is  governed  by  its  own 
distinctive  law.^^ 

The  construction,  nature,^^  mode,  and  legality  of  a  contract 
depend  on  the  law  of  its  seat. 

property  is  concerned,  the  positive  provisions  of  the  lex  situs  must  be  fol- 
lowed. When  the  lex  situs  is  silent ;  or  if  we  look  at  the  contract  apart 
from  its  direct  effect  upon  property  ;  or  if  the  contract  is  personal:  — 

a.  Provisions  of  the  lex  loci  actus  that  are  imperative  (i.  e.  made  by  that 
law  essential  to  the  validity  of  the  document)  must  be  conformed  to,  ex- 
cept that  our  courts  will  not  hold  Americans  contracting  in  China,  or  other 
uncivilized  country,  bound  to  conform  to  its  law.  And  when  parties  casa- 
ally  in  a  State  execute  a  contract  there,  in  accord  with  the  law  of  their 
domicil,  or  of  the  place  of  performance,  or  lex  situs,  it  will  be  sustained. 

b.  The  forms  of  the  lex  fori  must  be  looked  to  when  they  are  condi- 
tions of  bringing  suit. 

c.  Where  the  lex  situs  and  Irx  loci  are  not  imperative,  and  the  lex  fori 
does  not  require  a  certain  form  to  sustain  suit,  it  is  sufficient  if  the  docu- 
ment is  such  that  an  intent  to  give  it  legal  effect  can  be  inferred.  It  is 
a  natural  presumption  from  the  omission  of  the  forms  usual  where  the 
business  is  done,  that  the  instrument  is  not  intended  to  be  final,  but  only 
a  preliminary  informal  draft.  If  it  can  be  shown  that  the  parties  have 
actually  conformed  to  the  forms  usual  in  their  domicil,  or  in  the  place  of 
performance,  or  other  place  clearly  in  their  contemplation,  the  above  pre- 
sumption is  rebutted,  the  substantial  requisite  fulfilled,  and  the  contract 
should  be  sustained. 

^2  That  is,  whether  it  is  joint,  or  several,  or  joint  and  several ;  absolute 
or  conditional  ;  personal  or  real  ;  principal  or  surety ;  negotiable  or  not. 

13  lu  the  case  of  bills  and  notes  the  contract  of  the  maker  or  acceptor 
is  governed  by  the  place  of  payment,  which,  -unless  some  other  is  named, 
is  the  place  where  the  contract  is  made,  usually  the  place  of  deliver?/.  See 
notes  15  and  18. 

If  a  blank  indorsement  in  France  does  not  pass  the  property  to  holder, 
8uch  an  indorsee  cannot  recover  in  England,  though  he  could  sue  in 

40 


PLACE   OP   PERFORMANCE.  §  12 

What  is  the  place  of  performance,  or  seat  of  the  contract, 
is  a  question  of  the  mutual  intent  of  the  parties,  to  be  derived 
from  their  language  and  the  circumstances. 

If  a  place  is  named,  of  course  there  is  no  trouble,  as,  in  case 
of  a  note,  the  place  of  payment  governs  as  to  the  mode  of 
payment,  grace,  demand,  protest,  and  notice.^^ 

England  if  the  indorsement  had  been  made  in  England.  Trimbey  v. 
Vignier,  1  Bing.  N.  C.  151. 

A  parol  acceptance  by  B.  of  a  bill  drawn  in  Michigan  on  B.,  in  Chi- 
cago, was  good,  though  the  laws  of  Michigan  require  au  acceptance  to  be 
in  writing.     Mason  v.  Dousay,  35  111.  424. 

If  a  note  payable  in  Massachusetts  is  indorsed  in  another  State,  the 
maker's  liability  to  the  indorsee  is  ruled  by  Massachusetts  law.  Wood- 
ruff V.  Hill,  116  Mass.  310  ;  Hunt  v.  Hunt,  16  N.  Y.  Sup.  Ct.  622 ;  Evans 
V.  Anderson,  78  111.  558. 

But  the  contract  between  the  immediate  parties  to  an  indorsement  is 
subject  to  the  law  of  the  place  where  the  indorsement  is  made,  unless  an- 
other be  named  by  the  indorser.  National  Bank  of  Michigan  v.  Green, 
33  Iowa,  140. 

The  working  of  these  principles  leads  to  some  curious  results  :  — 

The  liability  of  an  indorser  or  drawee  is  determined  by  the  liability  of 
the  maker  or  acceptor  at  their  contract  seat ;  but  when  the  indorser's  lia- 
bility is  once  fixed,  the  law  as  to  payment  in  a  suit  against  the  indorser 
is  governed  by  the  law  of  the  place  of  indorsement.  Freese  v.  Brownell, 
35  N.  J.  L.  285  ;  Ripka  v.  Geddis.  23  Pa.  St.  140. 

If  a  bill  or  note  is  defective  in  formal  matters  at  the  place  where  made, 
but  good  at  the  place  of  indorsement,  the  indorsement  may  bind  the 
iudorsers,  though  not  the  original  parties ;  otherwise,  if  the  defect  is 
substantial.     Wharton,  Confl.  of  Laws,  §  458. 

So  a  transfer  defective  where  made,  but  valid  by  the  law  to  which 
the  maker  or  acceptor  is  subject,  binds  him,  though  not  the  indorser. 
W^harton,  Confl.  of  Laws,  §  459. 

Each  holder  has  the  same  rights  against  the  acceptor  or  maker  as  the 
original  payee,  if  the  transfer  to  the  holder  was  good  by  the  law  of  the 
place  of  the  maker's  or  acceptor's  contract,  though  bad  by  the  law  where 
the  indorsement  was  made,  for  the  maker's  obligations  are  governed  by 
his  law.     Robertson  v.  Burdekin,  1  Boss,  Lead.  Cases,  812. 

On  the  other  hand,  if  the  indorsement  is  bad  by  the  original  law, 
though  good  by  its  own  law,  the  maker  or  acceptor  is  not  bound  by  it, 
except,  it  is  said,  if  the  maker  use  words  that  in  another  State  (Y.) 
give  negotiability,  though  not  in  his  own,  he  will  be  held  on  the  suit 
of  D.  (to  whom  the  note  was  indorsed  in  Y.)  in  the  courts  of  Y.,  though 

41 


§  12  PRELIMINARY. 

Or  if  the  place  of  performance  is  fixed  by  the  necessity  of 
the  case,  as  when  work  is  to  be  done  on  land. 

The  scat  of  a  continuous  ^*  business  gives  its  law  to  all 
obligations  in  the  course  of  such  business  emanating  from 
him  who  conducts  the  business,  as  with  bank  collections. 

Delivery  of  goods  to  a  carrier  for  the  vendee  is  such  per- 
formance as  makes  the  place  of  delivery  the  seat  of  the  con- 
tract, which  determines  the  right  of  stoppage  in  trarisitu,  etc. 

The  parties  may  in  many  cases  incorporate  the  law  of  a 
particular  State  in  their  contract  by  reference  to  it. 

Where  there  are  two  laws  which  might  be  applied,  as,  for 
example,  in  case  of  interest,^^  that  most  favorable  to  the  con- 
not  in  the  courts  of  his  own  State  perhaps.  Lodge  v.  Phelps,  1  Johns. 
Cas.  (N.  Y.)  139. 

Days  of  grace  are  allowed  according  to  the  law  of  the  place 
of  payment.     Pomeroy  v.  Ainsworth,  22  Barb.  (N.  Y.)  118. 

That  demand  and  protest  are  governed  by  the  law  of  the  place  of  pay- 
ment the  authorities  are  agreed,  and  the  better  opinion  is  that 
Protest.  notice  is  equally  controlled  thereby.     The  nature  and  extent 

°  ^^^'  of  the  liability  of  the  drawer  or  indorser,  when  once  fixed,  are 

settled  by  the  law  of  his  own  obligation  ;  but  the  fixing  of  his  liability  is 
another  thing,  that  should  be  controlled  by  the  law  of  the  place  of  pay- 
ment by  acceptor  or  maker,  since  it  is  only  by  such  conduct  toward  the 
maker  or  acceptor  as  is  required  by  the  latter  law  that  said  liability  can 
be  fixed  ;  and  though  notice  is  not  a  part  of  the  conduct  toward  maker  or 
acceptor,  it  is  an  act  done  in  that  place,  and  the  principle  locus  regit  actus, 
and  the  security  and  convenience  of  business,  require  that  it  should  be 
placed  in  the  same  class.  It  would  be  very  confusing  to  have  to  conform 
to  the  law  of  four  or  five  different  countries,  in  which  successive  indorse- 
ments may  have  been  made,  in  order  to  charge  all  the  indorsers.  There 
are,  however,  authorities  that  hold  the  notice  to  drawer  or  indorser  must 
conform  to  the  law  of  the  place  where  the  drawing  or  indorsement  oc- 
curred. See  Daniell  on  Neg.  Inst.,  §  910.  When  the  liabihty  of  an 
indorser  is  once  fixed,  the  notice  he  must  give  to  his  indorser  is  of  course 
governed  by  the  law  of  their  special  contract.  National  Bank  of  Michi- 
gan r.  Green,  3-3  Iowa,  140. 

1^  Wharton,  Confl.  of  Laws,  §§  405,  426 ;  Minor,  Confl.  of  Laws,  §  67. 

^5  AVhen  no  rate  is  specified,  the  place  of  payment  decides  the  inter- 
est. The  acceptor  pays  interest  according  to  the  law  of  the  place  of 
acceptance,  and  the  drawer  or  indorser  according  to  the  law  of  his  own 
contract.  2  Parsons,  N.  &  B.  376;  Gibbs  v.  Fremont,  20  Eng.  L.  &  Eq. 
555 ;  Smith  v.  Smith,  2  Johns.  (X.  Y.)  235.  If  a  rate  is  named,  it  is 
42 


PLACE   OF   PERFORMANCE.  §  12 

tract  should  govern  ;  and  if  the  interest  is  proper  in  the  place 
where  the  money  is  used,  that  should  justify  it,  for  that  is  the 
real  place  of  performance  as  to  the  risks  incurred,  which  are 
the  basis  of  interest. 

When  a  person  is  casually  out  of  his  domicil  and  contracts, 
if  the  circumstances  point  to  a  performance  where  made, 
State  C,  as  in  case  of  hotel  bills  and  watering-place  debts, 
or  bargains  in  general  with  the  natives,  that  law  governs ; 
but  if  both  parties  are  casually  '^^  in  C,  perhaps  only  for  tlie 
purpose  of  negotiation,  it  may  be  more  reasonable  to  regard 
the  domicil  of  the  debtor  as  the  place  of  performance  ;  e.  g. 
where,  in  Tennessee,  Georgia  parties  give  or  indorse  a  note 
payable  in  future  to  New  York  parties  without  naming  a  place 
of  payment,  Georgia  is  the  seat  of  contract. 

When  the  place  of  performance  is  not  otherwise  determin- 
able, it  is  deemed  that  the  place  where  the  contract  was  made  ^'' 
was  so  intended,  and  it  is  not  the  place  of  dating,  writing,  or 

valid  if  the  law  either  ^  of  the  place  of  payment  or  of  making  the  con- 
tract allows  such  rate  ;  and  some  cases  ^  hold  that,  if  allowed  by  the  law 
of  the  place  where  the  money  is  to  be  used  and  the  ri>ik  incurred,  it  is 
valid,  for  the  place  of  payment  or  making  may  be  determined  merely  by 
convenience,  and  have  no  relation  to  the  real  value  of  the  money  at  the 
place  where  it  is  invested.  ('  Peck  v.  Mayo,  14  Vt.  33;  Depau  v.  Humph- 
reys, 8  Mart.  N.  S.  (La.)  1;  Potter  v.  Tallraan,  35  Barb.  (X.  Y.)  182. 
2  Young  V.  Godbe,  15  Wall.  562  ;  AVharton,  Confl.  of  Laws,  §  508,  and 
cases  cited.)  It  is  hard  that  money  lent  to  be  used  in  New  JNIexico 
(where  interest  is  constantly  21  p^,  showing  the  value  of  money  there  and 
the  risk)  should  legally  bear  no  more  than  6^,  because  payable  in  some 
Eastern  State. 

16  In  Vanzant  v.  Arnold,  31  Ga.  210,  the  plaintiffs  resided  in  New 
York,  the  makers  and  indorsers  iu  Georgia,  and  the  indorsement  and 
delivery  were  in  Tennessee,  to  the  plaintiff's  agents.  The  court  said  it 
was  known  the  indorsers  resided  in  Georgia,  and  were  only  in  Tennessee 
to  negotiate,  and  the  parties  must  be  deemed  to  have  contemplated 
Georgia  as  the  place  of  performance.  But  if  the  transaction  in  Ten- 
nessee were  between  a  Georgian  and  a  native  or  resident  of  Tennessee,  it 
would  be  very  likely  a  Tennessee  contract.  See  Story,  Confl.  of  Laws, 
§  274. 

1"  When  a  note  is  payable  generally,  evidence  that  it  was  agreed  to  be 
paid  in  a  particular  place  is  inadmissible;  the  law  makes  it  payable  where 
made.     Frazier  v.  Warfield,  9  Sm.  &  M.  (Miss.)  220. 

43 


§  12  PRELIMINARY. 

signing,  but  the  place  of  delivery,  where  the  bargain  is  con- 
summated, that  constitutes  the  place  of  making,  except  ^^  as 
to  bona  fide  purchasers  of  negotiable  paper,  for  value,  with- 
out notice  that  it  was  not  delivered  where  dated  ;  as  to  them, 
the  law  to  which  the  paper  purports  on  its  face  to  be  subject 
governs. 

^^  A  note  drawn  and  dated  in  Maryland,  but  delivered  in  New  York  in 
payment  of  goods  purchased  there,  is  payable  in  New  York  and  governed 
by  its  laws.  Cook  v.  Moffat,  5  now\  295.  The  place  of  delivery  from 
maker  or  drawer  to  payee,  or  from  indorser  to  indorsee,  is  the  contract 
seat,  except  as  against  honajide  purchasers  for  value,  in  the  usual  course 
of  business,  and  -without  notice  that  the  place  of  dating  and  drawing 
does  not  truly  represent  the  place  of  delivery.  In  Lennig  v.  Ralston, 
23  Pa.  St.  139,  the  bill  bore  the  dress  of  a  Pennsylvania  bill,  though 
really  issued  in  London.  The  court  said  :  "  Upon  the  principle  that 
every  one  is  presumed  to  produce  all  the  consequences  to  which  his  acts 
naturally  and  necessarily  tend,  the  presumption  is  the  defendants  intended 
the  purchasers  of  it  should  receive  it  under  the  belief  that  it  was  a  bill 
drawn  in  Philadelphia  in  the  usual  course  of  business." 

As  against  a  bona  Jide  purchaser  before  maturity,  without  notice,  the 
paper  cannot  be  shown  by  parol  to  be  other  than  what  it  claims  on  its 
face  to  be.  So  against  such  an  indorsee  (B.),  the  maker  or  indorser  can- 
not show  that  a  note  dated  in  Massachusetts,  and  indorsed  there  to  B., 
■was  really  made  in  New  York,  and  was  void  by  New  York  law.  Towne 
V.  Rice,  122  Mass.  67. 


44 


PART   I. 
BANKS   AND   BANKING    IN   GENERAL. 


CHAPTER   II. 

ORGANIZATION  AND  LOCATION. 

§  12  A.    Analysis. 
§  13.     Who  may  br  a  Banker. 
Common  Law. 
Restraining  Acts. 
Purpose. 

Apply  to  continuous  functions,  not  to  isolated  acts. 
For  violation  of  these  statutes  there  is  no  remedy  but  the  one 
they  provide. 
§  14.     Organization. 

By  Charter.     §  6,  n.  1,  3,  4;  §  98/;  §§  743,  744,  750,  171  j. 
Under  General  Law. 

Number  of  members. 
Amount  of  capital.     IL  §§  7,  14,  81. 
Mode  of  paying  it  in. 

Certificate  of  organization  acknowledged  and  recorded.    II.  §§  6, 
106  a;  II.  §§  12-15,  102. 
(a)  Existence  of  the  Bank.     §  765. 
Evidence  of. 

Judicial  Notice  of  the  Charter. 
§  15.    Ancillary  Powers  of  a  Bank. 
To  sue  and  to  be  sued. 
To  have  a  corporate  seal. 
To  have  perpetual  succession. 
To  appoint  and  qualify  officers. 
To  make  by-laws. 
To  increase  or  reduce  the  capital. 
§  16.    Appointment  and  Qualifications  of  Officers.    II.  §§  9,  10. 
Directors,  how  elected. 

qualifications  of. 
President. 
Cashier. 
Clerks. 

Term  of  oflSce. 
Bond. 

45 


§  13  ORGANIZATION    AND   LOCATION. 

§  13.  "Who  may  be  a  Banker?  —  Any  one,  at  common  law. 
Banking  statutes  may  or  may  not  restrict  individuals  in  this 
matter,  to  protect  the  public  from  fraud  and  incompetency ; 
but  the  restriction,  when  it  exists,  applies  to  a  continuous 
exercise  of  one  or  more  of  the  functions  of  banking,  and  not 
to  isolated  acts.  And  no  remedy  but  that  provided  in  the 
statutes  exists  for  their  violation. 

At  common  law,  the  right  of  banking  pertains  equally  to 
every  member  of  the  community.  Its  free  exercise  can  be  re- 
stricted only  by  legislative  enactment ;  but  that  it  legally  can 
be  thus  restricted  has  never  been  questioned.^  After  laws  upon 
the  subject  have  been  passed,  the  business  must  be  undertaken 
and  conducted  in  strict  accordance  with  all  the  provisions  con- 
tained in  them.  It  is  not  in  its  nature  a  corporate  franchise, 
though  it  may  be  made  such  by  legislation,  and  individuals 
may  be  proliibited  from  transacting  it,  either  altogether  in  all 
its  departments,  or  partially  in  any  specified  ones.  A  law 
which  forbids  the  carrying  on  of  "  any  kind  of  banking  busi- 
ness" is  a  total  prohibition  against  each  particular  department 
of  the  business,  though  conducted  singly,  and  may  be  infringed 
equally  by  exercising  any  separate  one  of  the  various  banking 
functions  as  by  exercising  all.^ 

But  the  restraining  statutes,  being  really  in  derogation  of 
common  law  rights,  will  always  be  interpreted  with  reasonable 
liberality  in  favor  of  the  supposed  infringer ;  and  when  they 
are  penal  in  their  character,  they  will  be  construed  with  con- 
siderable strictness  in  his  favor.  Isolated  acts  do  not  consti- 
Isoiated  tutc  an  infringement.     Thus,  discounting  notes  is 

acts.  Q^g  Qf  |-|-,Q  i-^-iost  important  of  banking  functions,  and 

the  one  which,  next  to  the  utterance  of  bills  for  circulation,^ 

1  §  13.   Contra,  see  State  r.  Scougal,  3  S.  D.  6G  (.51  N.  W.  858)  (1892). 

2  Curtis  V.  Leavitt,  15  N.  Y.  9  (p.  52) ;  Attorney-General  r.  Utica 
Ins.  Co.,  2  Johns.  Ch.  (N.  Y.)  371  ;  The  People  v.  Same,  15  Johns. 
(N.  Y.)  358;  Same  v.  Bartow,  6  Cow.  (N.  Y.)  290;  Nance  v.  Hemphill, 
1  Ala.  551 ;  State  v.  Williams,  8  Tex.  255. 

*  The  power  of  issuing  "  bills  or  paper  cradit  designed  to  circulate  as 
money  "  is  the  only  banking  power  made  a  franchise  under  the  constitu- 
tion of  South  Dakota.  State  v.  Scougal,  3  S.  D.  65  (51  N.  W.  858) 
(1892). 

46 


THE   RIGHT   TO    DO    BANKING.  §  13 

is  of  most  interest  to  the  public,  and  has  therefore  been  most 
frequently  and  most  carefully  regulated  by  statute.  But 
any  person  may  occasionally  discount  a  note  for  another 
without  coming  within  the  legislative  prohibition.  If  he  is 
simply  dealing  with,  his  own  funds,  he  is  not  properly  en- 
croaching upon  the  business  of  banks  in  the  same  department. 
For,  in  order  to  bring  discounting  within  the  proper  definition 
of  a  banking  function,  it  must  be  done  with  money,  in  part  at 
least  that  of  other  persons,  intrusted  to  or  deposited  with  the 
discounter,  so  that  he  has  the  practical  use  and  control  of  it 
for  these  purposes  as  fully  as  if  it  were  his  own.  Even  if  he 
does  use  the  money  of  others,  he  must  do  it,  not  on  compara- 
tively rare  occasions,  and  as  the  special  agent  of  each  one  of 
them  empowered  to  this  specific  end ;  but  with  some  degree 
of  frequency,  and  as  a  general  agent  having  control  of  the 
combined  or  intermingled  funds  of  several.'*  In  New  York, 
restraining  statutes,  penal  in  nature,  and  treating  n.y.  statutes 
in  their  exact  phraseology  only  of  "  associations  or  fo" restrain  ^ 
companies,"  have  been  declared  to  have  no  applica-  individuals, 
tion  to  individuals.  Any  single  person  may  enjoy  all  his  com- 
mon law  rights  unimpeded  by  them.^  But,  upon  the  other  hand, 
no  person  can  enjoy  any  of  the  powers  or  privileges  granted  or 
appurtenant  to  associations  or  companies,  even  though  for  the 
purpose  of  conducting  his  business  he  assumes  the  style  of  a 
corporation.  He  may  furnish  all  the  capital,  may  control  all 
the  business,  may  be  practically  the  bank  itself,  yet  he  must 
go  through  all  the  forms  of  organization  prescribed  in  the  or- 
ganic banking  laws  of  the  country  or  State  before  he  can  be 
entitled  to  any  of  the  rights  which  inhere  in  corporations  only 
by  virtue  of  those  laws.^ 

The  purpose  of  restraining  acts  is,  of  course,  to  secure  the 
public  welfare  and  safety  from  the  inroads  of   incompetent 

<  Utica  Ins.  Co.  v.  Scott,  8  Cow.  (N.  Y.)  709 ;  People  v.  Brewster,  4 
Wend.  (N.  Y.)  498. 

5  Bristol  V.  Barker,  14  Johns.  (N.  Y.)  205;  Codd  u.  Rathbone,  19  N.  Y. 
37.  To  the  same  effect  is  also  the  law  in  Illinois.  Hunt  u.  Divine,  37  111. 
137. 

«  Hallett  V.  Harrower,  33  Barb.  (N.  Y.)  537. 

47 


R  14  ORGANIZATION    AND    LOCATION. 

men  and  swindlers.  But,  serious  as  is  the  evil  to  be  guarded 
against,  no  other  means  of  defence  against  it  appear  to  exist 
save  precisely  those  penalties  which  are  provided  in  the  law 
itself  for  any  breach  of  the  law.  No  other  punishment  can  be 
inflicted  than  that  laid  down  in  the  statute,  and  means  of  pre- 
vention can  be  sought  only  from  the  same  source.  Equity  will 
not  intervene  to  check  infringements,  and  even  systematic  con- 
duct of  the  banking  business,  in  direct  contravention  of  enacted 
law,  will  not  be  enjoined  on  the  ground  that  it  is  a  mischief  or 
a  nuisance  to  the  community.'' 

§  14.  Organization.  —  A  banking  corporation  may  come  into 
existence,  either  under  a  special  act  of  incorporation,  called 
The  bank's  ^  charter,^  or  under  a  general  law.  The  latter  Is 
organic  law.  ^j^^  jj^q^.^  j^^g^^^  giving  the  Same  rights  to  all  persons 
who  fulfil  tlie  conditions  as  to  number,^  of  those  combining  to 
form  the  company,  amount  of  capital,^  manner  of  paying  it  in,* 
making  the  organization  certificate,^  and  having  it  properly 
acknowledged  and  recorded.^ 

7  Attorney-General  v.  Utica  Ins.  Co.,  2  Johns.  Ch.  (N.  Y.)  371 ;  Same 
V.  Bank  of  Niagara,  1  Hopk.  (N.  Y.)  354. 

1  §  14.  The  New  York  Constitution,  art.  8,  §  4,  prohibits  any  special 
charter  for  banking  purposes.  See  New  York  Trust  &  Loan  Co.  v.  Hel- 
mer,  12  Hun  (N.  Y.),  35. 

2  In  Massachusetts,  ten  or  more.  R.  L.  c.  115,  §  1.  National  bank, 
five  or  more.     Part  II.  §  5. 

3  One  hundred  thousand  to  one  million  in  Massachusetts.  P.  S.  673. 
National  bank,  see  Part  II.  §  7. 

4  In  ISIassachusetts  one  half  must  be  in  the  bank  vaults  in  gold  and 
silver,  and  examined  by  three  commissioners,  before  the  bank  can  go  into 
operation,  and  a  majority  of  the  directors  must  take  oath  that  the  money 
was  paid  in  by  the  stockholders  towards  the  payment  of  their  respective 
shares,  and  not  for  any  other  purpose.  R.  L.  c.  115,  §  3.  National  bank. 
Part  II.  §  14. 

5  A  Massachusetts  certificate  must  state  the  corporate  name,  city  or 
town  of  location,  amount  and  number  of  shares  of  capital  stock,  name, 
residence,  and  shares  of  each  stockholder,  and  the  time  the  bank  is  to  go 
into  operation.     R.  L.  c.  115,  §  4.     National  bank,  see  Part  II.  §  6. 

6  Massachusetts  certificate  must  be  acknowledged  before  a  justice,  re- 
corded in  registry  of  deeds  for  county  or  district  of  bank's  location,  and  a 
copy  filed  in  office  of  the  State  secretary.  R.  L.  c.  115,  §  4.  National 
bank,  see  Part  II.  §  6. 

48 


PROOF   OF   EXISTENCE.  §  14 

a.  The  Evidence  ^  of  the  Bank's  Existence  is  the  organization 
certificate,  or  the  charter,  as  the  case  may  be.  The  former 
is  brought  before  the  court  by  certified  copy;  the  latter  will 
in  some  States  be  judicially  noticed;^  in  others,  it  must  be 
pleaded  and  proved.^ 

'  Where  a  note  is  given  to  a  bank,  the  maker  cannot  afterwards  deny 
the  right  of  the  bank  to  sue  thereon  on  the  ground  that  the  said  bank  has 
not  corporate  existence.  Exchange  Nat.  Bank  v.  Capps,  32  Neb.  242 
(49  N,  W.  223)  (1891)  ;  Bair  v.  Bank,  27  Neb.  577  (43  N.  W.  347) 
(1889)  ;  Missouri  Valley  Land  Co.  v.  Bushnell,  11  Neb.  192  (8  N.  W. 
389);  Piatt  Valley  Bank  v.  Harding,  1  Neb.  461.  A  person  who  has 
dealt  with  a  de  facto  banking  company  cannot  object  to  defects  in  its 
organization  as  affecting  its  capacity  to  sue,  in  order  to  avoid  a  joint 
liability  to  it.  Bank  of  Port  Jefferson  v.  Darling,  91  Hun  (N.  Y.),  236  ; 
Camp  V.  Land,  122  Cal.  167  (54  Pac.  839);  R.  L.  c.  115,  §  4;  Part 
IL  §  6.  In  New  York  corporate  existence  need 'not  be  proved  unless 
denied  in  the  answer.  Code  Civ.  Prac.  §  1776.  The  comptroller's  cer- 
tificate under  United  States,  Rev.  Sts.  §  5169,  is  conclusive  as  to  the 
regularity  of  the  proceedings  organizing  a  national  bank.  Casey  v. 
Galli,  94  U.  S.  673;  Keyser  v.  Hitz,  2  Mackey,  514  (U.  C.  1883).  Such 
certificate  that  the  bank  has  complied  with  the  law,  &c.,  and  was  author- 
ized to  do  business,  and  proof  that  it  has  done  business  for  several  years, 
is  good  evidence  of  existence.  Alix  v.  National  Bank  of  Bloomington, 
91  111   20  (1878) ;  Hallstead  v.  Coleman,  143  Pa.  352  (22  Atl.  977). 

8  Shaffer  v.  Hahan,  HI  N.  C.  1  (15  S.  E.  1033)  (1892)  ;  National  Bank 
V.  Galland,  14  AVash.  502  (45  P.  35)  (1896)  ;  Stribbling  r.  Bank,  5  Rand. 
(Va.)  132;  Bank  of  Utica  v.  Magher,  18  Johns,  (N.  Y.)  341;  Vance  w. 
Bank,  1  Blackf.  (Ind.)  80  ;  Towson  v.  Havre  de  Grace  Bank,  6  Har.  & 
J.  (Md.)  47  ;  Williams  v.  Union  Bank,  2  Humph.  (Tenn.)  339  ;  Hays  v. 
Northwestern  Bank,  9  Graft.  (Va.)  127.  The  court  will  take  judicial 
cognizance  of  the  expiration  of  a  bank  charter,  and  thereupon  dismiss  an 
action.  Terry  v,  IVIerchants  &  Planters'  Bank,  66  Ga.  177.  The  West 
Virginia  courts  will  take  judicial  notice  of  the  Virginia  act  incorporating 
the  Northwestern  Bank  of  Virginia  ;  its  existence  being  preserved  by  the 
West  Virginia  constitution  of  1863,  art.  11,  §  8,  and  of  1872,  art.  8,  §  36. 
Northwestern  Bank  of  Virginia  v.  Machir,  18  W.  Va.  271  (1881). 

»  Haas  V.  Bank  of  Commerce  41  Neb.  754  (60  N.  W.  85)  (1894)  ;  Davis 
V.  Nebraska  National  Bank,  51  Neb.  401  (70  N.  W.  963)  (1897)  ;  Agnew 
V.  Bank  of  Getty.sburg,  2  Har.  &  Gill  (Md.),  478;  First  National 
Bank  of  Clarion  v.  Gruber,  87  Pa.  St.  468.  In  the  latter  case  the  court 
refused  to  take  notice  of  the  charters  of  State  banks  as  authorizing  them 
to  charge  a  higher  rate  of  interest  than  the  ordinary  rate,  but  said  that  a 
bank  charter  is  a  private  act,  and  must  be  pleaded  and  proved  like  other 
VOL.  I. — 4  49 


§  16  ORGANIZATION   AND   LOCATION. 

§  15.  The  Ancillary  Powers  of  the  Bank.  —  The  powers  of 
a  bank  may  be  conveniently  divided  into  powers  of  doing  busi- 
ness (see  §  44),  and  those  subservient  to  business,  or  ancillary 
powers.  The  latter  powers  or  riglits  are,  to  have  perpetual 
succession  under  a  special  denomination  and  artificial  form,  to 
sue  and  be  sued  in  the  corporate  name,  to  have  a  corporate 
seal,  to  appoint  otificers  and  agents  (§  16),  and  take  bonds 
for  their  good  behavior  (§  17),  and  to  make  by-laws  for  the 
government  of  its  affairs  and  the  conduct  of  its  members  and 
officers  (§  43). 

These  are  all  powers  inherent  at  common  law  in  every  cor- 
poration, but  are  usually  expressly  conferred  in  the  organic 
law  (see  II.  §  8). 

And  express  power  is  usually  given  in  the  organic  law  to 
increase  or  reduce  the  capital  stock  within  certain  limits, 
which  is  an  express  ancillary  power.^ 

§  16.  The  Appointment  and  Qualification  of  OfEcers  are  gen- 
erally   provided    for    in    the    charter ;     usually,    the    direc- 

private  acts,  and  the  national  bank  basing  its  claim  to  charge  a  cerlaia 
rate  on  the  existence  of  said  charters  must  prove  them. 

Where  to  suit  by  a  corporation  the  general  issue  is  pleaded,  the  corpo- 
ration must  prove  its  legal  existence.  In  New  York  it  was  held  tliat 
even  the  Bank  of  the  United  States  was  not  entitled  to  be  excepted  from 
this  rule.  United  States  Bank  v.  Stearns,  1.)  Wend.  (N".  Y.)  314.  But 
this  requirement  has  since  been  dispensed  with  in  New  York  by  special 
statute  (2  R.  S.  458,  §  3).  Bank  of  Genesee  v.  Patchin  Bank,  3  Kern. 
(N.  Y.)  309. 

Where  a  suit  to  recover  upon  worthless  bills,  which  have  been  issued 
by  a  banking  corporation,  is  brought  against  those  who  are  alleged  to 
have  been  the  officers  and  directors  of  the  corporation,  the  charter  must 
be  proved,  if  its  existence  is  necessary  to  make  the  bank  a  corporate 
body.     Gardner  v.  Post,  43  Pa.  St.  19. 

In  Nebraska  parol  testimony  was  held  admissible  in  showing  corporate 
existence.     Shabata  v.  Johnston,  53  Neb.  12  (73  N.  W.  278)  (1897). 

And  in  Washington  it  was  held  that  acceptance  of  a  charter  of  incorpo- 
ration might  be  shown  by  user.  Lancaster  Savings  Bank  v.  Elwell,  17 
Wash.  446  (49  P.  1070)  (1897). 

^  §  15.  The  R.  L.  of  Mass.  c.  115,  §  8,  as  provides  for  increase  of  capital 
by  three-fourths  vote  of  stockholders.  For  increase  and  reduction  of 
capital  of  national  banks  when  provided  for  in  articles  of  association 
and  approved  by  comptroller,  see  Part  II.  §  13. 

50 


OFFICERS.  §  16 

tors  ^  are  chosen  annually  by  the  stockholders,  and  are 
removable  by  a  special  meeting  of  the  shareholders  for  that 
purpose.  The  directors  must  have  certain  qualifications  ^ 
of  citizenship,  residence,  and  ownership  of  shares  in  the 
bank.  Once  properly  elected  they  hold  office  till  their  suc- 
cessors are  elected,^  or  until  they  are  disqualified,  or  they 
or  the  corporation  die,  or  the  time  for  which  they  were 
elected  expires. 

The  directors  elect  one  of  their  number  president,  and  ap- 
point a  cashier,^  and  such  clerks,  tellers,  and  other  officers  as 
they  deem  proper  for  the  business  of  the  bank>  The  term  of 
office  in  these  cases  may  be  fixed  by  the  organic  law,  or  the 
by-laws,  or  by  vote  of  the  corporate  government ;  but  unless 
limited,  the  officer  holds  until  a  successor  is  elected.  Term  of 
or  he  is  removed,  or  dies,  or  is  disqualified,  or  the  ^^^^' 
bank  ceases  to  exist,  as,  for  example,  by  expiration  of  charter.^ 
But  the  fact  that  the  directors  are  by  the  charter  to  be  annu- 
ally elected,  and  that  they  have  the  appointment  of  the  cashier, 
does  not  of  itself  make  the  office  of  cashier  annual,^  nor  does 
a  mere  habit  of  the  directors  to  re-elect  every  year  make  the 
office  an  annual  one,  so  as  to  expire  before  a  successor  is 
elected  and  qualified.'^     Of  course,  where  the  directors'  office 

^  §  16.  In  Massachusetts  seven  to  twelve  directors;  each  must  have  five 
shares  at  least,  be  a  citizen  of  Massachusetts  and  resident  there,  not  a 
director  in  any  other  bank,  and  a  majority  of  them  must  reside  or  have 
their  places  of  business  in  the  county  of  the  bank,  or  within  ten  miles  of 
the  bank.     R.  L.  c.  115,  §§  17,  18.     National  bank,  see  Part  II.  §  9. 

2  Part  II.  §  10,  settles  the  tenure  of  office  of  national  bank  directors  : 
they  hold  for  one  year  plus  any  further  time  passing  before  their  succes- 
sors are  elected  and  qualified,  unless  sooner  disqualified,  removed,  &c. 

The  term  of  office  of  a  director  in  a  bank  organized  under  the  Massa- 
chusetts statutes  is  one  year.     R.  L.  c.  115,  §  19. 

^  In  IMassachusetts  the  cashier  cannot  be  a  director  of  the  bank  in 
which  he  is  cashier.     R.  L.  c.  115,  §  29. 

*  These  officers  are  removable  by  the  appointing  power. 

6  But  the  charter  period  may  expire,  and  yet  the  bank  not  cease  to 
exist;  for  the  legislature  may  prolong  its  life,  and  then  the  tenure  of  office 
may  not  be  broken  by  arrival  of  the  limit  first  set.  Exeter  Bank  v. 
Rogers,  7  N.  H.  21.     See  §  27. 

6  Union  Bank  v.  Ridgely,  1  Har.  &  G.  (Md.)   413. 

'  Amherst  Bank  v.  Root,  2  Met.  (Mass.)  522. 

51 


§  16  ORGANIZATION   AND   LOCATION. 

is  annual  and  the  president  is  one  of  them,  his  office  also  is 
annual. 

Whether  required  ^  by  the  organic  law  or  not,  it  is  usual  to 
secure  the  bank  by  requiring  the  cashier  and  subordinate  offi- 
cers to  give  a  bond  for  the  faithful  discharge  of 

Bond.  .  .      .  . 

official  duty,  and  as  this  is  one  of  the  points  around 
which  the  cases  cluster,  we  will  devote  a  chapter  to  it. 

*  R.  L.  of  ]\Iass.  c.  115,  §  27,  requires  a  bond  not  less  than  $20,000  of 
the  cashier.     See  Part  II.  §  8. 


52 


CHAPTER  III. 

OFFICIAL   BONDS   AND   LIABILITIES   OF   SURETIES. 

§  16  A.  Analysis. 

§  17.  General  rule  and  difficulties  stated. 

§  18.  Defences,  analysis  of. 

§  19.  Form  and  requisites. 

§  20.  Delivery  and  acceptance. 

§  21.  Fraud  or  illegality  at  inception. 

§  22.  Do  not  cover  loss  by  act  of  other  than  the  officer,  as  by  theft. 

§  23.  Or  loss  by  innocent  mistakes. 

§  24.  Negligence  of  ofhcer. 

§  25.  Exceeding  his  authority. 

§26.  Unusual  duties  given  him.     See  §  17  a. 

§  27.  Period  covered  by  the  bond. 

§§28-32.        Change  in  circumstances  affects  risk.     See  §  17  a. 

§§  33,  37-41.  Misconduct  and  negligence  of  bank  or  other  officers.     See  §  17  a. 

§  34.  Satisfaction  of  bank's  loss. 

§  35.  Statute  of  limitations. 

§  36.  Revocation  by  surety. 

( Evidence. 

§  42.  "{  Measure  of  damages. 

I  Pleading  and  practice. 

§  17,  n.  3.       Construction. 
In  general. 

§  24.  "  Well  and  faithfully,"  "  well  and  truly,"  to  discharge. 

§  24.  (Penn.)         "  Well  and  truly  to  perform  duties  to  best  of  his  abilities." 

§  23.  "  Deliver  to  his  successor  all  moneys,"  &c. 

§  26,  n.  O'*.  "Perform  all  duties  of  office  which  the  directors   may   pre- 

scribe." 

§  25.  (Va.)  "Faithful  discharge  of  the  trust  reposed  in  (him)  as  assistant 

bookkeeper." 

§  41.  Express  stipulation  of  the  maximum  sum  to  be  intrusted  to 

clerk. 

§  17.  Bonds. —  Power  to  take. — Purpose. — Summary  of  Chap- 
ter. —  The  custom  of  requiring  bonds  from  the  various  officers 
may  probably  be  considered  as  universal  among  banking  insti- 
tutions. Usually  they  are  taken  only  from  the  executive  offi- 
cers ;  most  frequently  from  the  cashier  and  tellers,  sometimes 

63 


§  17  OFFICIAL   BONDS   AND   LIABILITIES   OF   SURETIES. 

from  the  bookkeepers ;  and  there  are  instances,  though  these 
are  comparatively  rare,  in  which  they  have  been  taken  even 
from  the  president  and  directors. 

The  power  to  take  official  bonds  is  inherent  in  every  corpo- 
ration independently  of  statute.^ 

The  purpose  2  of  the  bond  is  not  penalty,  but  indemnity 
against  loss  by  fault  of  the  officer,  in  the  transaction  of  the 
business  of  his  office,  or  by  reason  of  the  opportunities  it 
affords  him. 

The  questions  arising  on  the  execution,  delivery,  accept- 
ance, construction,^  and  revocation^  of  bonds,  and  in  relation 

1  §  17.  The  National  Banking  Act,  §  8,  declares  that  the  association 
"  may  elect  or  appoint  directors,  and  by  its  board  of  directors  appoint  a 
president,  vice-president,  cashier,  and  other  officers,  define  their  duties, 
require  bonds  of  them,  and  fix  the  penalty  thereof,"  &c.  It  is  evident 
that  this  gives  no  right  to  the  association  to  require  bonds  of  a  director, 
at  least  unless  he  shall  also  fill  some  other  office.  But  this  does  not 
render  the  taking  of  a  bond  from  a  director  illegal ;  nor  does  it  prevent 
such  a  bond  from  being  valid  at  common  law.  It  only  deprives  the  bond 
of  a  statutory  character,  which  is  an  insignificant  loss,  inasmuch  as  it 
seems  to  be  attended  by  no  very  definite  practical  advantage.  The 
power  to  take  official  bonds  is  inherent  in  every  corporation,  independ- 
ently of  statutory  permission;  and  the  permission  or  the  command  to 
take  them  from  any  particular  officers  cannot  be  construed  to  preclude 
the  power  of  taking  them  from  others  also.  Bank  of  Northern  Liberties 
V.  Cresson,  12  Serg.  &  R.   (Pa.)  306. 

It  is  clear  also  that  a  bond  may  be  void  as  a  statutory  bond,  by  reason 
of  variance  from  the  requirements  of  the  statute  under  which  it  purports 
to  be  drawn,  and  yet  be  valid  as  a  common  law  bond.     See  §  19. 
2  See  measure  of  damages,  §  42. 

8  Most  of  the  matters  treated  in  this  chapter  are  questions  of  construc- 
tion. No  particular  form  of  words  is  necessary  to  be  observed  in  the 
contract  of  suretyship,  and,  in  its  construction,  there  is  no  reason  why 
courts  should  not  be  governed,  as  in  all  other  contracts,  by  the  rule  that 
the  actual  intention  of  the  parties  must  prevail.  Fink  v.  Farmers'  Bank, 
178  Pa.  154,  169  (35  Atl.  636).  So  where  a  bond  is  susceptible  of  two 
constructions,  one  favorable  to  the  bank,  and  the  other  to  the  surety, 
the  former,  if  consistent  with  the  purpose  of  the  bond,  must  be  adopted, 
especially  where  the  bond  is  drawn  by  the  surety.  American  Surety  Co. 
V.  Pauly,  170  U.  S.  133,  144  (1897).  And  where  the  bond  is  inartifi- 
cially  and  clumsily  drawn,  so  that  the  careless  collocation  of  inconsistent 
words  would  lead  to  absurdities  if  a  literal  construction  were  attempted, 

64 


GENERAL   RULE    AS   TO    SURETY'S   LIABILITY.  §  17 

to  the  discharge  of  sureties  by  fraud,  or  misconduct  of  the 
bank,  or  officers  other  than  the  one  guaranteed,  can  be  very 
conveniently  grouped  under  the  various  defences  a  surety 
may  make,  adding  in  our  notes  a  few  points  in  reference  to 
evidence,  measure  of  damages,  and  pleading  and  practice  in 
general. 

a.  Liability  of  a  Surety.  —  Express  words  may  insure  against 
even  innocent  mistake  or  accident. 

But  in  the  case  of  an  ordinary  bond  for  the  faithful  dis- 
charge of  the  duties  of  a  certain  office,  C,  by  a  certain  person, 
O.,  the  surety  is  liable  for  all  loss  caused  by  the    p^jj^^jpig 
dishonest  or  incompetent  ^  (unless  this  is  excluded  by   ^'^J/jJ'j"'^ 
the  language  of  the  bond)  conduct  of  0.  in  the  sphere   dimcuities 

^.         ..       ,     -,.  1       T    1  .  •    !•  R        J     considered. 

of  said  office  (mcludmg  such  slight  variations'' and 
temporary  substitutions  as  are  likely  to  occur  in  the  ordinary 
course  of  business),  or  by  his  taking  advantage  of  the  opportu- 
nities'^ of  his  employment  in  such  office  to  commit  a  criminal  or 
tortious  act,  during  the  time^  lie  lawfully  holds  such  office 
under  the  election  to  which  the  bond  relates. 

But  difficult  questions  arise.     Suppose  the  directors  ^  order 

the  court  will  revise  and  correct  the  language  so  as  to  render  it  conform- 
able to  reason.     Planters  &  Merchants'  Bank  v.  Hill,  1  Stew.  (Ala.)  201. 

The  phraseology  of  the  bond,  upon  which  the  litigation  in  the  cited 
case  arose,  furnishes  a  fair  example  of  the  method  of  application  of  this 
rule.  The  condition  of  the  bond  was  that  the  cashier  should  "with 
fidelity,  punctuality,  and  attention,  to  the  best  of  his  skill,  judgment, 
and  ability,  conduct  himself  in  said  office  well  and  truly,  discharging  all 
its  duties,  executing  the  orders  of  the  directors  of  said  bank,  safely  and 
securely  keeping  all  moneys  deposited  in  his  hands,"  and  doing  a  great 
multiplicity  of  other  "duties,  acts,  and  things,"  "all  and  singularly," 
according  to  the  descriptions  contained  in  several  more  adjectives  and 
adverbs.  The  writer  of  the  bond  was  evidently  floundering  in  a  sea  of 
words,  and  the  court  was  obliged  to  come  gallantly  to  the  rescue.  They 
declared  that  it  was  evident,  from  the  very  nature  of  the  language,  that 
it  was  not  intended  to  apply  all  the  restrictions  to  each  particular  duty ; 
but  that  an  intelligent  apportionment  should  be  made  of  the  various 
expressions  among  the  divers  "  duties,  acts,  or  things  "  respectively,  as 
from  their  several  natures  they  might  be  susceptible  of  the  qualifications 

*  See  §  36.  «  §  24.  «  §  26. 

'  §  25.  »  §  27.  »  §§  37,  33. 

55 


8  17  OFFICIAL   BONDS   AND   LIABILITIES   OF   SURETIES. 

O.  to  do  a  wrongful  act,  from  which  loss  results  to  the  bank, 
or  by  their  negligence  or  connivance  give  him  the  opportunity 
for  wrong,  is  the  surety  discharged  ?  It  may  be  said  the  bank 
intrusts  its  business  to  the  directors,  and  their  acts  bind  it, 
and  others  prejudiced  by  their  conduct  are  not  to  be  held  by 
the  bank.  The  answer  is,  that  the  directors  are  not  intrusted 
to  do  wrong,  and  that  the  surety  docs  not  have  to  bear  loss 
caused  by  them  but  by  0.,  whom  he  has  guaranteed,  and  the 
fault  of  any  other  officer  cannot^"  make  O.'s  wrong  less  a 
breach  of  his  bond.  If  the  stockholders  themselves  are  guilty  of 
wrong,  that  would  be  a  different  question  ;  they  are  the  real 
principal^''  on  the  bond,  and  such  conduct  would  be  a  fraud 
on  the  surety  that  ought  to  discharge  him. 

mentioned.  Thus  "punctuality"  could  hardly  be  called  for  in  "keep- 
ing" but  rather  in  "accounting  for"  or  "paying  over"  money.  On 
the  other  hand,  "judgment  and  ability  "  might  be  required  in  "keeping," 
and  "  skill  "  in  "accounting,"  but  neither  of  these  qualities  could  be  of 
much  assistance  in  the  business  of  "paying  over."  The  surety  -will 
never  be  held  to  guarantee  the  performance  of  the  duties  of  a  public  office 
in  a  manner  either  absurd  or  impossible,  simply  because  an  awkwardly 
phrased  bond  would  subject  him  to  this  obligation  if  an  effort  were  made 
to  construe  it  strictly  according  to  its  wording. 

9«  A  bond  would  be  of  little  value  were  the  law  otherwise.  Sup- 
pose M.  employs  A.  as  a  manager  and  B.  as  cashier,  and  D.  is  surety  for 
both.  If  either  A.  or  B.  makes  default,  he  is  liable  to  IM.  ;  but  if  A.'s 
fault,  giving  B.  opportunity  for  wrong,  is  to  relieve  the  surety,  then  he 
is  liable  only  on  one  bond,  though  both  are  broken.  If  B.  defaults,  S. 
is  liable;  if  A.  defaults,  S.  is  liable;  but  if  they  put  their  heads  together 
he  is  only  liable  for  one  of  them.  Or,  if  D.  insures  B.,  and  C.  insures  A., 
in  case  of  fault  of  A.  giving  C.  his  opportunity,  only  C.  would  be  liable. 
This  seems  a  good  deal  like  saying  two  wrongs  together  against  the  same 
person  make  one  of  them  right. 

Again,  suppose  the  manager  comes  to  know  the  cashier  is  stealing,  and 
he  buys  silence.  Can  the  cashier,  the  principal  on  his  own  bond,  take 
advantage  of  his  own  wrong  to  deny  his  liability  on  the  bond  to  M.  ? 
And  if  the  principal  is  liable  on  the  bond,  is  not  the  surety? 

As  to  third  persons  generally,  who  are  injured  by  the  negligence  or 
misconduct  of  the  directors  in  the  business  intrusted  to  them,  the  bank 
is  liable ;  but  when  a  person  has  made  an  express  contract,  the  very  pur- 
pose and  nature  of  which  is  inconsistent  with  the  idea  of  holding  the 
bank  to  such  responsibility,  the  case  fronts  about. 

**  Any  fraud  or   improper   conduct  of   the  creditor   or  obligee  will 


INCREASE   OF   RISK.  §  17 

Suppose  again  that  O.'s  salary  is  increased  or  diminished, 
or  the  bank's  capital  is  raised,  or  O.  is  given  duties  outside 
the  sphere  contemplated  in  the  bond  as  above.  How  shall 
these  things  affect  the  obligation  ? 

On  principle  it  would  seem  clear,  1st,  that  if  the  loss  is 
caused  by  the  employment  of  0.  out  of  his  sphere,  the  surety 
is  not  liable,  and  to  this  the  cases  agree ;  ^^  2d,  that  if  it 
can  be  clearlv  shown   that  the    extra  duties    had 

•'  Change  of 

nothing  to  do  with  the  loss,  but  that  it  was  caused    officers' 

(iutics 

by  O.'s  conduct  in  the  sphere  of  the  office  C,  or  by 
a  wrongful  advantage  of  the   opportunities  afforded  by  that 
office,  the  surety  should  be  held,  for  it  is  a  loss  within  the 
bond   (unless  of  course  there  is    an  express  provision  that 
extra  duties  shall  avoid  the  contract). 

To  this  second  proposition  the  cases  do  not  assent  ^^  if 
the  duties  are  of  a  higher  grade  (i.  e.  require  more  skill,  or 
put  the  officer  under  greater  temptation)  than  those  of  the 
bonded  office.  In  such  cases  the  increase  of  risk  avoids 
the  bond.  The  surety  has  a  right  to  judge  of  the  circum- 
stances under  which  he  is  willing  to  be  liable,  and  any  change 
of  the  risk  without  his  consent  discharges  him,  unless  unsub- 
stantial or  clearly  for  his  benelit. 

It  may,  however,  be  strongly  urged  that  justice  only  requires 
that  the  hurden  of  proof  should  be  thrown  upon  the  bank  in 
such  cases  to  show  clearly  that  the  loss  was  not  in  conse- 
quence of  the  change.  In  most  cases  the  two  rules  would 
produce  identical  results,  as  it  would  usually  be  impossible 
to  disentangle  the  influences  producing  the  officer's  default, 
and  on  the  broad  consideration  of  practicality  the  rule  of  law 
is  perhaps  the  best,  as  preventing  troublesome  inquiry  in 
favor  of  one  who  has  by  his  own  act  put  a  cloud  upon  his 
rights.  The  analogy  of  goods  mingled  by  negligence  or  wilful 
act  is  against  the  rule  of  law  here,  for  the  owner  can  claim 
the  goods  if  he  can  clearly  distinguish  them. 

The  ground  for  holding  the  surety  discharged  is,  that  the 

discharge  the  surety.     Ham  v.  Greve,  34  Ind.   19 ;   Franklin  Bank  v. 
Cooper,  36  Me.  179. 
10  §§  30,  26. 

57 


§  18  OFFICIAL   BONDS   AND   LIABILITIES   OF    SURETIES. 

cause  of  loss  may  be  conduct  outside  the  bond,  and  if  this 
can  be  successfully  rebutted  the  ground  fails.  Nor  does  the 
rule  of  law  seem  necessary  to  prevent  fraud,  for  the  burden  of 
proof  would  do  that  as  well ;  however,  as  the  law  is  well 
settled  and  known,  it  can  work  little  injustice. 

It  might  be  urged  that,  as  the  fault  of  directors  cannot  dis- 
charge the  surety,  the  addition  of  higher  duties  by  the  direct- 
ors should  not ;  but  the  reason  of  release  of  the  surety  is  that 
the  cause  of  loss  may  be  outside  the  bond,  and  this  reason  is 
not  touched  by  any  consideration  of  the  manner  in  which  0. 
came  to  act  beyond  the  office  C. 

As  to  the  increase  of  capital,^^  the  arguments  are  about 
balanced  as  to  whether  it  is  an  enlargement  of  risk 

Increase  of  i       •  i  •         i  i      •  r 

capital  or  fairly  to  be  presumed  withm  the  contemplation  oi 
the  bond,  or  not. 

But  the  diminution  or  increase  of  salary  ^^  is  so  ordinary  a 
matter,  so  naturally  to  be  expected,  and  of  so  little  impor- 
tance to  the  risk,  as  to  seem  clearly  of  no  effect,  though  it 
has  been  held  otherwise. 

§  18.    Defences. 

(a)  That  the  bond  never  took  effect. 

(1)  Formal  requisites  absent.     §  19. 

(2)  No  delivery  and  acceptance.     §  20. 

(3)  Fraud  or  illegality  in  its  inception.     §  21. 

(b)  That  the  loss  is  not  of  a  nature  covered  by  the  bond. 

(1)  Loss  by  theft,  robbery,  unavoidable  accident, 

or  other  cause  not   involving  fault  of   the 
officer  (0.)  guaranteed.     §  22. 

(2)  Loss  by  innocent  mistake  of  0.     §  23. 

(3)  Loss  by  conduct  of  0.,  below  the  line  of  ordi- 

nary skill,  competency,  and  care.     §  24. 

(4)  Loss  by  act  of  0.  in  excess  of  his  authority. 

§25. 

(5)  Loss  by  0.  in  performing  extra  and  unusual 

duties,   or   such  as  do   not   pertain  to   the 
sphere  in  which  he  was  guaranteed.     §  26. 

"  §  32.  12  g  31, 

68 


FORM    OF   BOND.  §  19 

(c)  That  there  was  no  act  of  0.  of  a  nature  to  create  lia- 

bility of  the  sureties  occurring  within  the  'period 
covered  by  the  bond.     §  27. 

(d)  Discharge  of  the  surety. 

(1)  By  a   material  change   not   contemplated  in 

the  contract,  as  changes  in  the  banking 
firm,  in  the  duties  of  the  officer,  increase 
of  capital  stock  or  of  the  officer's  salary. 
§§  28-32. 

(2)  Misconduct  of  bank  in  keeping  0.  after  dis- 

covery of  his  dishonesty.     §  38. 

(3)  Satisfaction  of  the  bank's  loss.     §  34. 

(4)  Statute  of  limitations.     §  35. 

(e)  Revocation  previous  to  the  wrongful  act  of  0.     §  36. 
No  Defence. 

(a)  That  the  dishonest,  improper,  or  irregular  act  of  0. 

was   done   under    authority   from   the    directors. 

(b)  Nor  that  the  bank  was  negligent  in  not  discovering 

previous  defalcations  of  0.     §  38. 

(c)  Nor  that  the  signature  of  another  surety  was  fraudu- 

lently obtained.     §  21. 

(d)  Nor  that  a  greater  sum  was  intrusted  to  0.  than  the 

limit  set  in  the  bond,     §  41. 

(e)  Nor  that  the  bank  has  failed  to  perform  public  duties, 

or  done  business  contrary  to  its  charter.     §  39. 

(f)  Nor  that  the  officer  failed  to  take  the  oath  required 

by  statute.     §  40. 
§19.   Form^   of   the   Bond. —  The   National   Banking   law 

1  §  19.    A  bond  running  to  the  president  and  directors,  without  addi- 
tion of  the  corporate  name,  will  be  regarded  as  a  valid  bond 

•  ,1  1    T  1  •  Bond  in 

to   the   corporation,  and  may  be  sued  by  the   corporation,      name  of 
Pendleton  v.  Bank  of  Kentucky,  1  T.  B.  Monr.  (Ky.)  171.  °®*'^''- 

If  after  an  official  bond  is  duly  signed,  executed,  and  delivered  to  the 
proper  officer  by  the  principal  and  the   sureties,  it  is  found  that   the 
blanks  in  the  body  of  the  instrument,  which  were   left  for      Blanks 
the  names  of  the  sureties,  have  been  accidentally  left  unfilled,      unfilled, 
the  bank  has  authority  to  insert  the  names.     Hultz  v.  Commonwealth, 
3  Grant  (Pa.),  61. 

59 


§  19  OFFICIAL   BONDS    AND   LIABILITIES   OF   SURETIES. 

(11.  §  8)  does  not  specify  the  terms  of  the  bond,  and  the 
iState  statutes  ^  generally  have  few  provisions  on  the  subject. 
As  a  rule,  any  condition  in  the  bond,  consistent  with  its  char- 
acter as  a  guaranty  that  the  officer  shall  perform  his  contract, 
and  not  in  contravention  of  law,  morals,  or  public  policy,  will 
be  sustained. 

When  there  are  statutory/  provisions  to  ivhich  the  bond  fails 
to  conform,  it  may  still  be  good  as  a  common  law  bond,  unless 
Statutory  ^^^^  legislature  has  declared  that  bonds  not  in  accord- 
^""*^'  aiice  with  the  statute  shall  be  void.^ 

Although  both  in  its  form  and  in  its  execution  it  should 
differ  very  materially  from  the  special  regulations  prescribed 
in  the  charter  or  statute  in  accordance  with  which  it  purports 
to  be  drawn  and  executed,  nevertheless,  as  a  contract  volunta- 
rily entered  into,  upon  sufficient  consideration  and  for  a  per- 
fectly legal  purpose,  it  remains  obligatory  upon  the  parties, 
independently  of  the  statute.  Where  the  bond  differs  from 
the  statutory  form  only  in  setting  forth  a  greater  number  of 
requisitions  to  be  complied  with  by  the  officer,  if  they  are  sev- 
erable, those  of  them  which  are  not  called  for  by  the  statute 
may  be  rejected  as  surplusage.*  This  would  render  the  bond 
good  under  the  statute,  but  nothing  would  be  practically 
gained  by  it.  For  without  the  severance  and  rejection  the 
bond  would  still  have  been  good  in  its  original  shape  at  com- 
mon law.     The  operation  of  this  latter  doctrine  can  be  pre- 

Where   the   date  of   the  bond   is  "the day  of   ,  1869,"  the 

Date  legal  presum])tion  is  that  it  took  effect  on  the  last  day  of  that 

year.     Graves  v.  Lebanon  National  Bank,  10  Bush  (Ky.),  23. 

2  In  Massachusetts  the  cashier's  bond  is  to  be  "  conditioned  for  the 
faithful  performance  of  his  dvities,"  and  in  no  case  for  less  than  twenty 
thousand  dollars.     R.  L.  c.  115,  §  27. 

3  Bank  of  Brighton  v.  Smith,  5  Allen  (Mass.),  413  ;  Bank  of  Northern 
Liberties  r.  Cresson,  12  Serg.  &  R.  (Pa.)  306  ;  Franklin  Bank  v.  Cooper, 
30  Me.  179  ;  Gathwright  c.  Callaway  County,  10  Mo.  003  ;  The  Governor 
V.  Allen,  8  Humph.  (Tenn.)  170;  State  Bank  v.  Locke,  4  Dev.  (N.  Car.) 
529 ;  Bank  of  Carlisle  v.  Hopkins,  1  Monr.  (Ky.)  246  ;  Morse  v.  Hods- 
don,  5  Mass.  314  ;  Burroughs  v.  Lowder,  8  id.  373  ;  Sweetser  v.  Play,  2 
Gray  (Mass.),  49  ;  Grocers'  Bank  v.  Kingman,  16  Gray  (Mass.),  473. 

4  Shunk  V.  Miller,  5  Barr  (Pa.),  250 ;  Walker  v.  Chapman,  22  Ala. 
116 ;  Woods  V.  State,  10  Mo.  698. 

60 


PAROL    EVIDENCE   OF   ACCEPTANCE.  §  20 

vented  only  by  the  express  legislative  enactment  that  a  bond 
taken  in  any  other  form  shall  be  void.  No  less  positive  lan- 
guage can  be  substituted  for  this  explicit  declaration  with  the 
like  effect.  The  words  used  may  amount  to  a  prohibition 
against  the  officer's  entering  upon  the  discharge  of  his  office 
until  he  has  given  such  a  bond.  Still  the  bond  in  the  differ- 
ent shape  will  remain  good.  It  was  urged  in  the  Brighton 
Bank  case,  cited  in  note  3,  that  the  bank  could  not  recover 
because  it  could  not  make  out  its  case  except  by  proving  and 
relying  upon  an  illegal  act.  But  the  court  very  clearly  showed 
the  fallacy  of  this  argument,  even  if  it  were  assumed  that  the 
statute  were  to  be  construed  as  a  prohibition  on  the  bank  direct- 
ors, restraining  them  from  permitting  the  cashier  to  act  as 
such  till  he  had  given  the  prescribed  bond.  Still,  the  bank 
proved  no  illegal  act  or  omission  to  support  their  case.  In 
the  taking  of  the  bond  in  question  there  was  no  violation  of 
law.  The  only  possible  fault  lay  in  the  omission  to  take  an- 
other bond.  But  the  omission  to  do  something  else  did  not 
necessarily  vitiate  that  which  was  done.  The  bond  taken  was 
not  prohibited  by  statute  ;  both  might  have  been  legally  taken, 
and  both  or  either  must  be  valid. 

§  20.  Delivery  and  Acceptance, — At  common  law  no  vote 
or  record  of  acceptance  is  necessary ;  parol  evidence  of  any 
circumstances  that  would  raise  a  presumption  of  acceptance 
in  the  case  of  an  individual  is  sufficient ;  but  statutes  or  char- 
ter may  require  the  bond  to  be  "approved"  or  "accepted" 
by  the  directors,  or  "  by  vote  of  the  directors,"  or  that  it  shall 
be  "  to  the  satisfaction  of  the  directors."  In  all  cases  parol 
will  be  admitted  to  prove  circumstances  from  which  the  re- 
quired approval  can  be  inferred ;  mere  possession  by  the  bank 
of  a  paper  like  this,  intended  for  their  benefit,  is  good  evidence 
of  acceptance.  When  directors  are  themselves  sureties,  see 
§  21  a. 

The  form  of  the  bond  and  the  sufficiency  of  the  sureties 
offered  upon  it  ought  of  course  to  be  considered  and  passed 
upon  by  the  responsible  government.  But  where  an  express 
legislative  command  is  laid  upon  them  to  do  so,  it  has  occa- 
sionally been  set  up  in  defence  to  suits  upon  bonds,  either  that 

61 


§  20  OFFICIAL   BONDS   AND   LIABILITIES   OF   SURETIES. 

the  directors  had  not  "accepted"  at  all,  or  had  not  accepted 
"  by  vote " ;  or  that  there  is  no   proper  and  admissible  evi- 
dence of  their  having  done, so.     This  ground  was  first  taken 
in  the  case  of  the  Bank  of  the  United  States  v.  Dandridge.i  At 
the  trial  of  that  cause  the  plaintiffs   undertook  to 
^'  ^'  ^'  ^'    prove  that  the  bond  on  which  they  sued  fulfilled  the 
requisitions  of  the  charter,  —  that  it  should  be  "to  the  satis- 
faction of  the  directors,"  —  by  offering  in  evidence  the  fact  of 
its  being  in  their  possession,  and  by  other  such  presumptive 
evidence  as  would  suffice  to  raise  the  legal  presumption  if  the 
bank  had  been  an  individual.     The  defendants  objected  that 
this  evidence  was  inadmissible,  or,  even  if  admissible,  would 
not  be  sufficient ;  that  corporate  acts  must  be  proved  by  cor- 
porate records  and  minutes  of  proceedings,  and  since  these 
were  altogether  silent  on  the  subject  of  the  bond,  its  accept- 
ance and  approval,  as  required  by  the  law,  must  be  conclu- 
sively assumed  never  to  have  taken  place,  and  could  not  be 
shown  by  other  and  parol  testimony.     When  the  case  was 
tried  before  Chief  Justice  Marshall  in  the  Circuit  Court,  he 
adopted  the  views  of  the  defendants'  counsel ;  but  when  it 
came  before  the  full  bench,  they  reversed  his  decision.     A 
long  opinion,   intended   to    be  exhaustive,  was  delivered  by 
Judge  Story,  to  the  effect  that  the  acceptance  and  approval 
might  be  proved  by  testimony  dehors  the  corporate  records, 
and  might  be  presumed  in  favor  of  the  bank,  as  matter  of  law, 
from  proof  of  the  same  facts  which  would  suffice  to  raise  the 
same  legal  presumption  in  favor  of  an   individual.      Chief 
Justice  Marshall,  adhering  to  his  original  views,  delivered  a 
dissenting  opinion.     But  the  decision  of  the  associate  justices 
of  course  settled  the  law. 

While  the  case  was  pending,  after  the  ruling  in  the  Circuit 
Court  and  before  its  reversal  had  been  pronounced,  alike  case 
came  before  the  Supreme  Court  of  Massachusetts.  The  rec- 
ords of  the  bank  in  this  case,  however,  showed  that  J.  S.  B. 
Mass.  and  W.  D.  "  be  accepted  as  sufficient  sureties  in  a 

BaikT         ^0"^  ^^  ^^  ^^'^^^  ^y  *^^  cashier,"  &c.     Chief  Justice 
Cbickcring.     Parker  delivered  the  opinion.     He  expressed  sur- 

1  §  20.     12  Wheat.  64. 
62 


FRAUD. 


21 


prise  at  the  ruling  of  Chief  Justice  Marshall  in  the  Circuit 
Court,  above  stated,  saying,  "  We  sliould  have  supposed  that, 
in  the  case  as  well  of  a  corporation  as  of  an  individual,  a 
paper  intended  for  their  benefit,  and  found  on  their  files, 
would  be  considered  as  having  been  accepted  by  them."  But 
without  touching  this  principle,  in  this  cause,  "  the  vote  to 
accept  the  sureties,  and  the  bond's  being  in  the  possession 
of  the  president,  are  a  sufficient  acceptance  of  the  bond."  ^ 
Several  years  afterwards  the  same  court  again  held  that  parol 
evidence  was  admissible  to  show  that  the  bond  had  been  laid 
before  the  directors,  and  that  they  had  expressed  themselves 
satisfied  with  it,  and  that  this  was  in  law  equivalent  to  a  for- 
mal acceptance.^  The  same  doctrine  was  maintained  to  its 
full  extent  in  Maryland.^  It  can  no  longer  be  considered  to 
be  open  to  question.  The  fact  of  the  possession  by  the  bank 
of  a  bond  in  due  form,  legally  executed,  and  complete  in  every 
respect,  the  officer  having  been  allowed  to  enter  upon  his 
duties,  is  evidence  which  by  itself  will  suffice  to  authorize  a 
suit  upon  it  as  having  been  delivered  and  accepted  with  all 
requisite  formality.^  And  where  an  officer  makes  no  formal 
delivery  of  a  bond  in  which  he  is  principal,  but  retains  it 
among  other  papers  of  which  he  is  general  custodian,  it  may 
be  found  that  he  holds  it  on  account  of  the  bank  as  its  prop- 
erty.« 

§  21.  Fraud  or  Illegality  in  the  Inception  of  the  Bond.  —  A 
bond  is  void,  if  illegal,  as  when  given  by  a  director  in  a  State 
where  directors  are  forbidden  to  be  sureties  on  the  bond  of 
an  officer  of  their  own  bank  ;  or  if  tainted  with  fraud,  as 
when  the  sureties  are  misled  by  intentional  or  careless  7nis- 
representations  of  the  directors,  or  by  their  concealment  of 
facts  which  they  know  increase  the  risk.*^     But  it  is  held,  as 

2  Dedham  Bank  v.  Chickering,  3  Pick.  (Mass.)  335. 
8  Amherst  Bank  v.  Root,  2  Met.  (Mass.)  522. 
*  Union  Bank  v.  Ridgely,  1  Har.  &  G.  (Md.)  324. 
6  Graves  v.  Lebanon  National  Bank,  10  Bush  (Ky.),  23;  Bostwick  v. 
Van  Voorhis,  91  N.  Y.  353,  quoting  the  words  of  tlie  text  substantially. 
6  Johnson  V.  Gerald,  169  Mass.  500,  502  (48  N.  E.  764)  (1897). 
0  §   21.     There  must  be  entire  good  faith  in  the  transaction  between 

63 


§  21  OFFICIAL   BONDS   AND   LIABILITIES   OF   SURETIES. 

we  shall  see,  that  directors  are  not  bound  to  disclose  facts 
which  do  not  affect  moral  character  or  official  integrity. 

It  is  a  general  principle  of  guaranty  that  non-disclosure  of 
the  falsity  of  facts  on  belief  of  which  the  obligee  knows  the 
surety  is  acting  discharges  him.  We  should  say,  the  conceal- 
ment by  the  directors  of  any  facts,  viaterial,  and  peeuliarhj 
ivithin  their  knowledge,  is  fraud  ;  if  the  bond  only  covers  losses 
by  dishonesty,  facts  not  affecting  integrity  are  not  material, 
l)ut  if  the  surety  is  responsible  for  losses  by  negligence,  then 
facts  which  increase  the  risk  of  loss  by  negligence  in  an 
important  ^  and  substantial  manner   are  material,  and  if  the 

obligee  and  surety;   any  taking  advantage  of  the  surety  by  withholding 
proper  information  will  avoid  the  contract.     Story's  Eq.  Juris.   §  324. 

1  Matters  which,  though  affecting  the  risk,  do  so  in  a  trivial  and  un- 
important manner,  or  are  remote  and  do  not  necessarily  affect  the  risk, 
though  it  is  conceivable  they  may,  or  such  matters  as  are  within  the  con- 
templation of  every  reasonable  man,  as  the  slight  variations  of  prudence, 
care,  and  intellect  among  ordinary  men,  are  not  deemed  material.  If  an 
officer  already  in  the  directors'  service  is  re-elected,  they  are  not  bound  to 
state  to  his  sureties,  offered  upon  his  new  bond,  that  he  is  careless,  negli- 
gent, stupid,  or  a  poor  and  inaccurate  accountant.  They  are  not  obliged 
to  state  that  they  themselves  have  been  remiss  in  examining  into  the  con- 
dition of  the  bank,  the  amount  of  its  funds  on  hand,  and  the  correctness 
of  its  accounts.  Neither  need  they  state  the  existence  of  other  and  prior 
bonds,  even  though  they  may  be  still  in  force.  But  if  they  know  that 
there  is  in  fact  a  defalcation  existing  which  will  be  covered  by  the  terms 
of  the  proposed  bond,  they  are  bound  to  state  it,  and  their  failure  to  do  so 
is  such  a  breach  of  good  faith  on  their  part  as  will  invalidate  the  contract. 
Even  where  a  party  offered  as  bondsman  had  been  a  director  in  the  bank 
itself  at  the  time  the  defalcation  took  place,  and  ought  therefore  from  the 
nature  of  his  official  duty  to  have  been  aware  of  it,  it  was  held  that  the 
obligation  of  his  bond  could  not  be  enforced  against  him,  if  he  should  show 
that  as  matter  of  fact  he  did  not  know  it ;  that  his  co-directors  had  care- 
fully concealed  it  from  him  up  to  and  after  the  time  of  his  executing  the 
bond,  and  apparently  with  the  very  object  of  leading  him  to  execute  a 
bond  which  would  by  its  terms  cover  it.  Franklin  Bank  v.  Cooper,  36 
Me.  179;  39  id.  542;  Franklin  Bank  v.  Stevens,  39  id.  532;  Smith  v. 
Bank  of  Scotland,  1  Dow,  Pari.  R.  294.  The  essence  of  the  matter  seems 
to  be,  that  the  sureties,  unless  informed  to  the  contrary,  have  a  right  to 
suppose  that  their  undertaking  is  in  the  ordinary  course  of  business,  simi- 
lar in  all  material  respects  to  other  like  undertakings,  and  exposing  thega 
to  no  peculiar  and  hidden  risks. 

64 


DIRECTORS    AS   SURETIES.  §  21 

directors  know  such  facts  ^  by  reason  of  the  special  opportuni- 
ties of  observing  the  officer  that  his  past  employment  has 
afforded,  they  should  be  disclosed.  Receiving  a  guaranty  from 
G.  knowing  facts  which  G.  docs  not  know,  and  has  not  had 
opportunity  to  know,  and  which  it  is  reasonable  to  suppose 
might,  if  known  to  him,  deter  him  from  giving  the  guaranty, 
is  a  fraud  by  all  the  analogies  ^  of  the  law,  as  well  as  by  the 
judgment  of  morality. 

Of  course  fraud  on  one  surety  does  not  affectthe  liability  of 
co-sureties,  with  whom  the  dealings  were  strictly  in  good  faith.* 

We  will  now  more  fully  consider  the  points  thus  briefly 
stated. 

a.  Can  a  Director  be  a  Surety?  —  The  first  question  which 
presents  itself  is  whether  a  director  can  be  a  surety  upon 
the  bond  of  any  officer  of  his  own  bank.  In  sovie  States  this 
has  been  forbidden  by  legislative  enactment.  But  it  is  not 
thus  forbidden  by  the  National  Banking  Act;  and  when  not 
forbidden  by  statute,  it  cannot  be  said  to  be  absolutely  illegal. 
The  law  and  the  morality  are  both  so  very  neatly  put  by  Chief 
Justice  Shaw  that  we  are  tempted  to  give  his  own  words: 

2  For  example,  such  marked  and  unusual  carelessness  or  stupidity  as 
to  make  it  unreasonable  to  suppose  the  surety  would  guarantee  one  so 
wholly  incompetent,  and  so  exceedingly  likely  to  involve  him,  if  he  was 
in  possession  of  the  facts  known  to  the  directors. 

3  If  the  fraud  be  such  that  without  it  the  contract  would  not  have  been 
made,  it  is  material ;  but  if  it  is  probable  the  same  thing  would  have  been 
done  in  the  same  way  without  the  deceitful  conduct,  it  is  not  material. 
2  Parsons  on  Contracts,  267.  The  insured  must  state  all  facts  within  his 
knowledge  which  would  have  an  influence  on  the  terms  of  the  contract, 
and  are  not  known,  or  may  be  supposed  by  him  not  to  be  known,  to  the  in- 
surer. Lindenau  v.  Desborough,  8  B.  &  C.  586  ;  Bufe  v.  Turner,  6  Taunt. 
338  ;  Clark  v.  Man.  Ins.  Co.,  8  IIow.  235;  Xew  York  Bowery  Ins.  Co. 
V.  New  York  Ins.  Co.,  17  Wend.  (N.  Y.)  359;  Fletcher  v.  Commonwealth 
Ins.  Co.,  18  Pick.  (Mass.)  419.  See  also  Benj.  on  Sales,  §  461,  and  Kerr  on 
Fraud  and  Mistake  ;  also  Maynard  v.  Maynard,  49  Vt.  299  ;  Bruce  v. 
Ruler,  2  M.  &  R.  3 ;  Hill  v.  Gray,  1  Stark.  434. 

*  See  cases  cited  in  note  1  to  this  section.  If,  however,  the  obtain- 
ing of  A.'s  signature  is  the  condition  of  B.'s  signing,  and  A.'s  name  is 
fraudulently  obtained,  B.  cannot  be  held.  Franklin  Bank  v.  Stevens, 
39  Me.  532' 

VOL.  I. —5  65 


§  21  OFFICIAL    BONDS   AND    LIABILITIES    OF   SURETIES. 

"  The  next  exception  is,  that  the  bond  was  void,  as  against 
Amherst  the  poHcj  of  the  law,  because  three  of  the  directors, 
Root!  *'  whose    duty  it  was    to  examine  and    approve  the 

cashier's  bond,  were  themselves  his  sureties.  This  exception 
certainly  comes  with  a  very  bad  grace  from  those  directors 
who  thus  became  sureties.  It  sets  up  the  dereliction  of  their 
duties  as  directors,  to  avoid  their  obligation  as  contractors. 
It  may  have  been  in  very  bad  taste,  it  may  have  been  very 
indiscreet  and  ill-judged,  to  put  themselves  in  a  situation  to 
express  an  opinion  on  their  own  sufficiency  as  such  sureties. 
But  whether  right  or  wrong,  it  is  impossible  to  perceive  how 
the  obligors,  either  such  directors  themselves,  or  their  co- 
obligors,  can  avail  themselves  of  this  circumstance  to  avoid 
their  obligation.  Another  objection  .  .  .  was,  that  if  direct- 
ors, so  being  sureties  on  the  deed,  could  approve  or  accept  the 
deed,  it  was  in  effect  a  contract  with  themselves,  and  of  no 
binding  effect.  .  .  .  Here  the  corporation  is  an  artificial  per- 
son in  law,  distinct  from  all  the  individuals  composing  it, 
capable  of  contracting  and  bringing  suits,  and  may  contract 
with  its  own  members,  or  have  suits  against  them,  as  well  as 
against  any  other  persons."  ^ 

In  Maine  the  State  banking  law  provided  that  the  bond 
should  not  be  "  signed  "  by  a  director.  But  on  the  ground 
that  the  bond  was  not  operative  or  valid  till  it  had  been  ac- 
cepted, it  was  held  that  if  the  signer  was,  at  the  time  of  sig- 
nature, a  director,  but  had  ceased  to  be  so  at  the  time  of 
acceptance,  there  was  no  violation  of  the  statute.^  It  was 
held  in  another  case  that  the  same  law  would  invalidate  an 
obligation,  and  a  mortgage  security  accompanying  it,  given  by 
a  director  to  third  parties  to  indemnify  them  against  loss  as 
sureties  upon  an  official  bond,  the  object  being  to  induce  them 
to  become  such  sureties.' 

b.  Misrepresentations.  —  Where  an  embezzlement  by  a  cashier 
liad  occurred,  and  might  have  been  discovered  by  a  very 
limited  measure  of  diligence  on  the  part  of  the  directors,  and 

6  Amherst  Bank  v.  Root,  2  Met.  (Mass.)  522. 
«  Franklin  Bank  v.  Cooper,  36  Me.  179. 
'  Jose  V.  Hewett,  50  Me.  248. 
66 


CONCEALMENT   BY   DIRECTORS.  §  21 

they  yet  failed  to  detect  it,  and  published  a  statement  of  the 
affairs  of  the  bank,  going  to  show  a  faithful  and  careful  man- 
agement and  proper  condition  of  its  affairs,  and  two  persons, 
having  read  this  statement,  became  sureties  on  the  cashier's 
bond,  it  was  held,  in  Kentucky,  that  they  had  a  good  defence 
to  a  suit  against  them  to  make  good  losses  caused  by  his 
subsequent  embezzlements.^ 

c.  Concealment,  —  In  the  case  above  cited  of  Franklin  Bank 
V.  Stevens,  the  sureties  on  a  cashier's  bond  bound  themselves 
by  the  language  of  the  bond  to  guarantee,  not  only  that  the 
cashier  should  account  for  all  money  to  be  subsequently  re- 
ceived by  him,  but  also  that  he  should  account  for  all  money 
previously  received  by  him.  It  was  held  that  evidence  offered 
by  the  sureties  of  the  unskilful  and  careless  keeping  of  the 
books  of  the  bank,  of  the  negligence  of  the  directors  and  the 
bank  commissioners,  and  the  non-existence  of  other  bonds,  all 
relating  to  the  time  prior  to  the  date  of  the  bond  in  suit,  was 
immaterial,  as  having  no  bearing  on  the  liability  of  the  sure- 
ties. Though  evidence  tending  to  show  knowledge,  on  the 
part  of  the  bank  officers,  that  property  of  the  bank  had  been 
lost  by  the  cashier  prior  to  the  execution  of  the  bond,  would 
have  been  competent,  as  having  a  direct  bearing  on  the 
liability  of  the  sureties.^ 

In  Pennsylvania,  a  case  arose  where,  at  the  time  the  sure- 
ties executed  a  bond  for  the  teller,  he  had  already  defrauded 
the  bank,  though  he  had  not  been  as  yet  detected  or  suspected 
by  the  officers.  The  defendant  (the  surety)  sought  to  show 
in  defence,  that,  if  the  officers  had  examined  the  books  of  the 
bank  at  the  time  of  the  giving  of  the  bond,  they  would  have 
been  able  to  detect  the  then  existing  deficiency.  The  court 
said  that  a  fraudulent  concealment  of  the  defalcation,  at  the 
time  when  the  bond  was  executed,  would  have  constituted 
a  defence.  But  that  there  was  no  such  concealment,  since 
there  was  no  such  knowledge ;  that  the  "  sort  of  constructive 
notice  "  which  the  defendant  sought  to  allege  could  not  be 
permitted  to  be  set  up  to  defeat  his  liability  ;  that  the  officers 

«  Graves  r.  National  Bank,  10  Bush  (Ky.),  23. 
»  Franklin  Bank  v.  Stevens,  39  Me.  532. 

67 


§  23  OFFICIAL   BONDS   AND   LIABILITIES   OF   SURETIES. 

were  under  no  obligation  to  investigate  the  books  when  tlie 
bond  was  given,  and  their  faihire  to  do  so,  and  ignorance  con- 
sequent upon  such  failure,  constituted  no  basis  for  a  defence 
in  this  suit.  Though  it  was  intimated  that  a  different  rule 
might  have  prevailed  had  the  surety  at  the  time  requested 
an  examination,  and  the  request  had  been  either  refused  or 
cvaded.i*' 

The  directors  knew  of  certain  irregularities  and  omissions 

of  0.  while  teller,  but  did  not  suppose  them  to 
Bostwjck  V.      affect  his  moral  character  or  official  integrity,  and 

did  not  disclose  them  to  the  sureties  on  his  bond 
as  cashier.  This  was  held  no  defence  to  a  suit  on  the 
bond.ii 


Loss  NOT  OF  A  Nature  covered  by  the  Bond. 

§  22.  Loss  by  Act  of  another  than  the  Officer  guaranteed.  — 
A  loss  of  moneys  or  securities  by  reason  of  a  theft  or  rob- 
bery, accomplished  without  the  collusion  of  the  officer,  and 
not  furthered  or  rendered  possible  by  his  negligence  or  incom- 
petence, would  be  a  good  defence  to  a  suit  upon  a  bond  writ- 
ten in  any  of  the  forms  heretofore  described.^  The  bondsmen 
are  certainly  not  insurers  against  the  acts  of  any  person  save 
the  principal  in  the  bond. 

§  23.  Innocent  Mistake.  —  The  officer  contracts  for  ordi- 
nary skill  and  prudence,  and  it  is  this  the  surety  guar- 
antees, and  if  a  cashier  causes  loss  by  a  mistake  such  as 
cashiers  of  experience  are  liable  to  make  sometimes,  it  is 
not  a  loss  for  which  the  sureties  are  liable,  unless  the  words 
of  the  bond  are  absolute,  and  expressly  agree  that  the  officer 
shall  do  certain  specific  things  ;  in  such  case,  if  the  officer 
fails  to  do  these  things,  by  mistake  or  otherwise,  the  surety 
is  liable. 

10  Wayne  v.  Commercial  National  Bank,  52  Pa.  St.  343. 

11  Bostwick  V.  Van  Yooi-his,  91  N.  Y.  353. 

1  §  22.  Allison  v.  Farmers'  Bank,  6  Rand.  (Va.)  204;  American  Bank 
V.  Adams,  12  Pick.  (Mass.)  303 ;  Planters  &  Merchants'  Bank  v.  Hill,  1 
Stew.  (Ala.)  201;  Mohrenstecher  v.  Westerreet,  87  Fed.  157. 
68 


MISTAKE   OF   OFFICER.  §  24 

But  though  an  overpayment  by  mistake  may  be  set  up,  and 
often  successfully,  in  defence  to  a  suit  upon  a  bond,  it  is  nec- 
essary that  the  officer  should  have  acted  honestly,  not  only 
in  the  transaction  of  overpayment,  but  equally  in  reference  to 
all  matters  which,  however  remotely,  concern  it  or  are  con- 
nected with  it.  If  he  subsequently  commits  any  deceit  or 
fraud,  or  makes  false  entries  in  the  books,  for  the  purpose  of 
concealing;  the  deficiency,  his  dishonest  dealing  in  this  par- 
ticular will  suffice,  in  the  eye  of  the  law,  to  give  the  coloring 
of  guilt  to  the  entire  affair  from  the  very  outset.  It  may  still 
remain  true,  that  the  actual  loss  of  the  money  was  caused 
wholly  and  solely  by  the  innocent  overpayment ;  and  that  the 
subsequent  misconduct  could  not  aggravate  the  injury,  as  sub- 
sequent good  conduct  could  not  have  remedied  it.  Still  the 
acts  resorted  to  for  securing  concealment  are  a  suggestio 
falsi;  the  concealment  itself  is  a  suppressio  veri.  Each  is 
an  unfaithfulness,  and  will,  as  a  rule,  be  assumed  to  have 
contributed  to  the  injury  suffered  by  the  bank.^ 

If  the  bond,  instead  of  insuring  honesty  and  competency  in 
such  general  terms  as  are  displayed  in  the  foregoing  instances, 
enumerates  specific  acts  in  distinct  language,  and  guarantees 
that  the  officer  shall  perform  these  acts,  the  peril  of  possible 
mistakes  in  their  performance,  however  innocent  and  excusa- 
ble the  error  may  be,  is  assumed  by  the  obligors.  A  deliber- 
ate undertaking,  for  example,  that  the  cashier  shall  "  deliver 
to  Ids  successor  in  office  .  .  .  all  moneys,  securities,  stocks,  &c., 
<fec.,"  is  an  absolute  and  unconditional  guaranty  for  such 
delivery,  and  the  fact  of  an  innocent  loss,  growing  out  of 
an  excusable  mistake,  cannot  be  availed  of  in  defence  to  a 
suit  for  non-delivery.^ 

§  24.  Negligence  of  the  Officer.  —  The  officer  contracts  for 
reasonable  skill  and  diligence,  and  the  surety  guarantees  he 
will  fulfil  his  contract  unless  he  expressly  narrows  his  en- 
gagement, and  no  words  can  be  relied  on  to  restrict  the  lia- 
bility of  a  bank  officer's  bondsmen  to  mere  personal  honesty 

1  §  23.  Union  Bank  r.  Clossey,  11  Johns.  (N.  Y.)  182;  Rochester  City 
Bank  v.  Elwood,  21  N.  Y.  88. 

2  State  Bank  v.  Chetwood,  3  Ilalst.  (N.  Y.)  1. 

69 


§  24  OFFICIAL   BONDS   AND   LIABILITIES   OF   SURETIES. 

and  integrity,  unless  these  terms  or  their  clear  equivalents  are 
used,  and  stated  as  the  limits  of  the  insurance. 

If  the  ofhcer's  conduct  is  above  the  line  of  ordinary  skill 
and  care,  as  observed  among  persons  of  his  class,  the  case 
comes  under  §  23 ;  that  is,  where  only  such  slight  negligence 
attaches  to  the  officer  as  is  to  be  expected  of  ordinary  men  in 
his  position.  This  is  the  substance  of  the  law  of  this  topic, 
both  on  principle  and  authority. 

Of  course  considerable  variety  is  found  to  exist  in  the  form 
and  language  of  the  bonds  used  by  different  corporations,  and 
especially  in  those  portions  wherein  is  described  the  species 
of  good  and  satisfactory  conduct  which  is  insured.  Very  com- 
monly only  general  phraseology  is  used.  It  is  stipulated  simply 
that  the  officer  shall  "we?Z  and  faithfully  ^'  or  ''faithfully,''  or 
"  ivell  and  truly,''  discharge  and  perform  his  duties.  Practi- 
cally, it  may  be  considered  that  these  phrases  are  equivalent 
each  to  either  of  the  others.  For  though  a  finical  linguist 
might  seek  to  draw  some  delicate  distinction  between  the  sig- 
nification of  the  word  "  well "  on  the  one  side,  and  the  words 
"  faithfully  "  and  "  truly  "  on  the  other,  yet  such  over-nicety 
is  not  encouraged  by  the  law  which  has  been  laid  down  in  the 
premises ;  and  it  is  safe  to  say  that  these  words  may  be  used 
interchangeably.  The  better  rule  of  construction,  which  is  to 
be  applied  to  all  alike,  seems  to  be  that  they  are  designed  not 
only  to  guarantee  honesty  and  obedience,  but  also  reasonable 
skill,  competence,  and  diligence.  The  reason  for  taking  the 
bond  is  by  no  means  limited  to  the  narrow  object  of 
and  igno-  protecting  the  banking  house  only  against  loss  aris- 
rance.  .^^^  ivom  embezzlement  or  other  species  of  criminal 

conversion  and  misappropriation,  but  also  against  the  equally 
mischievous  danger  of  carelessness,  thoughtlessness,  and  ig- 
norance.2  The  security  for  the  "  faithful  discharge"  of  duties 
would  be  rendered  "  utterly  illusory,"  if  its  import  were  to  be 
narrowed  to  a  guaranty  against  personal  frauds  only.  Duties 
performed  negligently  and  unskilfully,  or  violated  from  want 
of  capacity  or  want  of  care,  can  never  be  said  to  be  "  well  and 

3  §  24.   Rogers  v.  Kelly,  2  Camp.  123. 
70 


SKILL  AND  CARE  REQUIRED  BY  BOND.         §  24 

truly  "  executed.^  In  Massachusetts  a  bond  calling  only  for 
"  faithful "  performance  was  declared  to  bind  the  obligors,  not 
only  for  the  honesty  of  the  officer,  but  also  for  his  "  faithful 
execution  of  the  duties  of  his  office,  which  embraces  compe- 
tent skill  and  due  diligence."  ^  It  must  certainly  be  considered 
that  the  last  two  cases,  one  of  which  was  decided  in  the  highest 
tribunal  in  the  land,  establish  the  correct  rule  of  law.  Yet  in 
New  York  there  is  a  well-known  cause  in  which  precisely  the 
opposite  doctrine  was  laid  down.  The  bond  of  a  teller  was 
conditioned  that  he  should  "  well  and  faithfully  perform  the 
duties,"  &c.  The  court  declared  that  this  was  security  solely 
for  his  honesty  in  his  trust,  and  not  for  his  competency.*^  Yet 
it  is  very  curious  to  note  that,  though  the  conflict  between  the 
abstract  statement  of  law  in  New  York  and  in  Massachusetts 
could  not  well  be  more  direct  and  apparently  irreconcilable, 
nevertheless  both  courts,  having  substantially  like  facts  to 
deal  with,  might  not  improbably  come  to  very  nearly  the 
same  practical  results.  In  New  York,  it  was  said  that  an 
overpayment  by  mistake,  honestly  made,  was  a  matter  of  in- 
competency, and  was  not  insured  against  in  the  bond.  In 
Massachusetts,  it  was  an  obvious  inference  from  the  language 
of  the  court  that,  if  the  fact  w^as  that  the  deficiency  was 
caused  by  an  overpayment,  made  honestly  and  through  a  sim- 
ple mistake,  then  evidence  that  experienced  and  able  tellers 
were  liable  occasionally  to  make  such  mistakes  would  have 
been  admitted  for  the  purpose  of  showing  that  at  least  this 
fact  did  not  of  itself  suffice  to  prove  incompetence.  It  is  not 
to  be  supposed  that  ample  evidence  of  this  description  could 
ever  be  found  inaccessible.  Whence  it  might  not  improbably 
occur  that,  upon  diametrically  opposite  doctrinal  bases,  the 
same  conclusion  of  acquitting  the  sureties  might  be  arrived  at. 
If  the  two  above-cited  decisions  are  the  only  ones  which 
directly  and  in  terms  run  counter  to  the  New  York  decision, 
there  is  yet  a  decision '^  in  the  Pennsylvania  reports  which 

•*  Minor  v.  Mechanics'  Bank,  1  Pet.  46. 

5  American  Bank  v.  Adams,  12  Pick.  (Mass.)  303. 

6  Union  Bank  v.  Clossey,  10  Johns.  (N.  Y.)  271 ;  11  id.  182. 

7  Barrington  v.  Bank  of  Washington,  14  Serg.  &  R.  (Pa.)  405. 

71 


§  24  OFFICIAL    BONDS    AND   LIABILITIES    OF   SURETIES. 

fails  to  do  SO  only  because  it  goes  much  farther,  though  in 
Pa.  the  same  direction,  than  either  the  Supreme  Court 

?Banfof  of  the  United  States  or  the  bench  of  Massa- 
Washington.  chusctts.  lu  this  casc  the  bond  was  conditioned 
that  "  J.  B.,  the  cashier,  shall  well  and  truly  perform  the 
duties  of  cashier  of  the  bank  aforesaid,  to  the  best  of  his 
ahilitiesr  The  italicized  words  certainly  ought  to  have  suf- 
ficed to  exclude  from  the  operation  of  the  guaranty  acts  of 
simple  incompetency  or  ignorance,  if  any  language  short  of 
an  exclusion  in  terms  could  do  so.  The  defendant's  counsel 
argued  thus,  and  urged  that  the  insurance  of  the  bond  was 
restricted  to  the  cashier's  fidelity  and  honesty ;  the  degree  of 
his  ability  might  be  considered  as  expressly  exempted,  pro- 
vided his  best  ability,  such  as  it  might  prove  to  be,  was  uni- 
formly used.  Certainly  these  arguments  were  not  devoid  of 
force.  The  court  complimented  them  as  ingenious,  but  de- 
clared them  unsound.  The  opinion  held,  substantially,  that 
the  covenant  was  that  the  cashier  should  discharge  the  duties 
of  his  appointment,  that  is  to  say,  that  he  should  do  so 
with  competent  skill  and  ability.  It  was  said  that  one  who 
accepts  an  office  or  trust  of  any  kind  contracts  to  execute  it 
with  competent  skill  and  ability;  his  sureties,  who  are  bound 
that  he  shall  execute  it  according  to  his  skill  and  ability,  war- 
rant for  the  performance  of  this  contract  of  the  officer.  His 
undertaking  is  to  act  according  to  the  duties  of  his  station. 
So,  if  by  his  act  of  honest  intention,  but  in  excess  of  his 
authority,  the  bank  suffers  a  loss,  it  must  be  reimbursed  by 
the  obligors  in  the  above  bond.^ 

This  is  subtle  and  not  altogether  unanswerable  reasoning. 
It  proceeds  on  the  basis  of  what  it  is  supposed  that  the  bond 
would  naturally  be  designed  to  contain,  rather  than  upon  the 
basis  of  what  it  really  does  contain.  There  is  a  little  con- 
fusion, moreover,  between  the  undertaking  of  the  cashier, 
implied  by  his  entry  into  office,  and  that  of  the  sureties, 
actually  expressed  in  the  instrument ;  between  the  liability 
of  the  cashier  at  common  law,  and  that  which  exists  under 
and  by  virtue  of  the  stipulations  of  the  bond.  It  is  true 
that  the  cashier  by  the  acceptance  of  the  trust  impliedly  con- 
72 


ACT   OUTSIDE   OFFICIAL   SPHERE.  §  25 

tracted  to  exercise  it  with  due  skill  and  ability  ;  but  it  was 
hij  the  acceptance  of  the  trust,  strictly  and  literally,  and  not  at 
all  by  the  execution  of  the  bond,  that  he  thus  contracted.  It 
is  possible  that  his  acceptance  of  office  may  have  placed  him 
under  obligations  greater  than  those  named  in  his  bond.  But 
to  say  that  the  sureties  in  the  bond,  who  defined  in  perfectly 
intelligible  language  the  extent  to  which  they  consented  to 
become  guarantors,  could  have  the  same  extended  until  it 
became  commensurate  with  a  liability  of  another  person,  their 
principal,  rising  from  an  entirely  alien  origin,  seems  to  us 
hardly  a  tenable  position.  It  is  not  a  logical  sequence,  but  a 
verbal  illusion,  to  say  that,  because  the  cashier,  by  accepting 
office,  binds  himself  to  use  due  skill  in  its  functions,  therefore 
his  bondsmen,  expressly  guaranteeing  only  that  he  shall  use 
skill  "  to  the  best  of  his  abilities,"  impliedly  assume  and  guar- 
antee that  the  skill  thus  described  is  due  skill.  This  is  to 
read  their  contract  by  the  light  of  his ;  to  embody  his  indi- 
vidual and  implied  undertaking,  arising  from  his  individual 
act,  into  their  specifically  worded  and  independent  under- 
taking; to  substitute  the  measure  which  a  legal  implication 
applies  to  his  contract  for  skill,  in  place  of  the  measure  which 
they  in  their  contract  have  taken  pains  to  provide  in  exact 
phraseology.  But  though  the  original  soundness  of  this  opin- 
ion may  be  thus  criticised,  yet  it  must  be  acknowledged  to 
be  the  law.  It  has  stood  for  long  years  unchallenged,  and 
perhaps  it  would  now  be  foolish  to  change  it. 

§  25.  Loss  occasioned  by  an  Act  of  O.  in  Excess  of  his  Au- 
thority. —  If  an  officer  goes  outside  of  his  duties,  as  to  take 
funds  he  had  no  occasion  to  touch,  the  better  opinion  is  that 
the  surety  is  bound,  for  the  "  faithful  discharge"  of  his  office 
implies  that  he  shall  not  go  outside  of  it,  even  though  his 
intention  is  honest,^  especially  not  to  use  the  opportunities  it 
affords  him  to  embezzle  the  bank's  funds,  or  defraud  it.  A 
case  in  Virginia,  however,  holds  the  contrary. 

But  O.'s  act  beyond  authority  must  cause  loss  to  the 
bank  ;  if  it  is,  for  instance,  an  act  of  agency  which  does  not 
bind  the  bank,  no  cause  of  action  against  the  sureties  arises 
*  §  25.     See  Barrington  v.  Bank  of  Washington,  §  24. 

73 


§  25  OFFICIAL    BONDS    AND    LIABILITIES    OF    SURETIES. 

unless  the  bank  sees  fit  to  ratify  the  act.  "We  will  now  ex- 
amine the  cases  and  develop  more  fully  the  points  thus  briefly 
stated. 

In  Allison  v.  Farmers'  Bank,^  a  A^irginian  bench  held  that 
the  sureties  on  an  accountant's  bond  were  not  liable  for  his 
theft  of  money  from  the  teller's  drawer,  since  his  bond  se- 
cured only  his  fidelity  in  the  "  office  of  accountant,"  and  as 
accountant  he  was  not  put  in  possession  of  any  money  of  the 
bank.  This  ruling  seems  thoroughly  narrow  and  unsatisfac- 
tory ;  it  was  rendered  only  by  a  divided  court,  and  has  been 
deliberately  overruled  in  New  York  in  the  case  above  cited, 
N.  Y.  of  Rochester  Bank  v.  Elwood,^  with  the  true  criti- 

Bank^f."  cism  that  its  principle,  if  followed,  would  substan- 

Eiwood.  tially  cancel  all  official  bonds.    In  this  latter  case, 

also,  the  bond  specifically  secured  the  faithful  discharge  "  of 
the  trust  reposed  in  [the  officer]  as  assistant  bookkeeper." 
In  this  case,  also,  he  embezzled  funds  which,  in  the  strict 
performance  of  his  duties,  he  had  no  occasion  to  touch,  and 
then  he  made  false  entries  in  his  books  to  conceal  the  fact. 
This  last  feature  in  the  case  gives  rise  to  some  remarks  in 
the  opinion  not  perhaps  strictly  bearing  upon  the  precise  point 
in  discussion  ;  but  rather  than  mutilate,  or  give  in  an  imper- 
fect shape,  the  reasoning  of  the  court,  we  shall  condense  the 
whole.  The  judge  said  that,  construing  the  instrument  by 
the  light  of  attendant  circumstances,  he  did  not  think  that 
the  bond  was  limited  to  insuring  mere  fidelity  in  the  actual 
bookkeeping.  The  bookkeeper  was  in  such  close  contact  that 
he  could  easily  abstract  money^  and  more  easily  than  any  one 
else  could  conceal  the  abstraction  by  falsifying  his  books. 
These  facts  must  be  presumed  to  have  been  known  to  the  sure- 
ties, when  they  guaranteed  his  faithful  performance  of  a  trust 
as  an  employee  in  the  bank.  It  cannot  be  fairly  supposed  that 
they  intended  to  guarantee  only  that  he  should  keep  the  books 
correctly,  but  rather  that  he  should  be  honest  and  faithful  in 
his  trust  as  an  emp>loyee  of  the  bank.  They  engaged  absolutely 
for  his  integrity  and  fidelity  in  the  discharge  of  the  trust  of 
assistant  bookkeeper.  The  bond  indicated  the  department 
2  6  Rand.  (Va.)  201.  «  oi  x.  Y.  88. 

74 


ACT    OUTSIDE   OFFICIAL   SPHERE.  §  25 

to  which  he  was  to  be  assigned,  and  guaranteed  that  he  was 
a  trustworthy  person  to  discharge  its  duties.  His  '''■faithful 
discharge  "  of  the  trust  implies  an  engagement  that  he  shall  not 
transcend  it  to  embezzle.  If  he  does  transcend  it,  and  uses  the 
opportunities  it  affords  him,  for  the  purpose  of  stealing,  it  is 
not  a  ^^ faithful  discharge."  Therefore  he  is  liable  for  the 
abstraction,  per  sc.  But  especially  would  he  be  liable  if  the 
false  entries  were  concurrent  and  simultaneous  with,  and  a 
part  of,  the  guilty  res  gestce.  A  liability  which  would  clearly 
have  accrued  had  these  entries  been  made  to  enable  a  confed- 
erate to  take  the  money  cannot  be  evaded  by  the  bookkeeper's 
taking  it  himself.  It  is  no  defence  that  the  false  entries  were 
made  solely  to  enable  him  to  escape  detection.  He  used  a 
means  furnished  by  his  agency  to  consummate  successfully 
a  fraud.  The  taking  and  the  entries  were  one  transaction, 
and  it  can  hardly  be  contended  that  the  ultimate  loss  of 
the  bank  was  in  no  degree  attributable  to  the  false  book- 
keeping and  the  abuse  of  trust  as  bookkeeper.  The  falsifi- 
cation was  parcel  of  the  wrongful  act,  and  this  is  deemed 
sufficient. 

Indeed,  it  seems  a  reasonable  general  rule  to  assert,  that,  if 
the  officer  has,  in  any  part  of  the  transaction,  acted  otherwise 
than  in  perfect  honesty  and  good  faith,  excuses  cannot  be 
heard  to  absolve  the  sureties.  It  is  impossible  to  split  up 
the  transaction  into  parts,  and  to  say  this  part  was  the  only 
part  which  actually  caused  the  injury,  and  this  part  was 
honest.  Such  a  system  of  legal  anatomy  is  simply  absurd. 
Originally  it  was  open  to  the  courts  to  declare  the  undertaking 
absolute,  and  to  refuse  to  admit  any  explanatory  matter  by 
way  of  exculpation.  If  practical  justice  effected  a  relaxation 
of  this  possible  stringency,  yet  it  was  only  for  the  sake  of  pro- 
tecting substantial  bona  fide  innocence,  not  to  aid  in  intro- 
ducing a  practice  of  the  artful  dissection  of  a  complete  whole 
into  guilty  and  innocent  components,  and  the  referring  the 
injury  to  the  one  or  the  other  of  these.  If  in  any  portion  of 
the  entire  business  there  has  been  dishonesty,  this  must  be 
regarded  as  tainting  the  whole. 

When  we  come  to  the  subject  of  the  powers  and  duties  of 

75  ■ 


§  26  OFFICIAL   BONDS    AND    LIABILITIES   OF   SURETIES. 

cashiers,  it  will  be  seen  that  dealings  may  be  had  with  these 
officers  under  such  circumstances  of  time  and  place 

Ratification.      ^^^^^  ^^^^  ^^^^  ^^^^  ^^^  ^^  ^^^^^  ^^,  ^j^^^^^       g^^.  ^j^^ 

bank  may  at  any  time  waive  the  irregularity,  abandon  its 
defence,  and  assume  the  liability  which  the  party  dealing 
with  the  cashier  sought  to  impose  upon  it.  It  has  an  unques- 
tionable right  to  do  this,  if  it  chooses.  It  depends  upon  the 
choice  which  the  bank  shall  make  between  repudiation  or 
ratification,  whether  or  not  it  can  have  any  remedy  on  the 
official  bond.  If  it  repudiates  the  transaction,  it  cannot  sue 
upon  the  bond  ;  for  the  reason  that  it  has  avoided  all  suffering. 
It  would  have  no  possible  cause  of  action.  But  if  it  ratifies 
and  adopts  the  transaction,  the  right  of  action  for  compensa- 
tion for  any  injury  consequent  upon  the  irregularity  accrues. 
Where  a  bank  has  to  consider  what  line  of  action  it  shall 
take  in  such  circumstances,  it  must  be  governed  by  its  views 
of  wise  policy  in  the  premises.  If  its  reputation  would  suffer 
from  a  rigid  adherence  to  its  rights,  and  a  more  liberal  con- 
duct is  deemed  advantageous,  it  has  the  unquestionable  right 
to  act  accordingly.  It  is  under  no  obligation  to  the  sureties 
in  the  bond  to  stand  upon  its  extreme  legal  rights,  and  to 
narrow  down  their  liability  and  watch  over  their  interests 
to  the  sacrifice  of  its  own.  The  possibility  of  such  dilemmas 
occurring,  and  of  the  decision  being  in  favor  of  corporate 
ratification,  is  an  event  which  every  bondsman  must  be  as- 
sumed to  contemplate  as  constituting  an  essential  part  of  his 
risk.  But  it  is  evident  that  if,  by  the  decision  of  the  bank, 
the  act  does  not  bind  it,  then  it  can  suffer  no  loss,  however 
official  the  proceedings  may  have  purported  to  be  ;  and  it  is 
not  the  fact  that  the  act  purports  to  be  official,  and  thereby 
accomplishes  a  fraud  upon  others,  that  gives  the  right  of 
action  to  the  bank ;  but  it  is  the  fact  that  some  substantial 
loss  or  measurable  injury  has  been  actually  inflicted  upon 
the  bank  itself,  through  the  medium  of  the  dishonesty  or 
irregularity.^ 

§  20.    Unusual  Employment.  —  The  bond  covers  any  duties 
belonging  by  custom  to  the  office,  and   such  as  in  the  natural 
*  Pendleton  v.  Bank  of  Kentucky,  1  T.  B.  Monr.  (Ky.)  171. 

76 


EXTRA   DUTIES.  §  26 

course  of  business  ^  are  assigned  to  the  officer,  as  in  the  tem- 
porary absence  of  a  fellow  officer,  or  any  similar  emergency. 
But  losses  occurring  by  reason  of  extra  duties  not  thus  rea- 
sonably within  the  contemplation  of  the  surety  ground  no 
suit  against  him  unless  the  words  of  the  bond  cover  the  loss 
of  the  given  kind  unqualifiedly .°"     Sec  §  30. 

A  bond  insured  that  the  clerk  should  "  well  and  faithfully 
serve,"  &c.,  and  should  not  "  cancel,  obliterate,  spoil,  destroy, 
waste,  embezzle,  spend,  or  make  away  with"  any  of    ^.^^ 
the  books,  cash,  notes,  &c.,  "  of  the  bank  or  of  any   Melville ». 

'  Doidge. 

of  the  customers,  which  should  be  deposited  in  his    Unqualified 

,  ,  .  ,      ,  .  insurance. 

hands,  or  intrusted  to  his  custody  or  possession,  or 
come  to  his  care,  custody,  or  possession."  At  request  of  a 
customer,  the  clerk  was  sent  eleven  miles  to  receive  a  sum  to 
be  deposited  to  the  customer's  credit  in  the  bank.  On  his 
return  he  lost  the  sum.  In  suit  by  the  bank  the  jury  found 
that  it  was  not  the  custom  to  send  a  clerk  to  receive  deposits 

0  §  26.  A  bond  for  the  faithful  performance  of  the  duties  of  the  office 
of  teller  or  cashier  covers  all  defaults  in  the  duties  of  such  office  annexed 
from  time  to  time  by  those  who  are  authorized  to  conti-ol  the  affairs 
of  the  bank  ;  and  the  sureties  enter  into  the  contract  in  reference  to  the 
rif^hts  and  authority  of  the  president  and  directors,  under  the  charter  and 
by-laws.  Minor  v.  Mechanics'  Bank,  1  Tet.  46  ;  Planters'  Bank  v.  Lam- 
kin,  R.  M.  Charlt.  (Ga.)  29. 

0  a  A  bank  was  incorporated  with  power  to  appoint  all  necessary 
officers,  to  take  bonds  from  them,  and  to  make  all  necessary  by-laws, 
rules,  and  regulations.  By  one  of  the  by-laws  it  was  provided  that  it 
should  be  the  duty  of  every  other  officer  of  the  bank  to  perform  such  ser- 
vices as  might  be  required  of  them  by  the  president  and  cashier.  In  an 
action  against  the  principal  and  sureties  of  a  bond  given  by  a  bookkeeper 
of  a  bank,  conditioned  for  the  faithful  performance  of  the  duties  of  his 
office,  "  and  of  all  other  duties  required  of  him  in  said  bank,"  the  bond 
was  adjudged  to  have  been  taken  in  conformity  with  the  charter  ;  and  the 
bookkeeper  having,  whilst  in  discharge  "  of  the  other  duties  required  of 
him,"  taken  large  sums  of  money,  the  sureties  were  rendered  liable  on 
his  bond.  Planters'  Bank  v.  Lamkin,  R.  M.  Charlt.  (Ga.)  29.  Where 
the  bond  of  a  receiving  teller  covered  his  duties  as  such,  "  or  the  duties  to 
which,  in  the  employer's  service,  he  may  be  subsequently  appointed  or 
assigned  by  the  employer,"  it  was  held  that  the  bank  might  appoint  him 
assistant  cashier  without  notice  to  the  surety.  Fidelity  Co.  v.  Gate  City 
Bank,  97  Ga.  63G  (25  S.  E.  392)  (1895). 

77 


§  27  OFFICIAL   BONDS    AND   LIABILITIES   OF   SURETIES. 

away  from  the  bank.  Nevertheless,  somewhat  strangely  as 
it  must  seem,  the  court  held  that  the  loss  was  covered  by  the 
condition  of  the  bond  ;  remarking  that  the  same  would  be  the 
case  where  money  should  be  received,  or  a  check  paid  erro- 
neously or  wrongfully  after  banking  hours,  or  if  the  clerk 
should  be  despatched  to  London  on  an  emergency  to  procure 
funds.i  In  this  case  tlie  bond  seems  to  insure  against  loss 
of  funds  of  the  bank  coming  to  the  care  of  the  officer,  no 
matter  how. 

The  receiving  teller  was  assigned  the  duties  of  the  general 
teller,  in  the  temporary  absence  of  the  latter.  The  court  said 
Jiich.  that  a  bank  teller's  official  bond  covers  any  duties 

hv's^Bank^'  ^o  wliich,  in  the  natural  course  of  business,  he  may 
y.  Ziegier.       |^g  assi2:ned  by  the  cashier  or  other  superior  officer 

J  emporary  o  ^  i 

absence.  in  the  temporary  absence  of  the  person  whose  duty 
it  is  to  perform  them.^ 

A  bookkeeper's  sureties  are  not  released  by  the  mere  fact 
that  he  also  assumed  the  duties  of  teller,  unless  the  errors 
were  connected  with  or  induced  by  the  employment  as 
teller.^ 

§  27.  Wrongful  Act  beyond  the  Period  of  the  Bond.  — 
Unless  otherwise  expressed,  the  bond  covers  the  legal  term^ 
of  office  of  the  person  guaranteed  (what  constitutes  the  legal 
term  being,  however,  a  difficult  question  in  some  cases,  see 
pp.  77-81) ;  but  whether,  nothing  being  said  in  the  bond  on 
the  subject,  the  surety  is  to  be  held  to  contemplate  the  pos- 
sible extension  of  the  officer's  term  under  his  election,  in 
consequence  of  legislative  action  prolonging  the  corporate 
existence  beyond  the  charter  limit,  queer e?     A  conflict  has 

1  Melville  v.  Doidge,  6  C.  B.  450. 

2  Detroit  Savings  Bank  v.  Ziegier,  49  Mich.  157  (13  N.  W.  496). 

8  Home  Savings  Bank  v.  Traube,  75  Mo.  199;  Garnett  v.  Farmers' 
Nat.  Bank,  91  Ky.  618-620  (16  S.  W.  709)  (1891). 

1  §  27.     See  §  16. 

2  The  presumption  that  the  official  bond  applies  only  to  the  existing 
term  is  very  far  from  conclusive,  and,  if  it  is  clear  that  the  parties  meant 
to  create  a  continuing  liability,  the  bond  must  be  held  to  have  done  so. 
Fink  V.  Farmers'  Bank,  178  Pa.  154,  169  (35  Atl.  636)  ;  Shackamaxon 
Bank  v.  Yard,  143  Pa.  129  (22  Atl.  208). 

78 


PERIOD    COVERED    BY    BOND.  §  27 

been  supposed  3  to  exist  on  this  point  between  New  ITamp- 
shire  and  Pennsylvania  ;  but,  keeping  in  mind  the  rule  that 
the  words  of  a  judge  are  to  be  understood  in  reference  to 
the  facts  of  the  case,  the  seeming  disagreement  disappears. 
In  the  New  Hampshire  case,  the  bank  did  not  cease  to  exist, 
the  legislative  medicine  being  administered  before  death,  and 
the  court  sustained  this  supplemental  liability,  such  a  con- 
tinuance of  the  officer's  term  being  within  reasonable  con- 
templation of  the  parties  at  the  time  of  making  the  bond. 
In  the  Pennsylvania  case,  the  bank  had  ceased  to  exist  and 
was  resuscitated,  and  the  court  denied  that  the  bond  once 
dead  could  be  revived  in  this  way. 

So  the  cases  do  not,  upon  close  inspection,  seem  to  cross 
each  other.  When  the  charter  limit  is  actually  reached,  or 
the  bank  in  any  way  ceases  to  exist,  if  only  for  a  moment, 
the  ofhcer  is  no  longer  an  officer ;  he  has  come  to  the  end  of 
his  term,  and  the  bond  is  dead,  and  can  only  be  revived  by- 
act  of  the  parties  to  it,  or  by  some  event  expressly  provided 
for  in  the  bond  itself.  But  if  a  bond  covers  the  term  of  a 
cashier's  ofhce,  and  by  reason  of  legislative  action  the  bank 
does  not  expire  at  the  original  charter  limit,  the  cashier's 
term  being  thereby  extended  unbroken  beyond  said  limit  by 
a  contingency  easily  within  the  contemplation  of  the  parties 
at  the  time  of  executing  the  bond,  it  is  at  least  clear  that  a 
case  holding  such  a  bond  to  cover  such  an  extension  is  not 
substantially  discordant  with  a  case  in  which  the  bank's  ex- 
istence was  absolutely  determined,  though  the  language  of  the 
judges  may  have  been  wider  than  their  cases,  their  decisions 
broader  than  the  foundation. 

However,  Ohio  presents  us  with  a  case  that  is  surely  in 
conflict  with  New  Hampshire  ;  but,  as  will  be  seen  by  referring 
to  the  citations  in  the  expansion  of  this  section,  the  court, 
instead  of  setting  out  reasons  for  the  faith  that  was  in  it, 
declares  the  references  of  the  counsel  conclusive.  And  yet, 
when  these  references  are  examined,  there  is  only  argument 
from  analogy.  In  each  case  where  the  question  of  period 
arose,  there  was  a  definite  limit  inherent  in  the  officer's  term ; 

8  See  1  Parsons  on  Contracts,  503. 

79 


§  27  OFFICIAL   BONDS   AND   LIABILITIES   OF   SURETIES. 

in  one  case  it  was  annual,  in  another  he  was  elected  for  six 
months,  and  of  course  such  limitations  are  very  different  from 
a  contingency  entirely  external  to  the  officer's  term.  Like 
that  of  the  dissolution  or  continuance  of  the  bank  at  the 
charter  limit,  there  is  nothing  certain  about  that ;  but  when  a 
cashier's  office  is  annual,  that  is  a  definite,  certain  limit,  upon 
the  very  subject  matter  of  the  bond. 

Therefore,  on  the  whole,  although  it  may  be  fairly  urged 
that  a  surety  should  have  the  benefit  of  any  doubt  as  to 
what  may  have  been  within  his  contemplation  (though 
Mr.  Burge  thinks  his  words  must  be  construed  contra  pro- 
ferenteiTi) ,  yet  upon  the  cases  we  must  conclude  that  M'ew 
Hampshire  has  the  only  well  considered  case  upon  the  precise 
point. 

Taking  a  new  bond  at  a  re-election  determines  the  old, 
unless  expressly  reserved  by  a  proviso  in  the  new. 

It  is  not  necessary  that  all  the  acts  in  the  chain  of  wrongful 
conduct  causing  the  loss,  and  concealing  it,  should  be  done 
within  the  period ;  it  is  enough  to  charge  the  sureties,  if  any 
substantial  part  of  such  conduct  occurs  within  the  time 
covered  by  their  bond.  The  remainder  of  this  section  is 
devoted  to  a  fuller  treatment  of  these  points. 

The  bond  of  an  officer  remains  in  force  as  a  continuing 
If  the  officer    obligation  only  during  the  period  for  which  he  le- 

is  elected  for  ,,      ,     ,i         rn  i         i  i 

an  expressly  gaily  holds  officc  uudcr  his  election.  His  re-elec- 
the  bond  has  tion  at  the  cud  of  this  period,  and  his  entry  upon 
tha7p"eHod'.  ^  sccoud  term  of  office,  though  no  actual  gap  inter- 
aifnuai"re-  vcues,  do  uot  Operate  to  revive  or  to  keep  alive  his 
election.  bond.  If  the  office  be  annual,  the  bond  should  be 
annually  renewed.  Though  if  the  office  be  annual  with  the 
proviso  that  the  incumbent  shall  continue  to  hold  until  a  suc- 
cessor is  appointed  and  qualified,  and  the  officer  continues  to 
hold  over  after  the  expiration  of  the  year  by  virtue  of  this 
clause,  his  bond  will  likewise  continue  in  force.  It  is  essen- 
tial, however,  that  the  office  derive  an  annual  character  by 
force  of  some  law,  or  legal  resolution,  or  by-law,  if  the  obliga- 
tion of  tlie  bond  is  to  be  only  of  a  year's  duration.  If  the 
office  is  declared  to  be  so  by  the  charter,  or  in  the  organic 
80 


PERIOD  COVERED    BY    BOND.  §  27 

law,  or  in  tho  corporate  by-laws,  or  perhaps  even  by  a  vote  of 
the  corporate  government,  it  will  be  assumed  that  the  sureties 
entered  into  their  undertaking  with  a  view  to  this  established 
limitation  upon  its  continuance.*  But  we  have  the  authority 
of  Amherst  v.  Root,  cited  below,  for  the  doctrine  that  a  mere 
habit  or  usage  of  the  directors  to  re-elect  every  year  docs 
not  impart  the  legal  character  of  annual  duration  to  the  office. 
The  sureties  are  not  supposed  to  have  regarded  a  custom 
which  has  in  fact  no  particular  necessity  or  object,  and  which 
may  at  any  time  be  broken  in  upon  or  wholly  abandoned  with- 
out changing  the  legal  position  of  affairs  in  any  respect.  The 
naked  fact  of  annual  re-election,  therefore,  is  not  sufficient  to 
make  the  obligation  of  the  bond  only  annual.  This  rule  ap- 
plies to  all  cases  in  which  the  bond  names  or  refers  to  no 
specific  limitation  of  the  liability,  and  to  all  cases  in  which 
such  general  phrases  are  used  as  "  during  his  continuance  in 
office,"  or  "  so  long  as  he  shall  be  "  cashier,  teller,  &c.  Of 
course,  if  the  bond  distinctly  declares  its  own  duration,  this 

^  Though  tlie  bond  do  not  recite  the  term  of  the  office  or  agency,  if  it 
be  one  of  limited  duration,  by  general  statute,  charter,  by-law,  or  terms 
of  appointment,  the  parties  are  still  supposed  to  contract  with  a  reference 
to  the  limited  term,  and  the  sureties  will  not  be  held  answerable  for  the 
misconduct  of  the  principal  beyond  that  term,  upon  a  new  appointment, 
even  though  the  words  of  the  bond  are  that  they  shall  be  responsible  for 
the  principal,  "at  all  times  or  any  time  hereafter."  St.  Saviour's  South- 
wark  V.  Bostock,  2  (B.  &  P.)  New  R.  174  ;  Hassell  v.  Long,  2  M.  &  S. 
(Eng.)  363;  Peppin  v.  Cooper,  2  B.  &  Aid.  431;  Parker  v.  Barker,  1 
T.  R.  295.  Sureties  on  the  bond  of  a  cashier  whose  term  of  office  is 
annual  are  not  liable  for  defaults  occurring  after  an  election  the  next  suc- 
ceeding year,  and  the  lapse  of  a  sufficient  time  for  him  to  qualify  by  giving 
a  new  bond.     Harris  v.  Babbitt,  4  Dillon,  185. 

In  Ulster  County  Savings  Institution  v.  Ostrander  (15  N.  Y.  App. 
Div.  173)  it  was  held  that  where  a  treasurer  who  is  elected  for  one  year 
gives  a  bond  to  pay  over  ...  to  his  successor  "  at  the  expiration  "  of  his 
office  and  to  faithfully  serve  ..."  during  his  continuance  in  office,"  the 
surety  is  only  liable  during  the  first  year. 

But  the  same  court  later  held  that  a  bond  for  faithful  service  "during 
bis  continuance  in  office,  even  though  he  hold  under  successive  appoint- 
ments," binds  the  surety  although  the  officer  held  over  without  a  reap- 
pointment. Ulster  County  Savings  Institution  v.  Young  (15  N.  Y.  App. 
Div.  181). 

VOL.    I.  —  6  81 


§  27  OFFICIAL    BONDS    AND    LIABILITIES    OF    SURETIES. 

is  conclusive  upon  the  question.^  "Where  the  charter  prescribes 
an  annual  election  of  directors,  and  that  the  "  directors  for 
the  time  being  shall  have  power  to  appoint  a  cashier,"  the 
tenure  of  office  of  tlie  cashier  is  not  thereby  rendered  annual. 
But  having  been  once  duly  appointed,  by  a  vote  containing  no 
express  limitation,  he  will  continue  to  hold  office  by  virtue  of 
this  original  appointment,  either  until  the  expiration  of  the 
charter  or  until  his  removal  before  that  time  by  the  directors.^ 
And  where  the  bond  of  a  cashier  is  without  any  limitation  as 
to  time,  the  liability  of  the  surety  does  not  end  at  the  expira- 
tion of  the  term  of  office  of  the  board  of  directors  that  ap- 
pointed liim.'^ 

In  a  Delaware  ^  case,  the   charter  gave  directors  power  to 
appoint  cashier,  annexed  no  terra  to  the  office,  but  required 
him  to  be  qualified  by  taking  oath  and  giving  bond. 
Farmers-'        In  1862  and  18G5  he"^gave  bond  ;  in  1863  and  1864 
^''"^^'  he  did  not,  though  annually  re-elected.     The  bond 

was  conditioned  for  a  faithful  discharge  of  his  duties  as  cashier, 
no  time  being  named.  The  question  was  whether  the  cashier's 
term  of  office  expired  at  the  new  election,  or  continued  till  the 
cashier  was  qualified  by  a  new  bond.  The  court  took  the 
latter  view,  for  otherwise  there  would  not  be  a  succession 
of  cashiers  qualified  as  required  by  the  charter,  and  in  the 
absence  of  any  exjpres8  rule  that  the  office  shall  expire  ipso 
facto  on   a  new  election,  it  is   a    reasonable  construction  that 

5  Welch  V.  Seymour,  28  Conn.  387  ;  State  Treasurer  i-.  Mann,  34  Vt. 
371  ;  Dedham  Bank  v.  Chickering,  3  Pick.  (Mass.)  335.  See  also  Boston 
Ilat  Manufactory  v.  Messinger,  2  id.  223,  and  the  authorities  therein  cited 
and  discussed.  But  it  should  be  remarked  that  Dedham  Bank  v.  Chick- 
ering, though  not  overruled,  was  yet  declared  to  be  of  questionable  sound- 
ness, in  Johnson  v.  Frankfort  Bank,  23  Me.  322.  "  During  the  time  of 
his  employment  by  the  bank"  was  held  to  bind  the  surety  where  the 
cashier  continued  in  office  several  years  without  re-election  ;  although  the 
State  law  required  annual  election  of  such  officers.  Shackamaxon  Bank 
V.  Yard,  143  Pa.  129,  (22  Atl.  908).  "  For  and  during  all  the  time  he 
shall  hold  said  office  "  continues  over  all  appointments.  Westervelt  v. 
Mohrenstecher,  76  Fed.  118. 

6  Union  Bank  v.  Ridgely,  1  Har.  &  G.  (Mass.)  413. 

'  Merchants'  Bank  of  Ellis  v.  Honey,  58  Kan.  603  (50  Pac.  871),  (1897). 
8  Sparks  v.  Farmers'  Bank  of  Delaware,  3  Del.  Ch.  274,  294. 
82 


PERIOD    COVERED    BY   BOND.  §  27 

the  old  term  shall  continue   till   the  new  is  duly  and  properly 
entered  on. 

A  similar  rule  was  laid  down  in  the  case  of  Amherst  Bank 
V.  Root,^  in  a  very  clear  and  satisfactory  opinion,  delivered  by 
Chief  Justice  Shaw.  The  statute  provided  that  the  gfatutorv 
cashier  should  retaiii  his  place  until  removed  there-  provisions. 
fro7n,  or  until  another  shoidd  he  appoiyited  in  his  stead.  In 
1831,  a  cashier  was  appointed  and  gave  bond  ;  in  1832,  he 
was  reappointed,  and  gave  no  new  bond.  He  continued  in 
office  several  consecutive  years,  and  in  1836-37  was  guilty  of 
defaults.  His  two  appointments  were  each  expressed,  on  the 
records,  to  be  "  for  the  year  ensuing."  The  portion  of  the 
opinion  which  we  have  occasion  to  rely  upon  at  present  is  sub- 
stantially as  follows :  This  statutory  provision  governs  the  tenure 
hy  which  the  cashier  holds  office,  ivhich  is  "  until  another  is  ap- 
pointed." If  he  is  to  hold  the  office,  he  is  also  to  perform  the 
official  duties,  and  a  bond  that  he  shall  faithfully  perform  the 
duties  will  "  include  duties  performed  after  the  limited  time 
for  which  he  is  chosen,  and  during  the  time  that  the  office  is 
continued  by  force  and  operation  of  law."  Though  the  elec- 
tion was  expressed  to  be  for  the  year  next  ensuing,  yet,  the 
office  not  being  by  law  annual,  he  held  it  by  force  of  the  gen- 
eral law  until  another  should  be  appointed  in  his  stead.  That 
the  directors  hold  by  virtue  of  an  annual  election  has  no  effect 
in  controlling  the  positive  provision  of  the  law  concerning  the 
cashier's  tenure  of  office.  A  plausible  argument  is,  that  the 
fact  of  an  annual  election  is  evidence  of  a  by-law  or  usage 
making  the  office  annual.  But  the  directors  are  supposed  to 
know  the  general  law,  which  declares  that  the  cashier  shall 
continue  in  office  till  they  remove  him.  Their  re-election, 
therefore,  amounts  only  to  the  fact  that  they  wish  to  give  ex- 
pression to  their  will  that  he  should  remain.  His  election 
to  an  office  which  he  already  holds,  and  would  continue  to  hold 
without  an  election,  is  only  a  manifestation  of  their  intent  that 
he  should    continue    to   hold.     That    they    themselves  regard 

®  Amherst  Bank  v.  Root,  2  Met.  (Mass.)  522.  Judge  Dewey's  dissent- 
ing opinion  appears  wholly  uuconvincing  when  compared  with  that  of  the 
Chief  Justice. 

83 


§  27  OFFICIAL   BONDS    AND   LIABILITIES   OF   SURETIES. 

it  thus,  as  a  continuance  of  an  existing  office,  not  the  com- 
mencement of  a  new  one,  is  obvious  from  their  requiring  no 
new  bonds.  "  The  cases  where  it  has  been  held  that  the  gen- 
erality of  the  words  of  an  obligation  may  be  restrained  and 
modified  are  of  two  classes :  (1)  where  there  is  a  preamble  or 
recital,  stating  directly  or  by  implication  the  intent  and  pur- 
pose of  the  parties  to  the  bond  ;  or  (2),  where  it  is  a  stipulation 
for  fidelity  in  office,  and  it  appears  by  the  nature  of  the  con- 
stitution of  the  office  that  it  was  limited  to  a  particular  time." 
In  the  present  case  the  words  are  general ;  there  is  no  recital ; 
the  office  itself  is  not  annual.  That  the  election  was  "  for  the 
year  ensuing"  is  answered  by  the  fact  that  the  law  made  the 
office  a  continuing  one  until  the  incumbent  was  removed,  and 
another  chosen  in  his  place  ;  which  did  not  happen  till  after 
the  occurrence  of  the  breaches  assigned.  Dewey,  J.,  dissented, 
on  the  ground  that  it  was  competent  for  the  directors  to  make 
the  office  annual,  and  they  had  done  so  by  their  votes. 

If  no  other  legal  .limitation  can  be  annexed  to  the  term  of 
office,  it  might  seem  that  at  least  the  duration  of  the  charter. 
Expiration  or  the  period  for  which  the  corporation  may  exist 
Supplemental  undcF  the  law  of  its  organization,  must  be  the  ut- 
liabiiity.  j^^gt;  h^q  over  which  the  bondsmen's  liability  could 
be  extended.  It  is  clear  that  a  renewal  of  the  charter  or  ex- 
tension of  the  period  of  existence  cannot  operate  to  carry  the 
obligation  over  into  the  second  lease  of  corporate  life,  if  the 
charter  limit  is  reached  before  the  renewal.  But  if  the  banic 
does  not  cease  to  exist,  its  existence  being  prolonged  by  an 
act  before  the  limit  of  its  former  term  is  reached,  it  has  been 
held  1°  in  New  Hampshire  that  the  bond  continues. 
ExSer  Bank  The  possibility  of  such  a  prolonging  of  the  cashier's 
«.  Eogers.  ^^^^  ^^^  within  reasonable  contemplation  at  the 
time  the  bond  was  made.  0.  might  be  cashier  for  a  week  or 
for  life,  according  to  circumstances,  one  of  which  is  such 
legislative  action  as  the  present,  and  the  bond  was  given  for 
all  the  time  he  should  be  cashier. 

The   court   said :  "  The  true  rules  of  law   to  be  deduced 
from  all  the  cases  on  this  subject  are  these.     When  the  term 
w  Exeter  Bank  v.  Rogers,  7  N.  H.  21. 

84 


PERIOD   COVERED   BY   BOND.  §  27 

of  office  is  limited  to  a  particular  period,  as  a  year  or  five 
years,  and  the  person  appointed  cannot  continue  in  office  for 
a  longer  period  without  a  new  appointment,  then  the  official 
bond,  if  nothing  appear  to  the  contrary,  is  presumed  to  be 
intended  to  be  confined  to  the  particular  term ;  and  if  the  offi- 
cer be  reappointed  there  must  be  a  new  bond.  But  when  an 
office  is  held  at  the  will  of  those  who  make  the  appointment, 
and  is  not  limited  to  any  certain  term,  then  the  bond  is  pre- 
sumed to  be  intended,  if  nothing  appear  to  the  contrary,  to 
cover  all  the  time  the  person  appointed  shall  continue  in  office 
under  the  appointment.  Thus  a  sheriff  is  appointed  in  this 
State  to  hold  his  office  during  the  term  of  five  years,  and  can- 
not hold  it  beyond  that  term  without  a  new  appointment. 
The  bond  he  gives  does  not  therefore  extend  beyond  the  term 
for  which  he  is  appointed.  But  the  deputies  of  the  sheriff 
hold  their  offices  at  the  will  of  the  sheriff,  and  their  bonds 
may  extend  to  any  period  during  which  they  are  continued  in 
office,  notwithstanding  the  sheriff  may  in  the  meantime  be  re- 
appointed, and  be  compelled  to  give  new  bonds  himself.  These 
rules  are  founded  in  sound  reason  and  good  sense.  Tlie  pre- 
sumption which  the  law  makes  as  to  the  intention  of  the  par- 
ties to  the  bond  is  the  natural  presumption  in  both  cases. 
Now  we  are  of  the  opinion  tliat  the  terms  of  the  condition  in 
this  case  are  broad  enough  to  embrace  the  whole  term  during 
which  Rogers  was  cashier,  and  that  there  is  nothing  in  the 
form  of  the  appointment,  the  nature  of  the  office,  the  words 
of  the  condition,  or  the  conduct  of  the  parties,  that  gives  the 
slightest  indication  of  any  intention  in  any  party  that  the 
bond  should  be  limited  to  the  period  mentioned  in  the  original 
charter  as  the  termination  of  the  corporation." 
In  Thompson  v.  Young,"  the  facts  were  these  :  — 
In  the  year  1811,  the  Bank  of  Muskingum  was  incorporated, 
the  charter  to  continue  until  the  1st  of  Janu- 
ary, 1818.  Marple  was  appointed  cashier.  Van- 
horn,  Price,  Thompson,  and  Mclntire  executed  with  Marple, 
as  securities,  a  bond  in  the  penalty  of  $20,000.  Marple  pro- 
ceeded to  discharge  the  duties  of  cashier. 

11  Thompson  v.  Young,  2  Ohio,  334. 

85 


S  27  OFFICIAL   BONDS   AND   LIABILITIES   OF   SURETIES. 

Before  the  1st  of  January,  1818,  the  legislature  extended 
the  charter  until  the  1st  of  January,  1843.  Marple  was  con- 
tinued cashier,  without  either  a  new  appointment  or  a  new 

bond. 

In  1815,  Mclntire,  one  of  the  securities,  died.  In  1819, 
Marple  became  a  defaulter  to  a  large  amount ;  and  suit  was 
commenced  against  Marple,  Vanhorn,  Price,  and  Thompson, 
the  surviving  obligors,  and  judgment  obtained  against  them 
for  the  amount  of  the  defalcation.  At  the  trial,  no  evidence 
was  given  of  any  default  before  the  1st  of  January,  1818. 
The  court  said :  "  The  authorities  adduced  by  the  defendants 
are  conclusive  that  the  securities  were  not  bound  for  any  de- 
falcation that  took  place  after  the  expiration  of  the  first  char- 
ter. And  we  hold  them  to  be  in  accordance  with  the  soundest 
principles  of  justice." 

The  chief  authorities  to  which  reference  was  made  were  to 
the  following  effect :  — 

In  Arlington  v.  Merricke,^^  the  defendant  entered  bonds  as 
security  for  Jenkins,  appointed  deputy-postmaster  for  six 
months.  In  an  action  to  recover  on  account  of  Jenkins's  fail- 
ure in  some  way,  his  counsel,  Saunders,  said  :  "  The  defendant, 
by  the  intention  of  the  condition,  was  not  to  be  responsible  for 
Jenkins  for  any  longer  time  than  for  the  said  six  months, 
although  the  words  are  that  Jenkins,  during  all  the  time 
that  he  shall  continue  deputy-postmaster,  etc.,  indefinitely, 
shall  observe  and  perform,  etc. ;  yet  this  time,  which  is  in- 
definite in  itself,  ought  to  be  construed  only  for  the  said  six 
months,  for  which  the  condition  recites  that  Jenkins  was  ap- 
pointed to  be  deputy-postmaster,  and  to  which  the  condition 
relates.  And  that  rather  because  Jenkins  cannot  continue 
deputy-postmaster  for  any  longer  time  than  for  the  said  six 
months,  unless  he  be  appointed  anew,  and  have  a  new  deputa- 
tion for  a  longer  time.  As  he  said  that,  by  the  construction 
which  the  plaintiff's  counsel  would  put  upon  it,  the  defendant 
would  be  tricked ;  for  it  appears  that  the  defendant  intended 
to  be  bound  for  Jenkins  for  the  due  execution  of  the  said 
office  only  for  six  months  ;  but  the  plaintiff  would  have  the 
1*  Arlington  v.  Merricke,  2  Saunders,  414. 
86 


PERIOD    COVERED   BY   BOND.  §  27 

defendant  bound  during  the  whole  life  of  Jenkins,  which  is 
unreasonable  to  suppose."  Hale,  Chief  Justice,  said  :  "  The 
condition  shall  refer  to  the  recital  by  which  the  defendant 
was  bound  only  for  six  months,  and  not  longer,  and  that  for 
the  reason  above  alleged  by  Saunders." 

A  foot-note  says,  "  This  has  been  considered  a  leading  case 
upon  this  subject  ever  since." 

In  Wright  v.  Russell,^^  Dq  Grey,  C.  J.,  said :  "  The  law  is, 
that  the  surety  shall  not  be  bound  beyond  the  scope  of  his 
engagement,  as  understood  at  the  time  he  entered  into  it. 
Where  there  is  the  least  difference  between  the  condition  and 
the  breach  assigned,  the  surety  will  not  he  hound.  Here  Wright 
takes  a  clerk  wlicn  sole,  with  security  for  his  good  behavior 
in  his  service.  He  then,  by  his  own  act,  takes  in  a  partner. 
From  that  moment  the  suretyship  is  at  an  end.  If  there  is 
one,  there  may  be  twenty  partners  taken  in.  Is  the  surety 
liable  if  Baird  disobeys  the  orders  of  any  one  of  these  part- 
ners ?  Or  can  the  surety  be  called  upon  to  insure  the  money 
of  all  the  partners  ?     Certainly  not." 

Bigelow,  Clerk,  &c.  v.  Bridge.i^  "  By  the  Court.  The 
bond  in  this  case  appears  to  have  been  given  to  the  plain- 
tiff, as  clerk  of  the  peace  for  the  county,  pursuant  to  the 
provisions  of  the  statute  of  1785,  c.  76,  §  1.  But  the  choice  of 
county  treasurer  being  by  that  statute  annual,  it  is  apparent 
that  the  bond  required  by  it  was  intended  for  the  protection 
of  the  public,  so  long  only  as  the  person  chosen  should  con- 
tinue in  office  in  virtue  of  such  election.  A  new  bond  should 
regularly  have  been  taken  for  each  several  year  for  which 
the  defendant  was  elected.  If  this  bond  were  valid  against 
the  defendant,  it  would  be  equally  valid  against  his  sureties  ; 
but  they  could  never  contemplate  tlieir  contract  as  binding 
them  thus  indefinitely.  And  indeed  it  is  to  be  presumed  that 
the  plaintiff  did  not  consider  them  as  held  to  answer  the 
present  demand,  as  he  has  not  joined  them  with  their  prin- 
cipal in  this  action.  But  the  principal  in  a  bond  is  no  fur- 
ther bound  than  his  sureties." 

13  Wright  I'.  Russell,  2  W.  Bl.  93i. 
1*  8  Mass.  275. 

87 


§  27         OFFICIAL   BONDS    AND    LIABILITIES   OF   SURETIES. 

It  will  be  observed  that  the  authorities  are  not  precisely 
to  the  point,  since,  so  far  as  they  directly  refer  to  the  limita- 
tion of  the  surety's  obligation  by  the  term  of  the  principal's 
office,  the  limitation  was  one  inherent  in  the  office  itself.  In 
one  case  the  office  was  annual,  in  the  other  for  the  definite 
term  of  six  months,  which  is  not  exactly  similar  to  the  case 
in  which  they  were  cited,  the  limitation  there  being  not  in- 
herent in  the  office,  but  aside  from  it, —  a  contingency  which 
might  or  might  not  affect  the  term  of  the  princi})ars  office. 

Authority  is  clear  that  legislative  reaction  of  a  deceased 
bank  does  not  infuse  new  life  into  the  bond.^^  In  Pennsylvania 
Bank  of  ^hc  court  declared  that  the  revival  of  the  charter 
ton  j^Bar-  after  a  forfeiture  had  been  legally  consummated  by 
rington.  default  of  the  cashier  will  not  operate  to  revive  the 

obligation  of  the  sureties  on  this  bond. 

"  By  the  constitution  of  this  corporation,  its  existence  was 
subject  to  be  terminated  alike  by  forfeiture  of  its  charter  and 
efflux  of  time ;  and  for  the  benefit  of  each  of  these  as  limita- 
tions of  the  term  of  their  liability,  the  sureties  had  stipulated, 
not  indeed  in  terms,  but  tacitly,  and  by  irresistible  implication 
from  the  nature  of  the  contract.  They  had  treated  on  the 
basis  of  corporate  existence  as  it  then  stood,  and  in  reference 
to  all  its  incidents.  They  might  have  seen,  and  they  are 
therefore  to  be  considered  as  having  known,  that  the  bank 
was  subject  to  cease  by  the  happening  of  a  contingency,  and 
that  with  it  would  cease  their  liability.  Who  can  say  this  did 
not  enter  into  their  estimate  of  the  risk  which  they  consented 
to  take  on  themselves  ?  They  were,  in  effect,  insurers,  but 
without  a  premium,  of  the  cashier's  fidelity ;  and  they  were 
entitled  to  the  benefit  of  any  termination  of  the  risk  which 
may  be  brought  within  the  letter  or  the  spirit  of  their  con- 
tract. Their  engagement  was  without  a  consideration  ben- 
eficial to  themselves,  and  it  is  therefore  not  to  be  extended 
beyond  its  strict  technical  import." 

In  this  case  the  forfeiture  was  absolute  and  complete,  when 
the  legislature  came  to  the  rescue,  and  declared  the  bank 

16  Batik  of  Washington  v.  Barrington,  2  P.  &  W.  (Pa.)  27  ;  Thompson 
V.  Young,  2  Ohio,  334;  Union  Bank  t;.  Ridgely,  1  Har.  &  GiU.  (Md.)  413. 


A    WRONG    ONLY   PARTLY    WITHIN    BONDED   PERIOD.         §  27 

should  come  again  into  existence,  ratifying  tlie  acts  done  in 
the  interval  ;  and  the  court  are  careful  to  state  that  they 
have  not  to  pass  on  a  case  where  the  legislature  had  only 
intervened  to  prevent  the  consummation  of  an  inchoate 
forfeiture. 

That  both  the  officer  and  the  corporate  government  have, 
in  fact,  supposed,  or  have  conducted  themselves  so  that  it 
must  be  assumed  that  they  supposed,  that  the  bond  was  still 
continuing  in  force  after  it  had  in  fact  been  terminated  in 
any  of  the  ways  above  described,  does  not  affect  its  validity, 
or  operate  as  a  waiver  of  its  determination.  The  misappre- 
hension, being  common  to  both  parties,  does  not  prevent  either 
from  standing  upon  his  original  rights. 

a.  When  an  officer  has  given  a  bond  in  which  no  express 
limitation  of  time  is  set  to  the  duration  of  the  obligation,  if 
afterwards,  at  the  close  of  a  year  or  other  term   „  ^. 

.  lakinga 

of  his  incumbency,  he  is  again  appointed,  again  new  bund. 
qualifies,  and  gives  a  new  bond,  —  the  old  appointment  is 
thereby  terminated,  the  obligation  of  the  old  bond  ceases, 
and  no  recovery  can  be  had  against  its  obligors  by  reason 
of  his  subsequent  default. ^^  But  if  there  is  a  special  proviso 
in  the  second  bond  that  it  shall  not  impair  the  obligation  of 
any  previous  bond  until  the  same  shall  have  been  given  up 
and  cancelled,  all  the  bonds  will  still  be  legally  valid,  and 
will  be  equally  available  as  security  against  breaches  until 
such  cancellation  of  the  earlier  ones  actually  takes  place.-^^ 

h.  It  has  sometimes  happened  that  an  officer,  being  re- 
appointed for  a  second  term  of  office,  and  giving  a  new  bond 
for  the  new  term,  is  at  the  very  time  of  his  appointment  a 
defaulter,  though  the  fact  is  unknown  to  all  the  parties  save 
himself.  If,  then,  after  the  reappointment,  he  does  p^^t  of  the 
anv  further  wrongful  official  act  in  reference  to  the   ^rong  be- 

-      _  ^  yond  the 

existing  defalcation,  though  only  for  the  purpose  bond  period, 
of  concealing  it,  and  even  though  he  may  not  in  any  man- 
ner increase  its  amount  or  alter  its  nature,  the  sureties  upon 

"  Johnson  v.  Frankfort  Bank,  23  Me.  322. 
"  Pendleton  v.  Bank  of  Kentucky,  1  T.  B.  Monr.  (Ky.)  171. 

89 


§  28  OFFICIAL   BONDS   AND   LIABILITIES   OF    SURETIES. 

the  second  bond  will  be  liable.^^  "Whether  or  not  the  sureties 
on  the  first  bond  could  also  be  held,  either  altogether  instead 
of  the  sureties  on  the  second  bond,  or  for  the  purpose  of  mak- 
ing up  the  full  amount  of  the  loss  if  this  could  not  be  obtained 
from  the  sureties  on  the  second  bond,  is  a  question  upon 
which  the  only  two  authorities  which  we  have  are  somewhat 
at  variance.  In  the  Indiana  case,  the  officer  misappropriated 
moneys  received  by  him  in  his  second  term  to  make  good  his 
defalcation  in  the  previous  term,  and  the  court  held  posi- 
tively that  only  the  sureties  for  the  second  term  could  be 
held.  In  the  Massachusetts  case,  the  cashier  had  embezzled 
in  the  first  term  ;  after  his  reappointment,  he  borrowed  money, 
as  cashier,  and  placed  it  in  the  bank  to  meet  an  examination, 
after  which  he  withdrew  the  amount  from  the  bank  and  re- 
turned it  to  the  lenders.  The  court  said,  although  a  deficit 
existed  prior  to  the  execution  of  the  second  bond,  "  and  which 
may  have  been  covered  by  an  antecedent  bond,"  yet  the  trans- 
action in  the  second  term  was  not  distinguishable  from  an 
actual  payment  from  his  own  funds  to  make  good  the  de- 
ficiency, and  a  removal  afterwards  of  corporate  funds  without 
the  assent  of  the  government.  It  follows  from  these  cases, 
that  it  is  not  necessary  that  the  entire  transaction  creating 
the  liability  should  take  place  within  the  period  covered 
by  the  bond.  The  occurrence  of  any  substantial  part 
within  that  period  is  enough  to  make  the  liability  attach. 
A  fortiori,  therefore,  if  the  whole  of  the  fraudulent  part 
falls  within  the  term  of  the  obligation,  the  obligors  will  be 
bound. ^^ 

§  28.  The  Surety  is  discharged  by  a  Material  Change  in  the 
relations  between  the  officer  and  the  bank,  so  as  to  increase 
the  risk  in  an  important  degree,  or  in  the  identity  of  the 
obligee,  unless  the  change  is  provided  for  in  the  bond. 

For  the  surety  has  a  right  to  judge  for  himself  of  the  cir- 
cumstances under  which  he  is  willing  to  be  liable,  and  they 
cannot  be  materially,  i.  e.  substantially,  changed  without  his 
consent,  unless  the  change  is  manifestly  for  his  benefit. 

"  Ingraham  v.  Maine  Bank,  13  Mass.  208;  Cook  v.  State,  13  lud.  151. 
"  State  V.  Van  Pelt,  1  Cart.  (Ind.)  304. 

90 


IDENTITY   OF   BANKING    FIRM.  §  29 

§  29.  Identity  of  Banking  Firm.  Where  there  is  a  change 
in  the  banking  firm  to  which  the  obligation  of  tlie  bond  runs, 
it  will  depend  upon  the  language  of  the  bond  whether  it  will 
enure  to  the  benefit  of  the  new  firm.  It  may  be  so  written 
that  the  obligation  is  to  the  original  firm  and  to  its  succes- 
sors through  any  number  of  subsequent  changes ;  or  it  may 
be  so  written  that  the  obligation  is  only  to  the  individuals 
who  at  the  date  of  the  bond  composed  the  firm.  An  early 
case  touching  upon  this  question  was  that  of  Wriglit  v.  Russell.^ 
The  guarantor  in  the  bond  undertook  with  A.  for  the  fidelity 
of  a  clerk  in  A.'s  employ,  so  long  as  he  should  con-  ,,     .    , 

^       -^ '  °  Identity  lost. 

tinue  in  A.'s  service  as  clerk.  Afterward  A.  took 
a  partner,  and,  the  clerk  being  in  default,  suit  was  brought  by 
A.  upon  the  bond,  alleging  that  the  clerk  had  received  money 
on  account  of  the  partnership,  and  had  not  paid  it  over. 
But  the  court  held  that  A.  could  not  recover ;  that  the  taking 
of  a  partner  by  A.  put  an  end  to  the  obligation.  The  con- 
dition of  the  obligation  ran  to  A.  alone,  and  the  breach  was 
not  strictly  within  the  condition ;  nor  was  there  anything  to 
show  that  the  surety  intended  to  guarantee  the  clerk's  fidelity 
to  any  other  person  than  A.  This  case  has  been  subjected 
to  much  criticism  ;  but  appears  never  yet  to  have  been  di- 
rectly overruled  upon  any  substantially  identical  condition 
of  facts.2 

The  directors  of  an  unincorporated  banking  company  merged 
the  association  into  an  existing  corporation  chartered  as  an 
insurance  and  trust  company,  and  continued  to  do  banking 
contrary  to  charter.  The  cashier's  bond  was  held  inoperative 
by  the  change.^ 

Yet  in  sundry  cases  the  obligation  has  been  held  to  be 
continuing  where  the  court  felt  able  to  hold  upon  the  facts 
that  the  bankers  were  really  the  same  copartnership  through- 

1  §  29.  3  Wils.  530;  2  W.  Bl.  934.  Also  to  the  same  effect  is  Dry  v. 
Davy,  10  Ad.  &  El.  30. 

2  Barclay  v.  Lucas,  3  Dougl.  321;  1  Term,  291,  n.  Though,  as  would 
appear  by  the  note  at  the  end  of  the  report  of  the  case  in  Douglas,  it 
also  has  not  escaped  question. 

8  Bensinger  v.  Wren,  100  Ta.  St.  500  (1882). 

91 


§  30         OFFICIAL   BONDS   AND   LIABILITIES   OF   SURETIES. 

out  the  several  changes.^  Where  the  obligee,  being  a  joint- 
id  titv  Eot  stock  banking  company,  received,  after  execution 
lost.    '  of  the  bond,  a  considerable  accession  of  proprietors 

and  capital,  and  thereupon  increased  the  number  of  directors 
and  changed  its  name,  it  was  nevertheless  held  that  the  bond 
continued  a  live  security,  surviving  these  changes,  on  the 
ground  that  the  bank,  not  having  changed  its  constitution 
in  any  respect,  had  preserved  its  identity.^  This  seems  to 
be  the  true  test,  in  theory,  whether  the  obligee  has  lost  or 
continued  his  or  its  identity.  But,  as  usual,  the  difficulty 
lies  in  applying  the  theory  to  the  facts,  and  determining  the 
question  of  continued  identity.  Some  of  the  cases  seem  to 
make  a  break  very  much  easier  of  accomplishment  than 
others. 

Where  a  state  bank  is  converted  into  a  national  bank  with 
a  change  of  name,  under  the  National  Banking  Act,  neither 
its  identity,  nor  its  right  to  sue  upon  liabilities  formerly 
incurred  is  affected.^" 

But  a  bond  requiring  the  clerk  to  account  to  the  banker 
and  his  executors,  administrators,  and  assigns,  does  not  cover 
defaults  committed  subsequently  to  the  obligee's  death  when 
the  clerk  is  in  the  employ  of  the  executors.^ 

§  30.  Change  in  the  Duties  of  the  Officer.  If  the  new  duties 
are  of  a  lower  grade,  and  less  risk  than  the  functions  of  the 
office  guaranteed,  the  surety  is  not  discharged  wholly,  though 
he  may  not  be  liable  for  a  loss  arising  from  such  employment. 
See  §  26. 

Or-  if  the  change,  though  increasing  the  risk,  does  so  in  a 

slight  and  unimportant  manner,  and  is  such  a  variation  as  is 

likely  to  occur  in  the  course  of  business,  it  does  not  avoid 

the  bond,  for  the  surety  is  presumed  to  know  that 

Presumed  i  ^  i    x- 

assent  of  the  directors  have  power  to  make  such  regulations 

^'"^^*^'  and  changes  as  they  see  fit,  and  the  surety  is  pre- 

*  Chapman  v.  Beckinton,  3  Q.  B.  722 ;  Metcalfe  v.  Bruin,  12  East, 
400;  Wilson  v.  Craven,  8  M.  &  W.  584. 
6  Metcalfe  v.  Bruin,  12  East,  400. 

s«  Michigan  Insurance  Bank  v.  Eldred,  143  U.  S.  293  (1892). 
e  Barker  v.  Parker,  1  Term,  287  ;  but  see  Strange  v.  Lee,  3  East,  490. 

92 


CHANGE  IN  THE   OBLIGEE.  §  30 

sumed  to  contemplate  such  action,  and  assent  in  advance  to 
reasonable  and  moderate  alterations  in  official  duties  ;  other- 
wise the  security  would  be  truly  a  boud  and  fetter  on  the 
business  of  the  bank,  rather  than  an  obligation  upon  the 
surety.  But  if  duties  of  a  higher  grade,  requiring  more  skill, 
or  subjecting  the  officer  to  greater  temptations,  are  added, 
the  surety  is  discharged,  though  it  may  be  doubted  if  the 
rule  is  not  more  sweeping  than  justice  requires.     See  §  17. 

The  language  of   the    bond    may  expressly  refer   to   such 
matters,  or  be  so  broad  and  absolute  as  to  cover     Express 
them.     See  §  26.     We  will  now  consider  the  cases     asseut. 
that  illustrate  these  rules. 

a.  Assent  to  any  considerable  increase  of  risk  can  never 
be  implied.  The  character  of  the  risk  can  never  be  materially 
altered.  A  bookkeeper  may  have  many  more  Lower  grade 
books  given  him  to  keep  than  he  had  at  the  time  '^"^'^^• 
of  the  execution  of  the  bond ;  a  cashier  may  be  deputed  to 
act  as  teller ;  "  for  the  office  of  teller  is  not  higher  than  that 
of  cashier."  Such  changes  do  not  work  substantial  increase 
in  the  bondsmen's  risk,  or  an  increase  which  it  can  be  supposed 
that  they  would  have  repudiated,  or  would  have  considered 
unlikely  to  occur,  when  they  entered  into  the  contract  of  in- 
surance. The  bookkeeper  is  a  bookkeeper  still ;  though  he 
has  more  labor,  it  is  of  the  same  nature ;  the  cashier  only 
fulfils  in  person  the  functions  of  a  subordinate,  which  are 
strictly  consistent  with  his  own  office.  But  to  raise  an  as- 
sistant bookkeeper  to  the  office  of  teller,  or  to  the  still  higher 
office  of  cashier,  would  assuredly  be  to  vitiate  his  bond  as  a 
security  for  his  good  conduct  and  sufficient  skill  in  his  new 
position.!     It  would  be  absurd  to  take  for  granted  that  per- 

1  §  30.  Anderson  v.  Thornton,  3  Q.  B.  271.  See  also  Grant  on 
Bankers  and  Banking,  p.  260,  and  cases  cited.  He  there  lays  down  the 
principle,  very  soundly,  that  a  variation,  without  assent  of  surety,  which 
may  amount  to  substituting  a  new  for  the  old  agreement,  is  an  absolute 
discharge  of  the  surety.  This  is  sound,  and  accords  with  the  text,  though 
Grant's  further  designation  of  any  variation  "  which  may  prejudice  "  the 
surety  ought  in  our  view  to  have  been  rather  more  narrowly  restricted,  as 
by  limiting  it  to  cases  of  substantial  prejudice,  or  to  prejudice  of  that  kind 

93 


S  30  OFFICIAL   BONDS    AND   LIABILITIES   OF   SURETIES. 

sons  willing  to  guarantee  that  a  man  has  skill  and  ability 
iiin-her  rade  cnough  to  assist  in  keeping  books,  are  therefore  will- 
duHes.  ing  to  guarantee  that  he  has  skill  and  ability  enough 

to  be  the  teller  or  cashier  of  a  banking  corporation  ;  equally 
absurd  to  declare  it  to  be  an  implication  of  law  that,  because 
the  same  persons  will  guarantee  his  honesty  in  the  circum- 
stances of  such  moderate  opportunity  and  temptation  to  fraud 
as  he  must  encounter  in  the  bookkeeping,  therefore  they  will, 
and  in  fact  do,  guarantee  the  same  honesty  in  the  face  of  the 
vastly  increased  opportunity  and  temptation  held  out  by  the 
duties  of  teller  or  cashier.^ 

A  bank  bookkeeper  who,  in  1863,  had  given  bond  for 
faithful  discharge  of  his  duties  as  bookkeeper,  was,  in  1870, 
appointed  teller  with  an  increased  salary,  and  in  1879  was 
a  defaulter.  Held,  that  the  bond  did  not  cover  the  defalca- 
tion.^ 

Words  are  sometimes  added  to  the  effect  that  the  officer 
shall  perform  all  the  "  duties  of  the  said  office  which  may  be 
prescribed  by  the  directors."  These  words  clearly  enlarge, 
rather  than  restrict,  the  responsibility  of  the  sureties,  and 
distinctly  anticipate  that  additional  duties  may  be  imposed 
during  the  term  of  the  suretyship,  and  will  be  included  within 
its  protection.  But  evidently  these  additional  duties  must  be 
consistent  with  the  functions  of  the  office  named ;  or,  if  not 
consistent,  they  must  at  least  be  of  a  lower  grade  and  a  less 
risk.  A  teller  could  not  be  made  a  director,  nor  could  a 
bookkeeper  be  made  a  president,  and  still  remain  guaran- 
tied by  this  bond,  by  virtue  of  the  enlarging  power  of  this 
phrase.* 

A  cashier's  bond  was  conditioned  to  secure  the  faithful 
discharge  of  "  all  his  duties  as  clerk  of  said  bank,"  also  for 
protection  against  his  misappropriation  of  any  funds  of  the 

or  degree  which  the  surety  could  not  have  been  reasonably  expected  to 
contemplate  as  a  possibility  when  he  entered  into  the  undertaking. 

2  Minor  v.  Mechanics'  Bank,  1  Pet.  46  ;  Rochester  Bank  v.  Elwood,  21 
N.  Y.  88. 

3  National  Mechanics'  Banking  Association  v.  Conklin,  24  Hun,  496 
(N.  Y.)  (1881). 

*  Durkin  v.  Exchange  Bank,  2  Patt.  &  H.  (Va.)  277. 
94 


CHANGE  IN   OFFICERS'   DUTIES.  §  31 

bank  might  "  come  under  the  care  or  control  of  said  cashier 
as  clerk."  It  was  in  evidence  that  the  cashier  performed  to 
some  extent  the  duties  of  teller ;  also  that  this  was  contem- 
plated to  be  included  in  the  phrase  "  duties  as  clerk."  It 
was  held  that  the  sureties  on  the  bond  were  not  entitled  to 
a  ruling,  as  a  matter  of  law,  that  there  had  been  such  a  change 
in  the  duties  of  the  clerk  as  would  discliarge  them  from  lia- 
bility for  his  wrongful  appropriation  of  fuuds.^ 

Where  a  cashier  was  employed  by  the  bank  in  transacting 
what  was  not  properly  banking  business,  in  the  course  of 
which  he  appropriated  the  bank  funds  to  his  own  use,  the 
sureties  on  the  bond  were  liable  for  moneys  so  appropriated.^ 

§  31.  Increase  or  Reduction  of  Salary.  (See  §  17.) — A 
clerk  was  paid  by  salary  at  the  time  of  the  giving  of  the  bond, 
and  afterward  it  was  arranged  that  he  should  be  paid  by  com- 
missions, which  gave  him  a  larger  return  than  his  salary, 
and  it  was  held  that  the  surety  was  thereby  discharged  from 
further  liability .^  And,  so  again,  where  a  clerk,  in  consider- 
ation of  having  his  salary  raised,  agreed  to  become  liable  to 
bear  one-fourth  part  of  all  losses  on  the  discounts  made  by 
the  bank,  it  was  held  that,  from  the  date  of  this  new  arrange- 
ment, the  surety  was  discharged.^ 

There  does  not  seem  to  be  much  reason  in  the  former  of 
these  decisions,  nor  is  our  respect  for  it  increased  when  we 
find  a  reduction  of  salary  held  not  to  discliarge  the  surety's 
obligation.^  Surely  one  would  think  a  reduction  of  salary 
more  likely  to  lead  to  negligence  in  labor,  or  to  dishonesty, 
than  an  increase  of  salary,  though  the  court,  in  the  first  case 
cited,  thought  otherwise. 

In  the  second  case  the  liability  assumed  by  the  clerk  is  a 
much  more  substantial  ground  for  discharge  than  the  increase 
of  salary,  for  a  new  liability  might  give  occasion  for  stronger 
temptation   to   cover   it.     So   common  and   unsubstantial   a 

6  Rollstone  National  Bank  v.  Carleton,  136  Mass.  226. 
®  Springer  v.  Exchange  Bank,  14  Can.  S.  C.  Rep.  716. 
'  §  31.  North  Western  Railway  Company  v.  Whinray,  10  Exch.  77. 

2  Bonar  v.  Macdonald,  3  H.  L.  Cas.  226. 

3  Frank  v.  Edwards,  10  Exch.  81. 

95 


§  32         OFFICIAL   BONDS    AND   LIABILITIES   OF   SURETIES. 

change  as  to  its  effect  on  the  risk  seems  a  very  unsatisfactory 
ground  of  avoiding  the  bond.* 

Increasing  a  cashier's  salary  and  enlarging  his  duties,  but 
changing  neither  the  character  of  the  duties  nor  his  relation 
to  the  bank  as  cashier,  is  no  defense  to  an  action  against  the 
sureties  for  the  cashier's  violation  of  duty.^ 

§  32.    An    Increase    of    Capital   Stock  may  be   considered   a 

fact  within  the  contemplation   of   the  surety,  and  though  a 

chansre  of  risk,  it  is  a  change  of   such  nature  as 

Delaware.  '='  '  .  ®  r    ,        • 

Surety  not  may  happen  at  any  tmie  m  the  course  of  busmess 
ibc  arge  .  ^^  ^^^^  accumulatiou  of  deposits.  This  is  the  opin- 
ion of  Delaware.^  The  court  rest  their  decision  on  the  simple 
statement  tliat  there  had  been  no  enlargement  of  the  cashier's 
duties  ;  that  "  the  sphere  of  his  duties  was  the  same,  although 
the  subject  matter  of  his  charge  might  be  increased,  which  is 
no  more  than  what  happens  from  day  to  day  from  fluctuations 
in  the  amount  of  deposits." 

In  Massachusetts,  the  court  consider  that  to  hold  the  sure- 
ties after  the  increase  would  be  to  extend  and  enlarge  their 
liability. 2  In  the  Delaware  case  the  cashier's  bond  did  not 
cover  loss  by  his  mistake ;  in  the  Massachusetts 
slTe^tV  dis-  case  it  did  ;  and  it  was  considered  obvious  that  the 
charged.  chanco  of  mistake  was  increased  by  enlargement 

of  the  capital.  If  the  chance  of  loss  by  mistakes  of  greater 
number  or  magnitude  released  the  surety  in  Massachusetts,  it 
may  be  difficult  to  imagine  why  the  increased  temptations  of 
laro-er   business   should    not   have    had    the   same    effect    in 

*  Increase  of  commissions  of  agent  held  not  to  invalidate  bond.  Smith 
V.  Addison,  5  Cranch,  623 ;  People  i'.  Vilas,  36  N.  Y.  459,  Amicable  Ins. 
Co.  V.  Sedgwick,  110  Mass.  163. 

6  Wallace  v.  Exchange  Bank,  126  Tud.  265  (26  X.  E.  175). 

1  §  32.  Bank  of  Wilmington  &  Brandywine  v.  Wollaston,  3  Harr. 
(Del.).  90. 

'^  Grocers'  Bank  v.  Kingman,  16  Gray  (Mass.),  473.  It  seems  just  that 
the  bondholders  should  not  be  held  in  any  case  not  clearly  within  their 
contract,  but  Mr.  Burge,  in  his  work  on  Suretyship  (p.  640),  says  the 
words  of  the  bond  are  to  be  construed  strictly  against  the  surety,  for  they 
are  his  words.  This  rule  is,  however,  a  mere  lifeless  formula,  that  is  only 
used  by  the  courts  when  they  can  see  no  other  way  to  sustain  the  inter- 
pretation they  think  just,  or  when  no  other  reason  applied. 
96 


EFFECT   OF   INCREASE   OF   CAPITAL.  §  33 

Delaware ;  in  other  words,  the  difference  of  facts  in  the 
cases  seems  insufficient  to  explain  the  contrariety  of  the 
decisions. 

It  may  well  be  argued,  that  a  surety  might  be  willing  to 
guarantee  0.,  in  a  bank  with  a  small  capital,  and  the  fluctu- 
ations of  deposits  likely  in  such  a  bank,  and  yet  be  unwilling 
to  guarantee  him  in  a  bank  with  a  larger  business;  for 
although  he  in  any  case  contemplates  fluctuations,  the  argu- 
ment of  Delaware  is  not  entirely  satisfactory,  for  contracting 
in  reference  to  fluctuations  in  the  business  of  a  bank  with 
a  small  capital  does  not  cover  a  change  of  the  line  round 
which  the  variations  are  grouped, — an  elevation  of  their 
centre  of  gravity.  A  man  may  stand  in  the  waves  at  low 
water,  who  would  be  overwhelmed  by  the  billows  of  the 
higher  tides. 

On  the  other  hand,  it  is  not  every  increase  of  liability  that 
can  avoid  a  bond ;  else  each  new  deposit,  or  temporary 
absence  of  a  superior  officer,  would  have  that  result.  The 
true  question  seems  to  be.  Is  the  enlargement  such  as  was 
within  the  reasonable  contemplation  of  the  parties  at  the  time 
of  making  the  bond  ? 

And  as  the  increase  of  capital  is  one  of  the  bank's  well- 
known  powers,  set  down  in  its  organic  law,  and  quite  fre- 
quently exercised,  it  would  be  hard  to  imagine  on  what  ground 
it  could  be  said  not  to  be  contemplated. 

Still,  the  just  principle,  that  in  case  of  doubt  the  surety 
should  be  favored,  not  the  bank,  urges  decision  in  the  oppo- 
site direction,  and  perhaps  the  best  rule  on  reason  and  au- 
thority is,  that  any  snbsfantial  increase  of  risk,  7iot  expressly 
provided  for,  or  necessarily  incident  to,  the  bank's  business  as 
ordinarily  carried  on,  will  discharge  the  surety.     See  §  17. 

§  38.  Unreasonable  Retention  of  the  Officer  after  discovery 
of  his  defalcation  will  (perhaps)  ^  discharge  the  sureties  as  to 
any  subsequent  breach  of  the  bond. 

0  §  33.  A  comparison  of  this  section  with  §  37  will  disclose  the  fact,  that 
while  the  surety  is  not  discharged  by  direct  command  of  the  directors  to  do 
an  unlawful  act,  yet  he  is  supposed  to  be  released  by  neglect  of  the  direc- 
tors to  discharge  or  suspend  the  officer  with  reasonable  despatch.     The 
VOL.  I. —7  97 


S  33  OFFICIAL    BONDS    AND    LIABILITIES    OF    SURETIES. 

A  reasonable  time  is  allowed  for  the  directors  to  assemble 
and  act  in  the  premises.     Bnt  if  misconduct  is  suspected,  or 

question  in  both  is  substantially  this:  Is  the  bank  to  lose  its 

Se6  the  Mass. 

case  cited  §  38,    remedy  against  the  cashier's  bondsmen  for  any  breach  of  the 

Me^c^nics'"'      Condition  of  the  bond,  because  some  other  officer  of  the  bank 

^^r'^j^c  o-^       is  also  in  fault  ?    The  surety  does  not  ao^ree  to  indemnify  pro- 
end  of  §  3(,  JO  J  1 

and§  17  a.  vided  the  other  officers  conduct  themselves  properly,  but  if  O. 
conducts  Aunse// improperly.  If  the  stockholders  become  aware  of  O.'s 
defalcation,  and  do  not  act  in  the  premises,  that  might  relieve  the  surety 
from  future  liability;  but  the  directors  are  not  the  bank,  and  if  their 
wrongful  conduct  in  commanding  or  connivance  with  a  dishonest  act  of 
the  cashier  does  not  deprive  the  bank  of  its  remedy  against  the  surety,  on 
what  ground  would  their  connivance  with  a  second  wrong,  knowing  of  a 
prior  offence,  or  tha  less  fault  of  neglecting  to  discharge  O.,  operate  to 
release  the  surety  ?  True,  it  may  be  argued  that  the  bank  intrusts  the 
superintendence  of  the  cashier  and  subordinates  to  the  directors,  and  must 
be  bound  by  their  conduct  in  the  matters  given  into  their  charge  ;  but  such 
an  argument  applies  to  ctU  the  cases  of  §  37,  as  well  as  to  those  of  §  33. 
It  has  been  declared  that  mere  negligence  in  examining  the  accounts  of  a 
cashier  is  no  release  of  his  sureties.  Black  v.  Ottoman  Bank,  10  W.  R. 
871;  Atlas  Bank  v.  Brownell,  9  R.  I.  168.  In  Amherst  Bank  v.  Root, 
2  Met.  (Mass.)  522,  C.  J.  Shaw,  says,  "The  idea  that  the  cashier  is  ex- 
cused by  the  act  or  negligence  of  the  directors  arises  from  considering  the 
board  of  directors  as  the  corporation,  and  then  applying  the  very  equitable 
principle,  that  one  ought  not  to  recover  of  a  surety  damages  caused  by 
himself.  We  think  the  principle  does  not  apply."  The  board  is  not  the 
corporation  in  such  matters.  To  hold  it  so  would  defeat  the  very  object 
of  the  bond.  See  United  States  v.  Kirkpatrick,  9  Wheat.  720;  Minor  u. 
Mechanics'  Bank,  1  Pet.  46;  Farmington  r.  Stanley,  60  Me.  472  ;  Tapley 
V.  Martin,  116  Mass.  275.  No  negligence  of  those  with  whom  rests  the 
duty  of  supervision,  short  of  a  virtual  connivance  at  the  official  delin- 
quency, or  a  wilful  shutting  of  the  eyes  to  the  fraud  about  to  be  committed, 
can  release  a  surety.  Dawson  v.  Lawes,  Kay.  280.  See  Story's  Eq.  Jur. 
§  325.  It  is  to  be  noted  that  these  decisions  are  negative  ;  do  not  say  even 
that  fraud  would  discharge  the  surety,  but  that  nothing  less  can,  and  espe- 
cially that  the  fraud  of  which  they  speak  as  possibly  able  to  release  is  the 
fraud  of  the  person  interested,  not  of  his  agents.  See  on  this  subject 
Tapley  v.  Martin,  116  Mass.  276;  Graves  v.  Lebanon  Bank,  10  Bush 
(Ky.),  23. 

The  weight  of  authority  and  reason  seems  heavily  against  releasing 
the  surety  because  of  the  directors'  fault,  unless  it  is  so  expressed  in  the 
bond,  or  the  organic  law  contains  some  provisions  touching  such  matters, 
which  may  therefore  be  considered  as  contemplated  in  the  contract  of 
suretyship.     Section  33  has   no  decision  to   rest  upon  that  goes  to  the 

98 


RETENTION   OF   DEFAULTERS.  §  34 

even  actually  discovered,  and  the  directors  are  satisfied  at 
first  only  to  suspend  the  wrong-doer  temporarily  from  the 
exercise  of  his  functions,  and  pass  a  vote  to  that  effect,  the 
liability  of  the  bondsmen  still  continues  until  the  suspension 
is  actually  effected.  At  least  this  is  the  case  if  there  is  no 
unnecessary  or  unreasonable  delay  iu  carrying  the  suspension 
into  effect.^  For  though  the  continuance  in  office  by  the 
directors  of  an  official,  whom  they  know  to  be  dishonest  and 
unfit  for  his  post,  may  have  the  effect  of  vitiating  the  obli- 
gation of  his  bond  as  a  security  for  his  defaults  occurring 
after  the  knowledge  and  continuance  in  office,^  yet  a  suspen- 
sion is  not,  in  fact,  a  continuance  in  office.  The  directors 
have  a  right  to  take  this  step  first,  for  the  purpose  of  gaining 
time  for  more  elaborate  investigation  and  deliberation.  If 
they  take  it  with  due  promptitude,  it  is  enough.  For  the 
guilty  party  is  as  incompetent  to  do  acts  which  will  place 
his  bondsmen  under  any  further  liability  when  he  is  sus- 
pended, as  when  he  is  absolutely  dismissed.  But  the  neglect 
of  the  directors  either  to  suspend  or  to  remove  the  officer, 
after  they  have  become  aware  of  his  dishonesty  or  incom- 
petence, will  not  relieve  the  sureties  from  the  liability  which 
had  already  accrued  for  breaches  which  bad  been  consum- 
mated prior  to  the  time  when  the  directors  acquired  such 
knowledge.^     It  only  annuls  the  bond  for  the  future. 

§  34.  Satisfaction  received  by  the  bank  is  a  good  defence. 
But  a  payment  will  be  applied  to  known  defalcations  in  pref- 
erence to  those  unknown,  though  prior. 

The  cashier,  who  had  given  a  bond  with  sureties,  embezzled 
money  to  the  amount  of  $4,000.     The  capital  stock  of  the  bank 

point,  but  the  law  was  stated  as  in  §  33,  without  the  "  perhaps,"  by  Mr. 
Morse,  and  is  retained  by  the  editor  in  respect  to  his  opinion. 

1  M'Gill  V.  Bank  of  the  United  States,  12  Wheat.  511. 

2  This  doctrine  is,  perhaps,  to  be  fairly  implied  from  the  language  of 
the  court  in  Taylor  v.  Bank  of  Kentucky,  2  J.  J.  Marsh.  (Ky.)  568  ;  which, 
however,  only  holds  directly  that  the  retaining  an  officer  in  office  after 
knowledge  of  his  default  does  not  exempt  the  surety  from  liability  for  all 
defaults  prior  to  the  knowledge  and  retention.  Also  arguendo  in  Franklin 
Bank  i-.  Cooper,  36  Me.  179.     See  note  0,  above. 

s  State  Bank  v.  Chetwood,  3  Halst.  (N.  J.)  1. 

99 


8  35  OFFICIAL   BONDS    AND   LIABILITIES   OF   SURETIES. 

was  afterward  increased,  the  embezzlement  remaining  undis- 
Grocers'  covcred.     The  cashier  continued  in  office,  and  no 

Kt"gman.  "Gw  bond  was  required.  He  continued  his  embezzle- 
ments upon  a  much  more  extensive  scale  after  the  increase  of 
the  corporate  capital.  At  last,  being  detected,  he  turned  over 
to  the  bank  assets  to  the  value  of  $20,000.  The  bank  sued  the 
sureties  to  recover  the  deficit  which  still  existed.  The  court 
ruled  that  the  increase  of  capital  put  an  end  to  the  liability  of 
the  sureties  from  that  time  forth.  The  sureties  then  claimed 
that  the  payment  made  by  the  cashier  should  be  appropriated 
first  to  the  discharge  of  his  earliest  embezzlements,  by  which 
means  the  sum  of  $4,000  embezzled  by  him  prior  to  the  increase 
of  capital  would  be  restored,  and  the  sureties  would  practically 
escape  without  loss.  But  the  court  said,  that  "  inasmuch  as 
that  embezzlement  (of  the  $4,000)  was  not  known  to  the 
bank  when  the  conveyance  was  made  (by  the  cashier),  and 
the  purpose  of  the  conveyance  was  to  cover,  as  far  as  it  would, 
the  known  defalcations  of  the  cashier,  .  .  .  the  sureties  are 
not  entitled  to  have  that  property  applied  in  discharge  of  their 
liability.  The  property  was  neither  conveyed  nor  received  for 
that  purpose."  ^ 

§  35.  The  statute  of  Limitations  usually  requires  suits  on 
cashier's  bonds  to  be  brought  within  two  years  after  the 
cause  of  action  arose.  In  suit  upon  a  bond,  whereby  the 
cashier  was  obliged  to  make  and  give  full  satisfaction  and 
recompense  to  the  bank  for  all  moneys,  bills,  notes,  and 
effects  which  should  come  to  his  hands,  it  was  held  that  the 
cause  of  action  did  not  accrue  at  the  date  of  any  defalcation 
or  embezzlement,  or  other  act  protected  against,  but  that  it 
be  accrued  when  the  cashier,  upon  quitting  his  office,  failed  to 
make  a  full  delivery  of  the  funds  received  by  him  ;  and  from 
this  latter  date  the  statute  began  to  run.^  If  the  bank  had 
previously  become  aware  of  the  defalcation  no  doubt  the 
statute  would  have  begun  to  run  from  the  time  of  knowledge 
of  the  cause  of  action. 

1  §  34.  Grocers'  Bank  v.  Kingman,  16  Gray  (Mass.),  473. 
1  §  35.    Bank  of  Wilmington  &   Brandywine  v.  WoUaston,  3  Harr. 
(Del.)  90. 
100 


REVOCATION  OF  GUARANTY.  §  37 

§  36.  Revocation. — A  surety  may  at  pleasure  revoke  his 
guaranty  upon  reasonable  and  proper  notice,  the  circum- 
stances being  such  that  the  bank  can  dismiss  the  officer  with- 
out injury  to  itself  if  he  should  fail  to  provide  new  sureties, 
unless  the  bond  is  on  a  continuing  consideration  the  benefit 
of  which  the  surety  cannot  or  does  not  renounce,  or  it  was 
made  to  cover  a  transaction  not  yet  completed.^ 

In  England,  however,  it  has  been  held  that  a  guaranty 
under  seal  cannot  be  revoked  without  the  aid  of  equity.^ 

But  notification  by  one  surety  that  he  desires  to  be  released 
docs  not  affect  the  liability  of  the  others.^ 

The  death  of  a  surety  and  notification  thereof  before  the 
commencement  of  the  cashier's  defalcations  will  not  relieve 
the  surety's  estate.^ 

§  37.  No  Act  of  the  President  or  Directors  in  violation  of 
their  duty  to  the  stockholders  can  discharge  the  surety  on  the 
bond  of  a  bank  officer.^     See  §  33,  note  0,  and  §  38. 

It  is  no  excuse  that  the  defalcation  was  accomplished  by 
the  exercise  of  a  power  unlawfully  conferred  by  the  direetois 
upon  the  defaulting  ofiicer.     And  if  he  acted  with  the  fraud- 

^  §  36.  1  Parsons  on  Contracts,  515.  And  see  Le  Eose  r.  Logansport 
National  Bank,  102  Ind.  332  (1885).  Surety  may  revoke,  without  cause, 
on  proper  notice  seasonably  given,  &c. 

2  Bostwick  V.  Van  Voorhis,  91  N.  Y.  353. 

8  Shackamaxon  Bank  v.  Yard,  143  Pa.  129  (22  Atl.  908). 

1  §  37.  Minor  v.  Mechanics'  Bank,  1  Pet.  46.  It  is  no  defence  that  a 
cashier  has  done  a  dishonest,  irregular,  or  improper  act,  under  the  express 
direction  of  the  board  of  directors,  if  he  knew  that  their  purpose  in  pro- 
curing the  act  to  be  done  was  wrongful.  He  is  bound  to  obey  them, 
doubtless,  and  it  may  be  that  he  would  have  rejected  any  participation  in 
the  profits  of  their  scheme.  But  neither  his  duty  of  obedience,  nor  his 
intention  to  keep  his  own  hand  clear  from  their  illicit  gains,  are  a  justi- 
fication or  excuse  for  his  connivance.  The  guilt  that  is  in  the  act 
leavens  its  entirety. 

Where  a  president  and  cashier  entered  into  a  scheme  to  defraud,  in 
pursuance  of  which  they  gave  a  certificate  in  order  that  the  cashier  could 
obtain  a  fidelity  bond,  it  was  not  presumed  that  the  president  com- 
municated to  the  bank  what  he  had  done  to  promote  the  fraud,  and  the 
bank  recovered  on  the  bond,  American  Surety  Co.  v.  Pauly,  176  U.  S. 
133,  160  (1897). 

101 


S  37  OFFICIAL   BONDS   AND   LIABILITIES    OF   SURETIES. 

ulent  connivance  of  the  president,  or  any  one  or  all  of  the 
directors  this  would  only  make  them  partners  in  crime. ^" 
Thus,  where  a  bank  authorized  its  teller  to  issue 
Fault  of  an-  duc-bills,  but  had  no  lawful  power  to  issue  such 
no  excuse  bills  or  clotlic  him  with  such  authority,  and  he 
for  .s  au  t.  accomplished  his  defalcations  by  issuing  due-bills 
for  his  own  benefit,  it  was  held  that  the  surety  could  not 
avail  himself  of  this  illegality  in  defence  to  a  suit  on  his  bond, 
and  could  not  set  up  that  the  bank  could  not  be  compelled  to 
pay  the  bills.^ 

If  a  cashier  permit  a  transfer  of  stock  to  be  made  to  the 
bank  beyond  the  amount  permitted  by  the  charter,  he  and  his 
sureties  are  answerable  to  the  stockholders  on  his  bond  for 
any  loss  caused  thereby,  although  such  transfer  was  author- 
ized by  a  resolution  of  the  directors;^  and  so  if  he  permit 
overdrafts  without  special  excuse.*  But  making  an  excess 
loan  does  not  of  itself  constitute  a  breach  of  a  cashier's 
bond.4" 

The  fact  that  the  cashier  consented  to  the  bookkeeper's 
application  to  his  own  use  of  money  not  due  him  constitutes 
no  defence  to  an  action  on  the  bookkeeper's  bond.^ 
This  is  an  ably  argued  case,  and  Henry,  J.,  dis- 
sented, quoting  Bissell  v.  First  National  Bank,  69  Pa.  St.  415, 
and  Caldwell  v.  National  Mohawk  Valley  Bank,  64  Barb. 
(N.  Y.)  333. 

The  mere  fact  that  the  directors  sanctioned  overdrafts,  will 
not  release  the  liability  of  a  teller's  sureties  for  the  conse- 
quent loss.^ 

The  culpable  neglect  of  the  directors  and  agents  of  a  bank 

to  make  frequent  examinations  of  the  affairs  of  the  bank,  to 

count  the  money,  and  generally  to  watch  over  its 

concerns,  according  to  the  direction  of  the  by-laws, 

i«  Phillips  V.  Bossard,  35  Fed.  99,  100. 

2  Wayue  v.  Commercial  National  Bank,  52  Pa.  St.  343  (1866). 

3  Bank  of  Washington  v.  Barrington,  2  Penn.  29. 

*  Bank  of  St.  Mary's  v.  Calder,  3  Strobh.  Law  (S.  Car.),  408. 

*«  Mohrenstecher  ii.  Westervelt,  87  Fed.  R.  157. 

p  Chew  V.  EUingwood,  86  Mo.  260  (1885). 

^  Market  Street  Bank  v.  Stumpe,  2  Mo.  App.  545. 

102 


FAULT  OP  OTHER  OFFICER  NO  DEFENCE.       §  38 

is  no  defence  to  the  sureties  in  a  suit  on  an  official  bond.  Tlie 
negligence  of  one  agent,  or  set  of  agents,  cannot  deprive  the 
corporation  of  its  remedy  for  the  default  of  another  agentJ 

Indeed,  no  act  or  vote  of  the  directors  of  a  bank,  contrary 
to  their  duties,  and  in  fraud  of  stockholders'  rights  u.  s.  Sup.  Ct. 
and  interests,  will  excuse  the  cashier  or  his  sure-  Mechanics' 
ties  from  a  violation  of  the  stipulation  in  his  bond,  ^'^"'^" 
well  and  truly  to  execute  the  duties  of  his  office,^ 

§  38,  Negligence  of  the  Directors  in  Supervision  or  failing  to 
discover  a  defalcation  does  not  discharge  the  surety  as  to 
subsequent  frauds  ;  Hiut,  as  we  have  seen,^  careless  misrep- 
resentations in  ignorance  of  defalcation  that  due  diligence 
would  have  disclosed,  constitute  a  defence  if  the  surety  was 
misled  thereby. 

On  the  bond  of  a  cashier  of  a  bank  "  faithfully  and  hon- 
estly to  discharge  his  duties  as  such  casliier,  and  faithfully 
apply  and  account  for  all  such  moneys,"  &c.,''  and 
return  the  same,  on  proper  demand,  to  the  order  ^°  "^  ^' 
of  the  board,"  &c.,  he  and  his  sureties  are  liable  for  a  loss 
caused  by  his  negligence,  though  the  directors  did  not  use 
due  diligence.^ 

It  is  no  defence  to  a  suit  against  the  sureties  on  the  bond 
of  a  bank  cashier,  that  the  directors  neglected  their 
duty  in  not  discovering  that  which  the  sureties 
covenanted  the  cashier  should  reveal.'* 

A  person  had  been  a  bookkeeper, and  in  that  position  had  com- 
mitted frauds,  which  had  never  been  detected.  He  was  raised 
to  the  position  of  cashier,  and  as  such  furnished 

.  .  Mass. 

a  bond,  with  sureties,  for  the   faithful   perform- 
ance of  his  duties.     He  continued,  however,  to  commit  frauds 

'  Amherst  Bank  v.  Root,  2  Met.  (Mass.)  541 ;  but  see  People  v.  Jansen, 
7  Johns.  (N.  Y.)    332. 

^  Minor  v.  Mechanics'  Bank,  1  Pet.  46.  See  also  American  Surety 
Co.  V.  Pauly,  170  U.  S.  133,  156. 

1  §  38.   See  Chew  v.  Ellingwood,  86  Mo.  260  (1885),  and  see  §  37. 

2  §  21  ft. 

3  Batchelor  v.  Planters'  National  Bank  of  Louisville,  78  Ky.  435 
(1880). 

*  Frelinghuysen  v.  Baldwin,  16  Fed.  Rep.  452. 

103 


§  40  OFFICIAL   BONDS   AND   LIABILITIES    OP   SURETIES. 

of  a  like  general  character  with  those  previously  committed 
by  him  as  bookkeeper.  Held,  that  in  a  suit  by  the  bank  to  re- 
cover from  the  sureties  on  the  bond  for  the  frauds  committed 
during  the  cashiership,  it  could  not  be  shown  in  defence  that 
the  frauds  committed  by  him  as  bookkeeper  would  have  been 
discovered  had  the  officers  of  the  bank  not  been  grossly  dere- 
lict in  tiie  examination  of  the  books  of  the  bank.  "  The  object 
of  the  bond  is  to  guarantee  to  the  bank  the  faithful  performance 
by  the  cashier  of  his  duties.  His  duties  and  obligations  are 
not  affected  by  the  negligence  of  the  other  officers  or  agents 
of  the  bank,  and  such  negligence  does  not  discharge  his  sure- 
ties." It  is  also  a  quoere  whether,  if  the  officers  of  the  bank 
had  had  knowledge  of  the  frauds  of  the  principal  as  book- 
keeper, and  had  failed  to  communicate  such  knowledge  to  the 
sureties  on  his  bond  as  casiiier,  these  sureties  would  thereby 
liave  been  discharged.^  To  decide  such  a  qucere  against  the 
sureties  would  be  a  great  hardship  upon  them,  not  easily 
capable  of  justification. 

§  39.  Ultra  Vires  action  by  the  bank  is  no  defence,  as  if  the 
bank  commenced  operations  contrary  to  charter,  or  has  failed 
to  perform  its  public  duties,  as  in  reference  to  redeeming  its 
notes.i  And,  where  a  bank  had  no  express  authority  to 
establish  a  "  branch  "  at  which  the  cashier  was  engaged,  it 
was  held  no  defence  to  an  action  on  his  bond.^ 

§  40.  Effect  of  Failure  to  take  the  Required  Oath  or  Informal- 
ity in  Appointment.  —  The  fact  that  the  officer  did  not  take 
the  oath  of  office  which  was  required  by  statute  prior  to 
entering  upon  the  exercise  of  his  functions,  does  not  operate 
to  vitiate  his  bond.  Being  one  of  the  duties  prescribed  for 
him  to  do,  his  neglect  to  do  it  may  be  itself  a  breach  of  the 
condition  of  the  bond.^  And  so  far  as  it  is  a  breach  of  the 
duty  of  the  directors,  it  is  covered  by  the  principles  of  §  38. 

6  Tapley  v.  Martin,  116  Mass.  275;  see  United  States  v.  Kirkpatrick, 
9  Wheat.  720;  Inhabitants  of  Faimingtou  v.  Stanley,  60  Me.  472. 

^  §  39.  Hughes  v.  Bank  of  Somerset,  5  Litt.  (Ky.)  45  ;  Wallace  r. 
Exchange  Bank,  126  Ind.  265  (26  N.  E.  175).     See  §  722. 

2  Morehead  Banking  Co.  v.  Tate,  122  N.  C.  313  (1898)  (30  S.  E.  341). 

1  §  40.    State  Bank  v.  Chetwood,  3  Halst.  (N.  J.)  1. 
104 


PROCEDURE  IN  BOND  CASES.  §  42 

The  surety  cannot  escape  liability  on  the  ground  that  his 
principal  was  never  duly  appointed  or  legally  qualified.^ 

§  41.  Express  Limitation  of  Risk.  —  If  the  bond  stipulates 
that  a  certain  sum  only  shall  be  left  in  the  custody  of  the 
clerk,  and  a  larger  sum  be  left,  the  bond  is  not  thereby 
avoided.  The  nomination  of  the  sum  will  be  construed, 
unless  clearly  otherwise  expressed,  to  be  a  limitation  of  the 
liability  of  the  surety.^ 

The  principles  of  §§  37  and  38  apply  in  such  cases,  and 
the  rule  that  the  substantial  object  of  the  bond,  namely, 
indemnity  against  loss  by  fault  of  the  officer  under  the  cir- 
cumstances of  ordinary  business  in  his  office,  will  be  kept 
in  mind,  and  the  bond  so  construed  as  to  make  it  available 
to  this  end,  unless  the  limitations  are  so  clearly  adverse 
that  they  will  not  bear  a  construction  in  harmony  with  that 
rule. 


§  42.   Notes  on   Evidence,  Measure   of   Damages,  and  Practice 
AND  Pleading  in  general. 

(a)  Evidence.  —  1.  In  a  suit  to  recover  a  deficiency  in  money,  or  the 
value  of  securities  which  ought  to  be  but,  are  not  forthcoming,  it  is 
sufficient  for  the  bank  in  the  first  instance  to  allege  and  prove  that  they 
came  into  the  hands  and  possession  of  the  officer,  and  have  not  since 
been  returned  or  accounted  for  by  him.  These  facts,  laid  in  the  declara- 
tion and  satisfactorily  established  on  the  trial,  suffice  to  create  a  pre- 
sumption that  the  missing  property  has  been  wasted  or  misappropriated 
by  the  officer.  If  the  deficiency  is  in  the  money,  or  uninvested  funds 
of  the  bank,  it  is  not  necessary  for  the  bank  to  declare  or  to  prove  the 
receipt,  at  certain  times,  of  specific  sums  by  the  cashier,  from  indi- 
viduals named,  and  to  allege  these  particular  sums  to  have  been  since 
lost  or  converted.  Obviously  this  would  be  at  once  a  useless  and  an 
impossible  requirement.  All  the  sums  paid  into  the  bank  are  usually 
blended  into  one  aggregate  mass,  and  the  waste,  loss,  or  embezzlement  in 
the  great  majority  of  cases  takes  place  from  this.  If  at  any  time  an 
officer  should  lose  or  embezzle  the  whole  of  any  especial  sum  taken  by 
him  at  one  time  from  an  individual,  it  would  probably  be  totally  impos- 
sible for  the  bank  to  assure  itself  of  the  fact.  Consequently  it  is  incum- 
bent upon  the  bank  to  allege  and  prove  simply  that  the  officer  has  received 

2  Board  of  County  Com'rs  v.  State  Bank  64  ^linn.  180  (66  N.  W.  143). 
1  §  41.    Lindsay  v.  Lord  Dowues,  2  Ir.  Eq.  307.     See  the  cases  in  §  42. 

105 


§  42  OFFICIAL    BONDS   AND   LIABILITIES   OF   SURETIES. 

a  certain  amount  as  a  sum  total,  and  that  he  has  returned  or  accounted 
for  a  less  amount,  likewise  as  a  sum  total.  If  then  the  defendants  seek 
to  rebut  the  presumption  of  his  liability  for  the  difference  which,  unless 
they  do  so,  becomes  conclusive  and  supports  a  judgment  against  them, 
the  burden  is  shifted  upon  them  to  allege  and  show  that  the  deficiency 
occurred  in  some  manner  such  as  to  relieve  them  from  a  liability,  under 
the  bond,  to  make  it  good.  If  to  this  end  they  intend  to  rely  upon  the 
innocent  mistake  of  the  officer,  or  upon  a  robbery  from  him,  either  of 
which  is  a  sufficient  defence,  (Walker  v.  British  Guarantee  Association,  18 
Q.  B.  227,  also  the  cases  cited  below  in  the  discussion  of  this  topic),  they 
must  set  forth  the  time,  place,  and  other  circumstances  attendant  upon 
the  mistake  or  theft,  with  such  certainty,  if  possible,  as  to  show  that  it 
befell  while  the  officer  was  acting  duly  and  properly  in  the  discharge  of 
his  functions  according  to  the  ordinary  rules  and  customs  of  the  business. 
It  is  not  sufficient  for  them  to  show  simply  that  the  explanation  is  a 
reasonable  or  a  probable  one;  they  must  maintain  it  affirmatively  as  a 
positive  fact.  Allison  v.  Farmers'  Bank,  6  Rand.  (Va.)  204;  Minor  v. 
Mechanics'  Bank,  1  Pet.  46  ;  American  Bank  v.  Adams,  12  Pick.  (Mass.) 
303  ;  Morris  Canal  &  Banking  Co.  v.  Van  Vorst,  3  Zabr.  (N.  J.)  98. 

For  proper  allegations  in  suit  on  a  contract  of  a  fidelity  company  to 
make  good  losses  occasioned  by  misconduct  of  an  employee,  see  Fidelity- 
Co.  V.  Gate  City  Bank,  97  Ga.  635  (2.5  S.  E.  392)  (189.5). 

2.  But  the  proof  which  will  be  required  must  be  in  accordance  with  the 
intrinsic  nature  of  the  fact  itself.  It  would  be  seldom,  for  example,  that 
a  paying  teller  could  show,  with  the  certainty  of  demonstration,  especially 
after  the  lapse  of  much  time,  that  he  had  overpaid  certain  amounts  on 
certain  checks.  The  question  would  seem  to  be  eminently  fit  for  the  de- 
cision of  a  jury,  though  in  the  case  of  the  American  Bank  v.  Adams  the 
court  declared,  as  if  it  were  a  matter  of  law,  that  the  evidence  adduced 
was  insufficient  to  sustain  the  defence  of  an  innocent  overpayment.  The 
evidence  was  that  the  teller  was  considered  to  be  honest,  careful,  and 
vigilant;  that  the  directors  had  stated  their  belief  that  the  loss  occurred 
through  overpayments;  that  they  had  since  continued  to  employ  the 
teller  in  duties  of  trust  and  confidence;  and  that  similar  innocent  losses 
befell  tellers  so  frequently  that  they  might  be  regarded  as  unavoidable  in- 
cidents to  the  business  of  the  office.  The  court  said  that  all  this  doubtless 
•went  strongly  to  repel  the  notion  of  want  of  integrity,  but  nevertheless 
was  not  sufficient  to  "prove  the  specific  mode  of  the  loss";  the  defendant 
must  maintain  his  justification  affirmatively.  It  is  not  to  be  supposed, 
however,  that  the  intention  of  the  court  in  delivering  this  opinion  was  to 
signify  that  the  question  of  fact,  to  wit,  what  was  the  real  cause  of  the 
loss,  was  to  be  taken  from  the  forum  of  the  jury.  Their  language  should 
rather  be  construed  as  a  criticism  made  upon  the  evidence  offered  in  a 
certain  cause,  and  serviceable  in  suggesting  the  instructions  which  may 
in  an  appropriate  case  be  given  to  a  jury  to  guide  them  in  weighing  the 

106 


PROCEDURE  IN  BOND  CASES.  §  42 

testimony  which  is  before  them.  It  is  clear  that,  though  the  court  may 
declare  as  matter  of  law  that  the  jury  shall  not  regard  proof  of  a  proba- 
bility established  by  testimony  of  a  purely  general  character  as  equiva- 
lent to  definite  proof  of  a  specific  fact,  yet  still  it  must  remain  for  the 
jury,  in  subjection  of  course  to  this  rule  of  law,  to  determine  whether  or 
not  that  specific  fact  is  proved  to  their  reasonable  satisfaction. 

3.  If  the  plaintiffs  assert  that  the  officer  has  received  a  certain  amount 
which  he  has  never  accounted  for,  it  will  be  proper  for  the  defendants  to 
deny  that  he  has  ever  received  the  amount.  This  leaves  the  burden  of 
proving  the  receipt  upon  the  bank.  But  if  the  defendants  only  answer 
that  the  officer  has  accounted  for  all  that  he  has  ever  received,  they  have 
the  onerous  task  of  proving  the  correctness  of  both  sides  of  the  account, 
and  of  making  them  balance.  They  in  fact  relieve  their  adversaries  of 
nearly  all  that  work  which  would  otherwise  have  to  be  done  in  establish- 
ing ?i  prima  facie  case.  Furthermore,  if  they  deny  the  receipt,  they  may 
still  plead  excuses,  if  the  receipt  should  be  proved,  which  they  could  not 
do  if  they  had  adopted  the  other  form  of  answer.  Exeter  Bank  v.  Rogers, 
6  N.  H.  142. 

There  must  be  evidence  of  an  actual  loss  to  the  bank.  Thus  in  a  suit 
upon  a  teller's  bond  it  is  not  enough  to  show  that  he  made  an  error  of 
SIOOO  in  adding  items  in  the  depositors'  column.  Commonwealth  v. 
Strickler,  178  Pa.  148  (35  Atl.  G28),  also  Mohrenstecher  v.  Westervelt, 
87  Fed.  157  (1898). 

Entries  made  by  the  clerk  in  the  books  kept  by  him  in  the  course  of 
his  duties  will,  after  his  death,  be  evidence,  against  the  sureties  in  his 
bond  of  his  receipt  of  the  moneys  therein  entered  as  received.  Whitnash 
V.  George,  8  B.  &  C.  556. 

(b)  Measure  of  Damages.  —  The  obligation  may  be  in  any  sum 
which  the  directors  see  fit.  Though  it  is  not  probable  that  they  would 
be  allowed  to  recover  any  designated  sum  as  "liquidated  damages"  in 
all  cases,  neither  any  money  in  the  nature  of  vindictive  or  penal  dam- 
ages, at  least  from  the  sureties.  From  them  the  recovery  should  be 
limited  to  the  actual  amount  of  the  loss.  The  bond  is  strictly  for  reim- 
bursement, not  for  either  punishment  or  profit.  This  character  impera- 
tively fixes  the  measure  of  damages  at  the  amount  of  actual  pecuniary 
loss  or  injury  which  the  bank  has  sustained.  The  rule  was  thus  laid 
down  in  Bank  of  Washington  v.  Barrington,  14  Serg.  &  R.  (Fa.)  405, 
•where  it  was  also  said  that  only  the  injury  naturally  and  in  the  ordinary 
course  of  business  arising  from  the  misconduct  could  be  recompensed. 
Remote  results  cannot  be  proved  against  the  sureties;  much  less,  results 
which  are  in  a  measure  due  to  negligence  or  ignorance  of  the  directors  ia 
the  events  transpiring  after  the  malfeasance. 

If  an  officer  converts  bills,  notes,  or  other  species  of  the  promises  to 
pay  of  the  bank,  on  which  it  legally  owes  money,  recovery  upon  the  bond 
may  be  had  for  the  full  nominal  value.     The  defendants  cannot  avail 

107 


§  42  OFFICIAL   BONDS   AND   LIABILITIES    OF   SURETIES. 

themselves  of  any  depreciation  in  the  marketable  value  of  the  converted 
paper  or  securities.  Pendleton  v.  Bank  of  Kentucky,  1  T.  B.  Monr.  (Ky.) 
171.  This  is  the  only  exception,  if  indeed  even  this  must  necessarily  be 
regarded  as  such,  to  the  general  rule,  that  the  bank  can  recover  only  the 
amount  of  its  real  and  actual  loss.  Bank  of  Washington  v.  Barrington, 
2  Penn.  27. 

(c)  Pleading  and  Practice.  —  1.  The  precaution  which  should  be  ob- 
served by  defendants  in  a  suit  wherein  the  plaintiffs  seek  to  recover  the 
amount  of  an  alleged  deficit  has  already  been  noticed  (p.  102).  A  few 
more  points  deserve  mention. 

In  suits  for  breach  on  the  part  of  the  officer  of  the  condition  of  his 
bond,  it  is  sufficient  to  aver  non-performance  in  the  words  of  the  bond. 
The  specific  acts  relied  on  as  constituting  the  breach  and  sustaining  the 
allegation  of  it  may  be  made  when  required  at  a  later  stage  in  the  pro- 
ceedings. Pendleton  v.  Bank  of  Kentucky,  supra  ;  Chetwood,  at  the  suit 
of  the  President,  &c.,  of  the  State  Bank,  2  Halst.  (N.  J.)  32. 

The  defendants  cannot  deny  the  contents  of  the  bond,  set  out  in  or 
made  a  part  of  the  plaintiff's  declaration,  after  they  have  admitted  by 
their  plea  its  execution,  delivery,  and  approval.  So  if  the  bond  recites 
that  the  principal  is  cashier,  &c.,  or  describes  or  designates  him  as  cash- 
ier, &c.,  a  surety,  who  has  admitted  the  whole  bond  in  his  pleadings,  can- 
not thereafter  deny  the  fact  that  the  principal  really  filled  the  office  which 
was  thus  stated  or  designated  in  it.  Milburn  v.  State  of  Maryland,  1  Md. 
1;  State  Bank  v.  Chetwood,  3  Ilalst.  (N.  J.)  1. 

It  has  been  declared  in  general  terms  in  California,  though  not  in  a 
banking  case,  that  official  bonds  are  joint  and  several.  People  v.  Jenkins, 
17  Cal.  500.  In  fact,  the  bond  may  be  made  either  joint  or  several,  or 
both,  by  its  own  phraseology.  The  California  decision  can  only  be  re- 
garded as  intimating  that  the  tendency  of  the  courts,  in  all  cases  where 
the  language  is  doubtful  or  reasonably  admits  of  the  construction,  is  to 
regard  such  undertakings  as  joint  and  several.  Where  this  is  the  sound 
construction,  the  bank  may  either  sue  any  one  of  the  parties  singly,  or  it 
may  sue  them  all  together.  But  it  cannot  sue  any  intermediate  number. 
Its  option  is  strictly  confined  to  a  suit  against  one  only,  or  against  the 
whole.  Of  course,  if  it  neglects  this  rule,  and  does  sue  more  than  one 
party  and  less  than  all,  the  defendants  can  only  take  advantage  of  the 
error  by  a  plea  in  abatement,  and  will  waive  it  by  a  plea  to  the  merits. 
Minor  v.  Mechanics'  Bank,  1  Pet.  46.  Where  a  bond  is  given  by  a  princi- 
pal in  a  certain  sum,  and  by  two  sureties  in  a  much  less  sum  each,  the 
obligation  of  the  sureties  is  several ;  either  one  of  them  may  be  sued 
singly,  and  recovery  may  be  had  from  him  to  the  full  amount  of  said  less 
sum,  provided  this  is  not  greater  than  the  amount  of  the  loss  or  injury 
sustained.     Stetson  v.  City  Bank,  12  Ohio  St.  577. 

Answer  by  defendants  that  the  officer  had  made   and  executed  his 
promissory  note  in  full  satisfaction,  and  that  it  had  been  accepted  and 
1U8 


PROCEDURE  IN   BOND   CASES.  §  42 

received  in  full  satisfaction,  was  held  to  be  sufficiently  met  by  a  denial 
only  of  the  making  and  executing.  Morris  Canal  &  Banking  Co.  v.  Van 
Vorst,  3  Zabr.  (N.  J.)  98. 

2.  Where  the  obligation  of  the  officer  and  his  sureties  is  joint,  and 
they  are  jointly  sued  thereon,  the  admissions  and  declarations  of  tlie 
officer  are  admissible  in  evidence  against  all  the  defendants  alike.  Am- 
herst Bank  v.  Root,  2  Met.  (Mass.)  522  ;  Pendleton  v.  Bank  of  Kentucky, 
1  T.  B.  Monr.  (Ky.)  171.  But  the  language  in  the  Massachusetts  case 
cited  points  directly  to  the  important  qualification  that  this  joint  char- 
acter of  the  obligation  and  of  the  suit  must  be  taken  to  be  essential  to  the 
operation  of  the  rule  ;  and  that  if  the  undertaking  of  the  surety  were  a 
separate  and  independent  one,  and  probably  even  where  it  was  joint  and 
several  and  he  alone  was  sued  upon  it,  precisely  the  opposite  doctrine 
would  obtain.  This  view  of  the  law  is  hardly  sustained  by  the  Kentucky 
case  cited  ;  and  Grant  says  that  the  English  principle  is,  that  "  wliatever 
is  evidence  available  against  the  principalis  available  against  the  surety.'" 
But  though  he  makes  this  statement  so  broadly,  he  cites  no  authority 
which  sustains  it  quite  to  its  full  extent.  The  case  which  he  gives  de- 
clares simply  that,  in  a  suit  against  the  surety  after  the  death  of  the 
principal,  entries  by  the  latter,  in  his  official  books,  of  receipts  of  money, 
were  evidence  in  behalf  of  the  bank  that  these  sums  had  been  received, 
upon  the  ground  that  the  bond  itself  also  guaianteed  the  faithful  keeping 
by  the  same  officer  of  tliese  very  books.  Grant  on  Bankers  and  Banking, 
p.  257,  citing  Whitnash  v.  George,  8  B.  &  C.  556. 

In  suit  against  the  principal  and  sureties  on  a  cashier's  bond,  their 
liability  being  by  the  terms  of  the  bond  several  and  not  joint,  it  was  held 
that,  under  the  Practice  Act  of  Massachusetts,  all  three  might  be  joined 
as  parties  defendant  in  one  and  the  same  action.  Grocers'  Bank  v.  King- 
man, 16  Gray  (Mass.),  473. 

3.  It  cannot  be  set  up  in  defence  to  a  suit  upon  a  bond  that  the  bank 
commenced  operations  in  a  manner  contrary  to  its  charter ;  neither  that 
it  has  failed  to  perform  its  public  duties  in  redeeming  its  circulating 
notes.  Such  matters  cannot  be  introduced  thus  indirectly,  neither  are 
they  available  for  the  purpose  of  absolving  a  debtor  from  his  liability. 
Hughes  V.  Bank  of  Somerset,  5  Litt.  (Ky.)  45.  Nor  is  it  a  defense  that 
the  bank  had  no  authority  to  establish  the  branch  bank  at  which  the 
cashier  was  engaged.  Morehead  Banking  Co.  v.  Tate,  122  N.  C.  313 
(30  S.  E.  341)  (1898). 

Two  or  three  English  cases  should  be  noticed  in  this  connection  before 
dismissing  the  subject. 

A  clerk  who  had  fraudulently  misappropriated  considerable  sums,  died 
before  discovery,  leaving  considerable  personalty  and  no  will.  His  widow 
deposited  the  personalty  with  the  banking-house  and  took  out  letters  of 
administration.  She  then  sought  to  recover  the  personalty,  which  the 
bankers  sought  to  retain.     She  sued  them,  and  they  filed  a  bill  against 

109 


§  42  OFFICIAL   BONDS   AND   LIABILITIES   OF   SURETIES. 

her,  askinfT  for  an  injunction  and  for  leave  to  administer  on  the  estate. 
It  was  held  to  be  no  answer  to  the  bill  to  reply  that  it  alleged  a  felony, 
and  that  no  civil  remedy  lay  in  respect  thereof.  Wickham  v.  Gatrill, 
2  Sm.  &  G.  353. 

The  father  of  a  banker's  clerk  transferred  stock  into  the  name  of  the 
banker,  in  order  to  cover  defalcations  of  his  son.  Held,  that  this  was  a 
composition  of  a  felony  to  prevent  a  prosecution.  Semble,  that  the  father 
could  not  recover  the  value  of  the  stock,  nor  obtain  an  order  for  its  trans- 
fer back  to  himself.     Claridge  v.  Hoare,  U  Ves.  Jun.  59. 

A  clerk,  who  had  embezzled,  prior  to  conviction  deposited  with  the 
bankin<T-house  certain  title  deeds  which  he  possessed,  and  transferred  to 
them  some  policies  of  insurance  upon  his  life,  as  security,  so  far  as  they 
would  go,  for  the  money  taken.  The  bankers,  however,  thereafter  pushed 
the  prosecution  to  conviction,  whereupon  the  clerk  sought  to  recover  back 
what  he  had  transferred.  The  court  said  that  the  amount  which  the  clerk 
had  embezzled  was  a  debt  owing  from  him  to  his  eniployers  ;  that  it  con- 
stituted a  good  and  sufficient  consideration  for  his  transfer  to  them  of  the 
aforesaid  securities;  and  that  they  were  entitled  to  hold  and  realize  upon 
these.  Chowne  v.  Baylis,  31  Beav.  351 ;  Grocers'  Bank  v.  Kingman,  IG 
Gray  (Mass.),  473. 

Pendency  of  a  suit  by  a  bank  against  its  cashier,  for  breach  of  his 
bond  in  permitting  an  overdraft,  does  not  affect  the  bank's  right  to  set 
up  the  overdraft  as  a  counter  claim  to  a  demand  by  the  cashier's  as- 
signee. St.  Louis  School  Board  v.  Broadway  Savings  Bank  Estate,  84 
Mo.  56  (1884). 

In  an  agreement  and  mortgage,  given  to  indemnify  a  bank  for  the  thefts 
of  an  officer,  the  word,  "  indebtedness,"  covers  not  only  the  thefts  of  the 
officer,  but  also  those  of  his  employees  occurring  by  his  connivance  or 
negligence.     Latimer  v.  Veader,  20  App.  Div.  (Hun,  N.  Y.)  418.  (1897). 

(d)  Surety's  Right  to  Demand  and  Notice.  —  1.  No  demand  need 
be  made  upon  a  surety  prior  to  bringing  suit  against  him.  Pierce  v.  Wil- 
liams, 23  L.  J.  Exch.  322 ;  Grocers'  Bank  v.  Kingman,  16  Gray  (:\Iass.), 
473.  Neither  is  he  entitled  to  prompt  notice  of  a  loss  covered  by  his  ob- 
ligation. The  bankers  may  continue  to  employ  the  principal  and  cloak 
the  fact  of  the  loss  so  long  as  they  like,  saying  nothing  about  it  to  the 
surety,  and  concealing  it  even  from  their  own  employees  by  a  false  entry 
on  their  books  of  a  loan  to  the  clerk  of  the  amount.  Grant,  p.  259,  citing 
Peel  V.  Tatlock,  1  Bos.  &  P.  419.  This  law  was  practically  established  by  the 
jury,  who  seem  to  have  thought  that  there  was  nothing  in  the  obligor's 
contract  with  the  bank  which  put  it  under  any  obligation  to  look  after 
his  interests  in  the  way  of  notifying  him  of  the  occurrence  of  a  loss. 
Nor  is  the  rule  devoid  of  reason,  for  the  surety  incurs  no  risk  on  the 
groutid  of  being  deprived  of  the  opportunity  at  once  to  withdraw  and 
annul  his  suretyship,  and  so  to  save  himself  from  further  loss ;  for  we 
have  already  seen  that  no  new  liability  can  accrue  against  him  if  the 
110 


PROCEDURE  IN  BOND  CASES.  §  42 

bank  continues  to  employ  the  officer  after  knowledge  of  his  misconduct. 
And  even  if  this  last  rule  should  ever  be  construed,  as  is  within  the 
bounds  of  possibility,  to  apply  only  to  cases  where  the  officer's  miscon- 
duct has  been  fraudulent,  or  otherwise  wrongful  in  its  character,  and  not 
to  apply  where  his  default  has  been  simply  the  result  of  incompetence, 
ignorance,  or  carelessness,  still  it  is  not  improbable  that,  if  the  sureties 
wish  to  secure  the  riglit  to  be  notified  even  of  such  acts,  they  must  insert 
express  stipulations  to  that  effect  in  their  undertaking  with  the  bank. 
If  they  neglect  to  take  such  precautions  in  their  own  interest,  the  law 
may  well  refuse  to  interfere  to  protect  them  from  the  results  of  their  own 
laches,  except  in  cases  which  are  tainted  with  actual  wrong-doing. 

2.  AVhere  the  contract  of  the  surety  stipulated  for  notice  to  be  given 
to  the  surety  on  discovery  of  fraud  or  dishonesty  on  the  part  of  the 
principal,  the  bank  is  not  required  to  exercise  any  diligence  to  watch  tliis 
particular  employee,  and,  knowledge  on  the  part  of  the  bank's  cashier  of 
any  misconduct  of  the  principal  (he  being  a  co-employee)  is  not  imput- 
able to  the  bank  itself.  Fidelity  Co.  v.  Gate  City  Bank,  97  Ga.  637-641 
(25  S.  E.  392)  (1895). 

3.  A  bond  requiring  the  bank  to  give  notice  of  cashier's  fraud,  "as 
soon  as  practicable  after  such  act  shall  have  come  to  the  knowledge  of  the 
employer,"  does  not  require  notice  of  any  act  of  cashier  that  might 
involve  loss,  unless  the  bank  has  knowledge,  not  merely  suspicion,  of  such 
facts  as  would  justify  a  careful  and  prudent  man  in  charging  another  with 
fraud  and  dishonesty.  American  Surety  Co.  v.  Paaly,  170  U.  S.  133,  147. 
See  also  p.  160. 

4.  Where  the  loss  was  discovered  in  the  latter  part  of  Maj  and  proofs 
of  loss  were  mailed  to  surety  company  on  June  24,  and,  no  objection  was 
made  upon  receipt  either  as  to  their  being  received  in  time  or  their 
sufficiency  it  was  held  that  notice  was  given,  "  as  soon  as  practicable  "  as 
required  by  the  bond  in  (3)  supra.  American  Surety  Co.  v.  Pauly,  170 
U.  S.  133,  IGO  (1897). 


Ill 


CHAPTER   IV. 

BY-LAWS   AND    THEIR   EFFECT. 

§  42.   A.    Analysis. 
§  43.    By-Laws. 

Power  to  make  is   inherent,  at   common  law,  in  the  stockholders, 

though  often  given  to  directors  in  the  organic  law. 
Extent  of  the  power. 
A  valid  by-law  must  be 

Passed  by  the  proper  authority. 

Not  contrary  to  tlie  cliarter  or  statute  law,  nor  public  policy, 
nor  beyond  the    charter  powers,   nor    against  common  right, 
nor  unreasonable. 
Examples  of  good  by-laws,  n.  10. 
Effect  by  By-Laws, 
(a)    As  to  members, 
as  by-laws, 
as  contracts. 
(6)    As  to  third  parties, 
directly, 
indirectly, 
(a)    Enforcement  by  By-Laws. 
Invalid  By-Laws,  n.  7,  8,  9. 
Establishing  a  lien  on  stock.     §  698. 
Of  savings  banks.     §  620. 
amendment  of.     §  620. 
as  to  production  of  pass-book.     §  620  b. 
part  of  contract  with  depositor.     §  620  a. 
payment  contrary  to.     §  620 e. 

§  43.  By-Laws  and  their  Effect.  —  The  power  to  make  by- 
laws for  the  government  of  the  corporate  affairs  is  at  com- 
mon law  inherent  ^-  in  the  body  of  stockholders ,2  but  is  often 
expressed  in  the  charter  or  statute  ^  and  reposed  in  the  board 
of  directors,^  and  when  the  organic  law  gives  the  power  for 

1  §  43.    Norris  v.  Staps,  Hob.  2106. 

2  Union  Bank  v.  Ridgely,  1  Harr.  &  Gill  (Md.),  324. 
8  See  Part  II. 

112 


EEQUISITES    OF   BY-LAW.  §  43 

purposes  named,  power  to  make  them  for  other  purposes  is 
impliedly  excluded.* 

By-laws  to  be  valid  must  be,  —  (1)  Passed  by  the  proper 
authority,  as,  if  the  power  lies  with  the  directors,  a  majority 
is  necessary  to  constitute  a  quorum  to  pass  by-laws,^  unless  a 
special  provision  alters  this  common  law  rule.*^  (2)  Not  in- 
consistent with  charter  or  statute  law,'^  nor  beyond  the  powers 
given  in  the  organic  law/  but  the  bank  may  renounce  by 
by-law  a  privilege  given  by  the  organic  law,  but  not  a  duty 
imposed  by  it.  (3)  Not  in  violation  of  public  policy  or  com- 
mon right,  as  settled  by  the  principles  of  the  common  law, 
unless  such  infringement  is  expressly  authorized  by  the 
organic  law.^  (4)  Not  unreasonable.  The  power  is  for  the 
benefit  of  the  whole  corporation,  and  all  by-laws  that  are  un- 
equal, oppressive,  vexatious,  or  plainly  detrimental  to  the 
interests  of  the  bank  are  void,^  but  the  unreasonableness  must 

*  Child  V.  Hudson  Bay  Co.,  2  P.  Wms.  207. 

8  Cahill  V.  Kalamazoo  Ins.  Co.,  2  Dougl.  (Mich.)  124. 

6  Iloyt  V.  Shelden,  3  Bosw.  (X.  Y.)  267.  A  by-law  specifying  the 
number  of  directors  constituting  a  quorum  held  valid. 

'  Kennebec  R.  Co.  v.  Kendall,  31  Me.  470  ;  Hoyt  v.  Thompson,  19 
N.  Y.  207.  Such  by-laws  as  the  following  are  void  as  inconsistent  with, 
or  beyond  the  powers  granted  in  the  charter:  —  (1.)  By-laws  creating  a 
new  office.  Rex  v.  Ginever,  6  T.  R.  732.  (2.)  Giving  a  vote  to  one  not 
entitled,  or  restricting  the  right  of  voting.  Rexu.  Bird,  13  East,  384; 
McCullough  V.  Annapolis  R.  Co.,  4  Gill  (Md.),  58.  (3.)  Altering  the 
mode  of  election  or  qualifications  for  eligibility  to  office,  as  requiring  a 
certain  number  of  shares  for  admission,  or  office,  or  giving  a  vote  for 
every  share.  Taylor  v.  Griswold,  2  Green  (X.  J.),  223;  Powell  v.  Regem, 
2  Bro.  P.  C.  298.  (4.)  Imposing  a  liability  for  debts  of  the  corpora- 
tion. 13  Met.  539.  (5.)  A  by-law  embracing  not  only  members,  but 
strangers  beyond  the  legislation  of  the  bank,  would  be  void.  Dodwell  v. 
Oxford,  2  Vent.  34. 

8  Taylor  v.  Griswold,  2  Green  (N.  J.),  223. 

^  As  a  by-law  that  mistakes  in  payment  will  not  be  rectified  after  the 
person  leaves  the  bank.  Farmers'  Bank  v.  Smith,  19  Johns.  (N.  Y.)  115. 
By-laws  taking  away  the  right  of  members  to  legal  redress.  Player  ». 
Archer,  2  Sid.  121.  Retrospective  by-laws  are  void,  both  at  common  law 
and  under  the  United  States  Constitution,  being  ex  post  facto,  as  the  bank 
has  only  such  powers  as  the  legislature  gave,  and  the  State  could  not 
give  a  power  it  did  not  itself  possess.  Howard  v.  Savannah,  T.  Charlt. 
(Ga.)  173.  A  by-law  levying  taxes,  or  depriving  of  property,  is  void.  Ua- 
VOL.   I. —8  113 


R  43  BY-LAWS   AND   THEIR   EFFECT. 

be  demonstrated  ^^  and  the  question  is  for  the  court."  This 
covers  much  of  the  same  ground  as  (3),  and  is  subject  to  the 
same  exception. 

a.  Effect  of  By-Lawa  on  Members.  —  1.  A  valid  bj-law  binds  ^^ 
each  member  as  though  a  part  of  the  charter,  even  though  he 
Enforcement  ^^^  "^^  ^  member  when  the  bj-law  was  passed,!^ 
of  by-law.  ^^d  the  bank  may  enforce  the  penalty  by  suit  in 
an  action  of  debt  or  assumpsit ;"  and  there  may  be  other 
methods  of  enforcement  besides  pecuniary  penalties,  as  by  sus- 
pension of  the  power  of  voting,!^  but  not  by  imprisonment  nor 
forfeiture  of  goods,  as  of  the  shares  of  the  member,  unless 
such  power  is  specially  given  in  the  organic  law.^^ 

For  examples  of  binding  by-laws,  see  note  12. 

2.  An  invalid  by-law  has  no  effect  whatever  as  a  by-law 
upon  anybody.  But  as  a  contract  it  may  be  good  as  against 
members  or  others  who  assent  to  it,"  but  the  assent  must  be 
actual.     The  assent  of  absent  members  is  only  presumed  in 

less  so  provided  in  the  articles  of  association  or  other  organic  law,  a 
company  cannot  interfere  with  the  rights  of  property  and  dealings  with 
third  persons,  as  by  creating  a  lien  on  stock,  or  refusing  to  transfer  until 
the  stockholders'  debt  to  the  company  is  paid,  and  a  bona  fide  purchaser 
without  notice  of  such  by-law  can  compel  the  company  to  transfer 
the  stock  to  him  on  its  books.  DriscoU  v.  West  Bradley  Manuf.  Co.,  59 
N.  Y.  96. 

10  Paxson  v.  Sweet,  1  Green  (N.  J.),  196. 

"  Commonwealth  v.  Worcester,  3  Pick.  (Mass.)  462. 

12  The  bank  may  enforce  its  right  to  the  service  of  members  by  a  by- 
law imposing  a  penalty  on  those  who  refuse  to  serve  in  office,  or  to  take 
the  oath  of  office,  or  members  who  refuse  to  attend  meetings.  Rex  v. 
Weymouth,  7  Mod.  374;  Tobacco  Pipe  Makers  v.  Woodroffe,  7  B.  &  C. 
838.  So  the  refusal  to  continue  in  office.  Planters'  Bank  v.  Lamkin, 
K.  M.  Charlt.  (Ga.)  34. 

18  Susquehanna  Ins.  Co.  v.  Perrine,  7  Watts  &  S.  (Pa.)  348.  A 
member  assents  by  the  fact  of  membership  to  all  valid  by-laws,  whether 
he  knows  of  them  or  not. 

"  Tidd's  Prac.  3,  4. 

16  Commonwealth  v.  Cain,  5  S.  &  R.  (Pa.)  510. 

16  Barter  v.  Commonwealth,  3  Penn.  &  W.  (Pa.)  253 ;  Hart  v.  Albany, 
9  Wend.  (X.  Y.)  571;  Cotter  v.  Doty,  5  Ohio,  395;  Mobile  v.  Yuille,  3 
Ala.  137  ;  State  v.  Morris  R.  Co.,  23  N.  J.  L.  360. 

"  Cooper  V.  Frederick,  9  Ala.  738;   Slee  v.  Bloom,  19  Johns.  (Pa.) 
456;  Stetson  v.  Kempton,  13  Mass.  282. 
114 


BY-LAWS   AS   AFFECTING   THIRD   PERSONS.  §  43 

reference  to  legal  votes  of  a  corporate  meeting.^^  Of  course 
this  contract  rule  can  apply  only  to  by-laws  void  merely 
because  they  infringe  on  rights  which,  though  secured  by  com- 
mon law,  are  still  such  that  the  owner  can  waive  or  part  with 
them  by  agreement ;  no  by-law  void  because  contrary  to  char- 
ter, statute,  public  policy,  or  morality,  can  take  effect  as  a 
contract  or  otherwise.^^ 

h.  Effect  of  By-Laws  on  Third  Persons.  —  The  effect  of 
invalid  by-laws  has  just  been  noted. 

Valid  by-laws  have  no  effect,  as  by-laws,  on  strangers,  that 
is,  persons  not  members  of  the  corporation,  unless  by  statute 
they  have  been  made  obligatory  on  such  persons.^*^ 

But  such  by-laws  may  indirectly  affect  third  persons.  Just 
as  any  contract  or  arrangement  between  A.  and  B.  may  affect 
the  dealings  of  C.  with  either,  by  limiting  the  power  of  A.  or 
B.,  or  by  reason  of  C.'s  knowledge  of  the  arrangement  and 
contracts  in  reference  to  it.  In  the  same  way  as  a  usage  pe- 
culiar to  a  single  bank  may,^!  —  (1)  hy  bearing  on  the  actual 
authority  ^  of  an  officer  in  dealings  with  such  persons ;  (2)  by 
determining  the  riglit  of  a  member  to  deal  in  a  certain  way 
with  such  third  persons,  and  bind  the  rights  of  the  bank 
thereby,  as  in  case  of  by-laws  concerning  the  transfer  of  stock  ; 
(B)  by  entering  into  transactions  so  as  to  affect  parties  who 

18  Insurance  Co.  v.  Connor,  17  Pa.  St.  136 ;  Stetson  v.  Kempton,  13 
Mass.  282. 

J9  Adley  v.  Whitstable  Co.,  17  Ves.  323. 

2°  As  in  Sopor  v.  Harvard  College,  1  Pick.  (Mass.)  177,  where  a  State 
statute  had  forbidden  innkeepers  to  give  credit  to  the  students  in  viola- 
tion of  any  rules  of  the  College. 

21  See  §  9  e. 

22  A  person  dealing  with  a  corporation  officer,  whose  duties  are  regu- 
lated by  the  by-laws,  is  chargeable  with  notice  of  the  limitations  of  his 
authority  contained  in  charter  and  by-laws  (Dabney  v.  Stevens,  40  How. 
Pr.  N.  Y.  341),  unless  the  bank  has  held  out  the  officer  to  such  person  as 
having  more  authority  than  is  actually  the  case,  and  even  this,  though  of 
superior  force  to  by-laws  and  private  instructions,  cannot  give  third 
persons  a  right  to  infer  authority  beyond  charter  limits.  Marsh  v.  Fulton 
County,  10  Wall.  676;  Clark  v.  Des  Moines,  19  Towa,  199.  Every  one 
must  take  notice  of  the  restrictions  in  the  articles  of  association  and  the 
rest  of  the  organic  law. 

115 


C  43  BY-LAWS   AND   THEIR   EFFECT. 

employ  the  bank  to  act  for  them  whether  they  know  of  the 
by-laws  or  not  '^^  (4)  by  affecting  transactions  into  which 
such  persons  enter,  being  reasonably  aware  that  the  bank 
will  be  a  factor  in  the  transaction,  and  having  actual  knowl- 
edge of  the  by-law  -^^  (5)  and  by  the  consent  in  any  other 
way  of  the  said  third  person  to  be  bound  by  the  said  by-laws. 
A  by-law  may  be  the  root  from  which  will  come  a  usage, 
that  shall  grow  into  common  law,  and  roof  all  with  its 
shade. 


116 


CHAPTER  Y. 

BUSINESS   OF   THE   BANK. TIME   AND   PLACE. 

§  43  A.   Analtsis. 
§  44.  The  Six  Questions. 
§  45.   Time.     When  can  a  bank  do  business. 
Beginning.     II.  §§  12,  17. 
Doing  business  before  it  is  authorized. 

"Exercise  of  Privilege"  requires  a  de  jure  corporation. 
Ordinary  business,  a  de  facto  corporation. 
Only  the  State  can  object.     §  726  d,  e;  %  758  cases. 
End  of  business.     §§  763,  766  ;  II.  §  46. 
(a)  Banlcing  hours.     §§  646,  647. 
Judicial  cognizance  of. 

Reasonableness  of,  —  what  is  reasonable  as  to  banking  business 
may  not  be  reasonable  as  a  limitation  upon  the  business  of 
others,  as  delivery  by  an  express  company. 
§  46.    Place.     §§  69  a,  168;  II.  §§  41,  108  (/,  141  L. 

Legal  home  in  State  where  created  or  located. 
Cannot  take  its  franchises  into  another  sovereignty,  but  may  do 
ordinary  business  in  another  State  through    agents,   if  it   has 
(6)        power  to  do  the  business  under  its  charter,  and  there  is  nothing 
to  prevent  in  the  law  of  its  own  State  or  that  in  which  it  under- 
takes to  do  the  business. 
(a)  May  buy  a  bill  of  exchange  in  another  State, 
(c)  May  hold  land. 

{d)  Cannot  issue  bank  notes  in  another  State, 
(e)  Nor  have  an  agency  for  deposit. 

(y)  Place  of  a  national  bank  is  the  locality  named  in  its  organization 
certificate. 

§  44.  Six  Questions  naturally  arise.  —  When  Can  the  bank 
do  business  ?  Where  must  it  be  done  ?  What  business  can 
it  do  ?  How  is  the  business  to  be  done  ?  What  rights,  du- 
ties, and  liabilities  arise  in  doing  it  ?  and,  What  is  the  effect 
of  the  acts  of  a  bank  beyond  its  authority  ? 

§  45.   Time.  —  A  bank  can  begin  business  as  soon  as  it  has 
obtained  its  charter  and  fulfilled  the  antecedent  conditions  of 
its  organic  law,  if  any.     Under  the  State  statutes   Beginning 
generally,  the  organization  certificate  must  be  duly   °  i'"suiess. 

IIT 


§  45  BUSINESS   OF  THE   BANK.  —  TIME   AND    PLACE. 

filed,  and  a  specified  portion  of  the  capital  paid  in.i  Under 
the  National  Banking  Act  the  execution  of  the  organization 
certificate  makes  the  bank  a  body  corporate,  but  no  business 
except  that  incidental  to  its  own  internal  organization  can  be 
done  until  authorized  by  the  comptroller  to  commence  the 
business  of  banking.^  And  under  Sec.  6134  of  the  Act,  a 
National  Bank  is  precluded  from  leasing  a  banking  house 
before  it  is  authorized  to  do  business,  and  in  such  case  may 
set  up  the  plea  of  ^dtra  vires  against  a  claim  for  rent. 2* 

If  a  bank  in  fact  enters  upon  the  exercise  of  business 
powers  before  it  has  a  right  to  (as  if  by  some  irregularity 
Bank  doing  or  informality  it  is  not  legally  constituted  a  bank 
befdrfit  is  "^i^^^  ^^^^  ^^S^l  powers  of  one),  no  objection  on  this 
autiiorized.  ground  Can  be  raised  by  any  private  person  to 
avoid  a  just  liability  arising  from  such  transaction,^  nor  can 
the  bank  raise  such  objection  when  sued.S'^  If  the  contract  is 
executory,  then  and  only  then  may  ultra  vires  be  set  up  as  a 
defense  (see  Ultra  Vires) ;  but  if  the  act  of  the  bank  is  the 
exercise  of  a  privilege  (or  power  to  do  an  act  of  a  nature  be- 
yond the  right  of  an  individual,  and  in  contravention  of  the 
common  rights  of  others,  which  only  the  sovereign  can  do  or 
authorize),  it  is  not  enough  for  it  to  be  a  de  facto  corporation, 
it  must  be  a  corporation  de  jure  ;  ^  for  no  one  shall  infringe 
upon  the  liberties  or  property  of  others  except  when  duly 
authorized.     See  §  726. 

1  §  45  R.  L.  of  Mass.  c.  115,  §  3.  One  half  must  be  paid  in  specie, 
and  examined  by  the  commissioners.  Same  with  national  bank.  See 
Part  II.  §  14. 

2  See  Part  IT.  §  8.     Long  v.  Citizens'  Bank,  8  Utah,  104  (29  Pac.  878). 
2-  McCormick  v.  Market  National  Bank,  162  111.  100  (44  N.  E.  381)  ; 

Suberger  v.  McCormick,  178  111.  404  (53  N.  E.  340)  (1899). 

3  Allison  V.  Hubbell,  17  Ind.  559;  Southern  Bank  v.  Williams,  25  Ga. 
534;  Bank  of  Port  Jefferson  v.  Darling,  91  Hun  (N.  Y.)236;  Bair  v. 
Bank,  27  Neb.  .577  (43  N.  W.  347)  (1895)  ;  Piatt  Valley  Bank  v.  Hard- 
ing, 1  Neb.  461;  ]\Iissouri  Valley  Land  Co.  v.  BushnelL  11  Neb.  192 
(8  N.  W.  389)  ;  Exchange  National  Bank  v.  Capps,  32  Neb.  242  (49 
N.  W.  243)  (1891). 

3»  Kellogg  V.  Douglass  Bank,  Same  v.  Latham,  Same  v.  Chemical 
National  Bank,  58  Kan.  43  (48  Pac.  587)  (1897). 

4  N.  Y.  Cable  Co.  v.  Mayor,  etc.,  of  N.  Y.  143  (10  N.  E.  146). 

118 


BANK   HOURS.  §  45 

This  reason  does  not  apply  to  the  cases  above,  in  which  a 
de  facto  bank  lends  money,  receives  deposits,  or  does  other 
acts  in  the  nature  of  contract,  and  which  do  not  involve  the 
exercise  of  privilege.  Justice  between  the  parties  in  such 
matters  is  not  affected  by  any  question  of  the  bank's  proper 
organization.     §  726. 

The  hank  can  never  take  advantage  of  its  own  wrong  to 
avoid  liability  for  tort,  or  on  a  contract  implied  upon  the  facts, 
or  any  just  liability  in  tlie  case.  For  instance,  stockholders 
cannot  escape  their  usual  liability  to  redeem  circulation  be- 
cause of  irregular  organization  of  the  bank.^ 

The  termination  of  a  bank's  power  to  do  business  will  be 
considered  under  the  heads  of  Dissolution  (§  766)  and  For- 
feiture (§  722).  It  may  be  noted  here,  that  the  mere  happen- 
ing of  such  a  breach  of  law  as  may  cause  forfeiture  may  not 
of  itself  affect  the  business  powers  of  the  bank.  Its  subse- 
quent acts  are  valid,  for  the  State  may  waive  the  forfeiture, 
and  the  right  of  the  bank  to  continue  its  business  remains 
until  forfeitui'e  is  judicially  declared. 

All  these  rules  may  be  altered  by  express  legislation. 

(a)  Banking  Hours.  — Between  the  boundaries  above,  the 
bank  may  adopt  reasonable  (and  what  is  reasonable  varies 
according  as  the  rule  affects  only  banking  business  or  the 
business  of  others  as  well)  rules  and  usages  concerning  the 
hours  of  each  day  within  which  it  will  do  business.  Such  a 
usage  will  be  judicially  recognized.  The  remainder  of  this 
section  is  devoted  to  these  two  points,  the  judicial  recognition 
and  the  reasonableness  of  banking  hours. 

Whether  or  not  the  courts  will  take  judicial  cognizance  of 
what  are  banking  hours  in  any  particular  place  is,  of  course, 
a  question  which  must  be  decided  specially  concern-  jy^jj^j^i 
ing  that  particular  place.  Undoubtedly,  no  court  cognizance. 
would  take  judicial  cognizance  of  the  banking  hours  of  any 
place  not  lying  within  the  area  of  the  jurisdiction  of  the  court. 
The  English  courts  take  judicial  notice  of  what  are  banking 
hours  in  the  "  city,"  so  called,  of  London ;  ^  but  in  other  parts 

6  McDougald  v.  Bellamy,  18  Ga.  411. 

®  Parker  v.  Gordon,  7  East,  385 ;  Jameson  v.  Swinton,  2  Taunt.  224. 

119 


§  45  BUSINESS   OF   THE   BANK.  —  TIME   AND    PLACE. 

of  London,  and  in  other  cities  and  towns,  the  hours  must  be 
proved.^  The  fact  of  what  was  the  hour  for  closing  a  certain 
bank  in  the  city  of  New  York  was  also  found,  as  an  essential 
fact,  by  the  court,  in  reporting  a  case  for  decision  of  questions 
of  law.^ 

"  Banking  hours  "  are  so  far  recognized  by  the  courts  that 
any  transaction  in  the  ordinary  course  of  banking  business, 
which  is  to  be  had  with  the  bank  upon  any  day,  must  be  had 
within  "  banking  hours"  upon  that  day.  Thus,  a  notice  left 
with  a  bank  after  expiration  of  such  hours  on  any  day  is 
operative  as  notice  only  at  and  from  such  later  time  as,  in  the 
ordinary  course  of  business,  it  is  opened  and  read.^ 

If  a  bank  should  say  it  would  pay  deposits  only  during  a 

certain  five  minutes  each  day,  that  might  be  considered  un- 

u,         reasonable,  and  when  the  limitation  affects  the  time 

Reasonable-  ' 

ness.  within  which  others  may  perform  their  peculiar 

business,  as,  for  example,  when  an  express  company  may 
deliver  packages  to  the  bank,  a  different  standard  of  reason- 
ableness applies  from  what  is  proper  when  the  rule  only  affects 
the  hours  within  which  the  public  may  avail  themselves  of 
the  facilities  of  the  bank. 

A  rule  that  the  bank  would  not  receive  deposits  after  three 
o'clock  would  be  reasonable,  and  though  the  officers  should 
remain  in  the  bank  an  hour  or  two  they  would  not  be  bound  to 
receive  deposits  after  that  time ;  but  when  the  rule  regulates, 
not  banking  business,  but  the  business  of  a  carrier,  for  exam- 
ple, the  convenience  of  the  latter  must  be  considered  as  well 
as  that  of  the  bank. 

In  a  Wisconsin  case,''^  the  bank  had  after  banking  hours 
received  packages  coming  on  a  certain  train  by  express 
many  times,  the  teller  being  usually  the  receiving 
Amer.  Ex''-"  officcr.  The  cxprcss  agent  on  the  day  of  the  trou- 
press  Co.  ^^^  offered  a  package  to  the  teller,  in  the  bank 

after  hours,  but  at  such  time  as  they  had  been  often  before 

T  Hare  v.  Henty,  10  C.  B.  n.  s.  65. 

8  Salt  Springs  kational  Bank  v.  Burton,  58  N.  Y.  430. 

9  Calisher  v.  Forbes,  41  L.  J.  Ch.  56. 

1''  Marshall  v.  American  Express  Co.,  7  Wis.  1. 

120 


BANK   HOURS    AND   EXPRESS   DELIVERY.  §  45 

received,  the  package  having  come  on  the  train  just  mentioned. 
The  teller  said,  "Fred,  you  will  have  to  take  the  package  back 
with  you,  for  the  cashier  has  gone  to  tea."  The  court  said, 
that  what  are  reasonable  hours  for  receiving  deposits,  dis- 
counting bills,  &c.,  are  not  necessarily  reasonable  hours  for 
receiving  express  packages,  and  a  bank  cannot  declare  it  will 
not  receive  from  a  carrier  after  what  it  calls  banking  hours, 
and  thereby  thrust  on  him  a  continuance  of  his  extraordi- 
nary responsiblity  ;  the  carrier  after  such  offer  is  a  gratuitous 
bailee. 

In  Kentucky  the  court  said,  in  substance:  "In  the  ab- 
sence of  proof  of  usage  in  New  Orleans  as  to  delivery  within 
banking  hours,  or  of  any  reference  to  banking  Young  v. 
hours  in  the  contract  with  the  carrier,  we  do  not  S""^**- 
perceive  that,  as  matter  of  law,  the  right  to  deliver  a 
box  of  specie  is  restricted  to  banking  hours.  If  in  making 
or  offering  to  make  the  delivery  the  convenience  of  the  person 
who  is  to  receive,  and  the  safety  of  the  commodity  after 
it  is  received,  are  to  be  regarded,  as  they  jyrohably  should  be, 
to  a  reasonable  extent,  it  would  seem  sufHcient  if  the  offer 
were  made  at  any  time  of  the  day  when  the  business  houses 
of  the  city  were  open,  and  when  convenient  means  were  at 
hand  for  the  safe  transportation  of  the  article  from  the 
wharf."  11 

In  this  case  the  consignee  of  the  specie  ivas  not  a  bank,  but 
a  private  person,  and  though  he  desired  to  deposit  in  bank, 
nothing  had  been  said  to  the  carrier  about  delivery  Discussion  of 
with  reference  to  this  purpose.  But  suppose  a  ^''^^^  cases. 
bank  has  a  vault  with  a  time  lock,  would  it  be  reasonable  to 
hold  good  a  delivery  after  that  lock  was  set,  even  though  some 
of  the  officers  might  be  found  in  the  bank?  And  an  offer 
to  deliver  when  the  bank  is  shut  and  the  officers  gone  is 
clearly  bad.i^  If,  as  the  Kentucky  judge  said  above,  the  con- 
venience of  the  consignee  and  the  safety  of  the  commodity  are 
to  be  regarded,  it  would  seem  clear  that,  when  the  bank  has 
closed  its  vaults  and  the  officer  who  can  open  them  is  gone, 
or  if  they  are  fastened  with  time  locks,  it  would  not  be  rea- 

"  3  Dana,  (Ky  )  91.  ^  Merwin  v.  Butler,  17  Conn.  138. 

121 


§  46  BUSINESS   OF   THE   BANE. — TIME   AND    PLACE. 

sonable  to  hold  the  hank  bound  to  receive  the  money,  unless, 
as  in  the  Wisconsin  case,  there  was  a  custom  to  receive  after 
Jiours.  A  grocer  is  not  obliged  to  stay  at  his  place  of  business 
to  receive  express  matter  after  the  hours  usual  in  mercantile 
business.  Why  should  a  banker  have  to  be  ready  beyond  the 
hours  recognized  as  usual  for  the  bank  to  be  open  and  do 
business  ?  Of  course,  if  he  is  at  the  bank,  and  can  receive  the 
package  without  any  further  inconvenience  than  reopening 
his  safe,  he  should  do  so.  The  fair  thing  would  seem  to  be, 
not  that  a  bank  must  receive  after  the  ordinary  banking 
hours  or  lose  all  redress  except  for  gross  negligence  of  the 
carrier  ;  nor  that  the  carrier  continues  an  insurer,  but  that, 
after  the  consignee  knows  of  the  arrival  of  the  package,  the 
carrier  is  held  to  ordinary  diligence,  no  more  nor  less,  that 
is,  a  warehouse  liability,  until  the  banking  hours  of  the  next 
day,  when  the  bank  can  with  convenience  and  safety  receive 
the  money. 

§  46.  Place.  A  bank  has  its  legal  home  ^  in  the  State  by 
which  it  is  created,  or,  in  case  of  a  national  bank,  the  State  in 
which  it  is  located  or  organized.^*  Its  domicil  ^  is  there  and 
it  is  a  citizen  ^  of  that  State  in  reference  to  suing  in  any  State 
or  Federal  court ;  it  cannot  transfer  its  franchises  ^"'  into  any 

1  §  46.  The  language  of  Waite,  C.  J.,  in  Ex  parte  Schollenberger,  96 
U.  S.  309. 

i«  Linton  v.  Childs  105  Ga.  567  (32  S.  E.  617)  (1898);  National 
Bank  i;.  Golland,  14  Wash.  502  (45  Pac.  315)  (1890). 

2  Adams  v.  Raikoad,  6  H.  &  N.  404;  Maclaren  v.  Stainton,  16 
Beav.  279. 

3  See  Green's  Ultra  Vires  (1880),  p.  4  ;  Ducat  v.  Chicago,  48  111.  172  ; 
Fargo  v.  McYicker,  38  liow.  Pr  N.  Y.  1.  But  in  other  respects  than  tlie 
right  of  bringing  suits,  a  corporation  has  no  status  in  other  States  as  a 
citizen  of  its  creator. 

2"  A  corporation  cannot  migrate  beyond  its  own  State.  Runyan  v. 
Lessee  of  Coster,  14  Pet.  122,  131.  The  corporation  itself  cannot  act 
validly  beyond  the  territory  of  its  sovereign,  and  the  first  meeting  in  New 
York  of  a  Maine  corporation  is  void.  But  the  directors  may  act  val- 
idly in  another  State,  as  where  the  directors  of  a  Vermont  corporation 
met  in  Massachusetts  and  granted  mortgages,  the  action  was  valid. 
Arms  V.  Conant,  36  Vt.  745 ;  see  Galveston  R.  R.  Co.  v.  Cowdrey,  11 
Wall.  459. 
122 


LOCALITY.  §  46 

other  sovereignty  ;  "  it  exists  by  force  of  the  law  creating  it, 
and  where  that  ceases  to  operate  it  can  have  no  existence."* 

But  such  ordinary  business  as  its  organic  law  gives  it  power 
to  do,  it  may,  by  its  agents,  transact  in  any  other  State,  urdess 
prohibited  by  its  charter,  or  by  the  laws  or  policy  of  such  other 
State.^  Agencies  for  specific  purposes,  as  for  the  redemption 
of  bills  or  the  dealing  in  bills  of  exchange,^  may  be  established 
in  other  places.  In  these  cases,  it  is  for  the  convenience  of 
the  public  that  such  should  be  the  case.^  But  there  is  no  case 
which  holds  that  an  agency  for  the  exercise  of  the  more  im- 
portant and  valuable  functions,  such  as  issuing  circulating 
paper  or  discounting  notes,  or  an  agency  designed  to  carry 
on  the  general  business  of  banking,  would  be  regarded  as 
legal.  For  such  nominal  establishment  of  agencies  might 
easily  result  in  the  practical  establishment  of  a  network  of 
branch  banks  throughout  the  home  State  or  in  other  States. 

States  differ  in  their  corporation  laws  ;  some  restrict  the 
"capital ;  some  make  the  stockholders  individually  liable  ;  some 
require  deposits  with  the  State  for  the  security  of  the  public. 
Of  course  no  State's  comity  will  extend  to  allow  the  corpora- 
tions of  other  states  in  which  no  such  laws  exist,  to  come  and 
undermine  such  regulations.  Such  a  State  will  say  to  foreign 
corporations,  "  If  you  wish  to  do  business  here,  you  must  put 
yourselves  under  my  laws." 

Some  business,  as  receiving  deposits,  certifying*^  checks,  and 
giving  information  of  most  kinds,  ^  must  be  done  at  the  bank- 
ing house,  or  place  set  apart  for  those  purposes  by  the  bank, 

4  Bank  of  Augusta  v.  Earle,  13  Pet.  519. 

5  See  on  the  general  principle,  Paul  v.  Virginia,  8  Wall.  168;  Ex  parte 
Schollenberger,  96  U.  S.  369 ;  Newburg  Petroleum  Co.  v.  Weare,  27  Ohio 
St.  343. 

6  See  (a),  p.  118,  and  (e),  p.  120. 

''  City  Bank  of  Columbus  v.  Beach,  1  Blatchf.  C.  C  425 ;  Bank  of  Au- 
gusta V.  Earle,  13  Pet.  519;  People  v.  Oakland  County  Bank,  1  Dougl. 
(Mich.)  282;  Tombigbee  R.  R.  Co.  Kneeland,  4  How.  U.  S.  16. 

*  A  bank  can  reject  an  acceptance  of  a  cashier  made  away  from  the 
bank,  if  before  his  return  anything  happens  that  would  make  such  ac- 
ceptance improper,  except  as  against  a  bonafde  purchaser  without  notice. 
Bullard  v.  Randall,  1  Gray,  (Mass.)  605.     See  however  (/"),  p.  120. 

9  Merchants'  Bank  v.  Rudolf,  5  Neb.  527.     See  p.  121. 

123 


§  46  BUSINESS   OF  THE   BANK. — TIME   AND   PLACE. 

and  cannot  be  done  so  as  to  bind  the  company  by  an  officer 
Officers  away  from  the  bank ;  other  business,  as  receiving 

ness  away'  information,  and  collecting  debts,  may  be  done  by 
ban'k"'see  ^"  officcr  away  from  the  bank;  the  question  is, 
§  168.  "  Does  the  proper  performance  of  the  business  re- 

quire any  knowlege  or  appliances  that  can  only  be  fully  pos- 
sessed at  the  office."  ^'^ 

(a)  The  Chief  Justice  of  the  United  States  Supreme  Court 
Bank  of  has  Said,  "  Natural  persons  through  the  interven- 

E^He!*^  "'  tion  of  agents  are  continually  making  contracts  in 
biH'of'ex-^  countries  in  which  they  do  not  reside,  and  where 
change  in  an-  they  are  not  personally  present  when  the  contract 

other  State.  •'  ^  •'    ^  i  i      . 

is  made  ;  and  nobody  has  ever  doubted  the  validity 
of  these  agreements.  And  what  greater  objection  can  there 
be  to  the  capacity  of  an  artificial  person,  by  its  agents,  to 
make  a  contract  within  the  scope  of  its  limited  powers,  in  a 
sovereignty  in  which  it  does  not  reside,  provided  such  con- 
tracts are  permitted  to  be  made  by  it  by  the  laws  of  the 
place  ?  The  corporation  must  no  doubt  show  that  the  laws  of 
its  creation  gave  it  authority  to  make  such  contracts,  through 
such  agents." 

In  this  case,  a  Georgia  bank  having  power  to  purchase  bills 
of  exchange  had  by  its  agent  bought  a  bill  in  Alabama.  The 
Circuit  Court  decided  that  a  Georgia  bank  could  not  exercise 
its  powers  of  discounting  in  another  State,  but  the  Supreme 
Court,  in  a  powerful  opinion,  of  which  the  above  is  a  fragment, 
reversed  the  Circuit  decision,  holding  that  the  comity  of  na- 
tions was  administered  by  the  courts  of  the  various  States,  and 
acknowledged  by  them  as  a  proper  ground  of  judgment,  and 
that  when  the  organic  law  of  the  bank  allows  it  to  make  such 
contract  in  another  State,  and  such  transaction  is  not  con- 
trary to  the  law,  policy,  or  interests  of  such  State,  there  is  no 
reason  for  refusing  to  sustain  the  contract.  This  was  done 
in  this  case,  establishing  a  rule  that  has  been  followed  in  New 
York,  Missouri,  Massachusetts,  Louisiana,  and  other  States, 
and  may  be  regarded  as  settled  law.^*'" 

^°  See  on  this  subject  "  Cashier,"  §  168. 

10"  A  foreign  banking  corporation  purchasing  a  note  in  the  State,  but 
124 


DOING   BUSINESS   IN   ANOTHER  STATE.  §  46 

(J)  The  corporation  must  show  that  the  law  of  its  creation 
gave  it  authority  to  make  such  contracts  as  those  it  seeks 
to  enforce.  Yet,  as  in  case  of  a  natural  person,  it  is  not 
necessary  that  it  should  actually  exist  in  the  sovereignty 
in  which  the  contract  is  made.  It  is  sufficient  that  its  ex- 
istence, as  an  artificial  person,  in  the  State  of  its  creation,  is 
acknowledged  and  recognized  by  the  State  or  nation  where 
the  dealing  takes  place,  and  that  it  is  permitted  by  the 
laws  of  that  place  to  exercise  the  powers  with  which  it  is 
endowed.^^ 

(^)  In  those  States  where  there  are  no  general  statutes  or 
settled  policy  restricting  them  in  this  respect,  corporations  of 
other  States  may  purchase   and  hold  lands  ad  libi-  Holding  land 

.,,,.,,  •         l^  ii  •"  Other 

tum^  provided  their  charters  give  them  the  compe-  states. 
tent  power.^2 

(c?)  In  Virginia,  it  was  decided  that  no  recovery  could  be 
bad  upon  notes  there  issued  by  a  banking  corporation  of 
another  State,  through   an   agency  established  in   ,^ 

'  °  .  .  Notes  issued 

Viro-inia,   inasmuch   as    such    banking   operations    in  another 

State. 

were  contrary  to  the  policy  of  the  statute  against 
unincorporated  banking  companies ;  though  it  was  admitted 
that  notes,  originally    negotiated   and  indorsed   in  Virginia, 
and   that    contracts   ancillary  to   banking  operations,  might 
legally  be  made  there  by  such  a  corporation.^^ 

having  no  purpose  to  do  any  other  act  in  the  State,  is  not  "  transacting 
business"  in  the  State.  Commercial  Bank  v.  Sherman,  28  Or.  572  (45 
Pac.  658)  (1896)  ;  Bank  of  British  Columbia  v.  Page,  6  Or.  431 ;  Hacheny  v. 
Leary,  12  Or.  40  (7  Pac.  329). 

11  Commercial  Bank  of  Vicksburg  v.  Slocomb,  14  Pet.  60 ;  Irvine  v. 
Lowry,  14  Pet.  293.  And  see  Bank  of  Augusta  v.  Earle,  13  Pet.  584; 
Ohio  Railroad  Co.  v.  Wheeler,  1  Black,  286. 

12  Silver  Lake  Bank  v.  North,  4  Johns.  Ch.  (N".  Y.)  370;  Lumbard  v. 
Aldrich,  8  N.  H.  34  ;  Lathrop  v.  Commercial  Bank  of  Scioto,  8  Dana, 
(Ky.)  llf);  Bank  of  Washtenaw  v.  Montgomery,  2  Scam.  (III.)  428;  2 
Kent,  Com.  2»4,  285;  New  York  Dry  Dock  v.  Hicks,  5  McLean,  111; 
Farmers'  Loan  Co.  v.  McKinney,  6  id.  1.  The  burden  is,  however,  upon 
the  corporation  or  those  claiming  under  it,  to  show  that  by  its  charter 
it  is  a  body  politic  authorized  to  take  or  convey  lands.  Lumbard  v. 
Aldrich,  8  N.  H.  34. 

"  Bank  of  Marietta  v.  Pindall,  2  Rand.  (Va.)  465. 

125 


§  46  BUSINESS   OP  THE   BANK. TIME    AND   PLACE. 

(e)    Having  an  agency  to  receive  deposits  in  another  county 

than  that  of  the  bank's  location,  contrary  to  charter,  is  a  cause 

of  forfeiture,  thougli  an  agency  to  redeem  bills  is 

deposits  in       not.^*     So  it  is    uulawful  for  a  national    bank  of 

another  State.  -»t  t  ^      i  j.  i.  •  i  -^      • 

j\ew  Jersey  to  have  an  agent  to  receive  deposits  in 
Philadelphia.^^ 

A  bank  within  the  sphere  of  its  action  may  bind  itself  to 
do  any  act  in  ayiy  place }^ 

(/)  The  place  named  in  the  organization  certificate  fixes 
the  locality  of  a  national  bank,i"  and  its  general  business  must 
National  bc  douc  there  ;^^  but  this  provision  is  to  be  con- 
bauk's  locus.  gf;j.ue(j  reasonably.  "  The  business  of  every  bank 
away  from  its  office — frequently  large  and  important  —  is 
unavoidably  done  at  the  proper  place  by  the  cashier  in  per- 
son ;  or  by  correspondents  or  other  agents."  So,  where  a 
cashier  bought  gold  and  paid  for  it  by  certifying  checks  at  the 
counter  of  another  bank,  it  was  held  proper.^^ 

A  national  bank  in  another  State  cannot  have  an  officer  of 
discount  or  deposit  in  New  York.^o 

A  national  bank  cannot  make  a  valid  contract  for  the  cash- 
ing of  checks  upon  it,  at  a  different  place  from  that  of  its 
residence,  through  the  agency  of  another  bank.^i 

But  representations  that  a  note  is  good,  made  by  a  cashier 
in  another  city,  bind  the  bank.^^ 

"  People  V.  Oakland  County  Bank,  1  Doug.  (Mich.)  2S2. 

"  National  Bank  of  Caniden  v.  Pierce,  18  Alb.  Law  J.  16. 

16  Bank  of  Utica  v.  Smedes,  3  Cowen  (N.  Y.),  684;  McCall  v.  Byram 
Manufacturing  Co.,  6  Coun.  428. 

1'  Cooke  V.  State  National  Bank,  52  N.  Y.  96  ;  National  Bank  v. 
Galland,  14  Wash.  502  (45  Pac.  315)  (1896). 

18  Burton  v.  Burley,  12  Leg.  News,  178;  s.  c,  9  Rep.  301. 

13  Merchants'  National  Bank  v.  State  National  Bank,  10  Wall.  604. 

2°  National  Bank  of  Fair  Haven  v.  The  Phcenix  Bank,  6  Hun  (N.  Y.)  71. 

21  Armstrong  v.  Second  Nat.  Bank,  38  Fed.  R.  883  (Ohio). 

22  Houghton  V.  First  National  Bank,  26  Wis.  663;  Bissell  v.  First 
National  Bank,  69  Pa.  St.  415. 


126 


CHAPTER  VI. 

BUSINESS    POWERS. 

§  46  A.  Analysis. 

§  47.    Business  Powers,  Express  or  Implied,  Original  and  Incidental. 

(a)  History  is  a  proper  guide  as  to  wliat  constitutes  banking  business. 
(6)  Fundamentals,  banks  not  created  for  traffic,  but  to  receive  de- 
posits and  lend  money  for  tiie  accommodation  of  the  public 
and  the  profit  of  stockholders,  and  power  to  issue  money  is 
sometimes  added. 
§  48.    The  Banking  Powers. 

(1)  To  receive  deposits,  special,  specific,  and  general,  and  give  secu- 

rity.    §§  171,  191. 

(2)  To  loan  money  on  real  or  personal  security,  &c.     §§  74-76,  75  d, 

125, 128,  160,  173,  357,  753,  755,  761  ;  II.  §§  35,  129. 
§  49.  (3)  To  buy  and  sell  exchange,  coin,  and  bullion,  to  sell  its  property, 

deal  in  checks,  and  to  purchase  bills  and  notes.     §§  72,  73. 
§  50.  (4)  To  discount  negotiable  paper  and  negotiate  the  same.     §§  72, 73 ; 

§  9,  n.  9;  §§117,125,  134. 
§  61.  (5)  To  give  certificates  of  deposit,  and  a  prohibition  against  issuing 

notes  to  circulate  as  money  does  not  affect  this  power.     §§  296- 
309  •,  II.  §  78. 
§  52.  (6)  To  act  as  agent  in  some  financial  dealings,  collection,  remission, 

&c.     §§213,264. 
§  53.  (7)  To  issue  bank  notes,  if  the  power  is  specially  conferred.     §  633. 

Incidental  Powers. 
§  54.  Unless  restricted,  a  bank  may  do  any  act  to  accomplish  the  ends 

of  its  creation  that  an  individual  could  do  for  the  same  end. 
§  66.  Holding  real   estate,   general    rule.      §  12,  n.  4  •,    §§  74-76,  169 ; 

II.  §§  28,  128. 

Statutes  of  Mortmain. 
Devise. 
§  66.  Making  contracts.     §  12,  (5),  (6),  (7),  n.  3, 4, 5,  9, 10,  §§  70,  144  d,  e, 

m,  162,  109,  170,  722,  744. 
Test  of  its  power. 
Modern  tendency  is  to  liberality. 
A  contract  is  presumed  to  be  for  a  proper  purpose.     II.  §  128. 
Agreement  to  recover  stolen  deposit  good. 
§  57.  May  settle  claims. 

§  68.  May  take  goods  on  credit. 

127 


§  47  BUSINESS   POWERS. 

§  59.  May  deal  in  government  securities.     National  hank  may  not  loan 

on  its  own  stock,  State  bank  may.     Any  bank  can  loan  on  otlier 
stocks,  but  not  buy  and  sell  tliem.     §§  77  a,  104  ;  TI.  §  35. 
§  60.  To  save  a  debt,  may  even  carry  on  temporarily  a  foreign  business. 

§§  77  a,  6,  78. 
§  61.  Surplus  capital  may  be  used  in  other  business.     §  60.     Tax  on. 

II.  §  Ul,p,  t. 
§  62.  Alienation  of  Property.     §  721. 

Gift.     §  65. 
§  03.  May  borrow  on  time  when  reasonably  necessary  in  the  conduct  of 

the  business  of  the  bank,  and  negotiable  paper  or  mortgage  security 
may  be  given      §§  1 10  a,  100  a,  b. 
§  G4.  May  draw  checks,  and  indorse  them,  or  any  other  paper  properly 

coining  to  it.     §§  154,  158. 
§  65.  A  bank  cannot  lend  its  credit.     It  cannot  be  a  guarantor  or  surety 

where  it  has  no  interest.     It  cannot  indorse  for 
Guaranty.  accommodation,   but   may    warrant  goods,    or 

Warranty.  guarantee  or  indorse  negotiable  paper.    §§  156, 

Accommodation.       j^g,  745  .^  748. 

§  66.  Dividends,   Surplus.     §§  128,  699  e,  708,  716,  717  ;  U.  §§  33,  34,  35, 

50  r,  112,  1.35. 
§  67.  Abandonment  of  a  part  of  its  franchises. 

§  68.    Eestrictions  on  the  Powers  of  a  Bank. 
§  69.  Express  Restrictions  as  to 

(a)  Place.     §  168. 

(6)  Time.      §  168. 

(c)  Traffic. 

(d-l),  (n,  o)     Debts  and  Loans.      §§  128,  753,  755,  701 ;  II.  §§  29, 

35,  36,  129. 
(I)  and  (m)      Real  Estate.      §  12,  n.  4,  §§  74-76,  169;  II.   §§  28, 

128. 
{n,  o)  Interest.      §  12,  n.  15,  §§  309,  750 ;  II.  §§  30,  130, 

150  c. 
(p-u)  Circulation.     §  633. 

(»)  Capital.     §§  14,  127  ;  II.,  §§  12-15,  37,  38,  81, 113. 

§  70.  [w)  Form  of  contract.     §§  12  (6),  (7),  98  L,  144,  162,  169, 

170,  722,  744. 
§  71.  Common  Law  Restrictions. 

§  47.  "What  Business  can  a  Bank  do  ?  —  The  business  powers 
of  a  bank  are  either  express  or  imj^Hed,  and  are  conveniently 
divided  into  (1st)  Primary  or  Principal,  or  Banking  Powers, 
for  the  exercise  of  which  it  is  created,  and  (2)  Incidental 
Powers,  or  such  as  are  necessary  or  usual  and  convenient  for 
the  attainment  of  the  purposes  of  its  creation. 

It  is  necessary  to  confer  in  distinct  terms  in  the  charter  or 
act  of  incorporation  only  those  powers  which  the  company 
128 


WHAT   BUSINESS    CAN    A    BANK    DO  ?  §  47 

could  not  otherwise  exercise,  or  those  concerning  which  there 
might  be  some  doubt.  Various  powers  liave  been  at  different 
times  declared  by  the  courts  to  be  inherent,  and  to  be  prop- 
erly enjoyed  by  banking  associations  simply  by  virtue  of  their 
creation  and  existence  as  such,  and  for  the  designated  end  of 
conducting  the  banking  business.  Bat  powers  of  this  nature, 
being  based  only  upon  a  legal  implication,  must  be  used  only 
in  a  manner  and  for  purposes  strictly  consistent  with  such 
restrictions,  and  in  furtherance  of  such  duties  as  are  specifi- 
cally prescribed  by  law. 

(a)  In  regard  to  matters  not  clear  upon  statute  or  binding 
decisions,  it  is  a  proper  method  of  ascertaining  what  is  legit- 
imately within  the  scope  of  the  business  of  banking,  and  what 
are  the  powers  of  corporations  formed  for  the  purpose  of 
carrying  on  that  business,  to  refer  to  the  history  of  banking 
and  the  definitions  of  lexicographers.^ 

The  powers  of  a  bank,  so  far  as  established  by  statutes  and 
decisions,  will  be  of  course  judicially  ^  noticed  by  the  courts  ; 
and,  as  the  business  of  bankers  is  part  of  the  law  merchant, 
courts  judicially  notice  the  universal  custom  of  bankers. 

(b)  The  heart  of  the  law  of  banking  is  that  a  bank  has 
such  powers  as  are  requisite  for  the  safe  and  convenient 
attainment  of  the  purposes  of  its  incorporation,  t]ie  chief 
of  these  being  to  provide  a  place  of  safety  in  which  the 
public  may  keep  money  and  other  valuables^  and  to  lend  its 
own  money ^    and    that  of   others  deposited    with   it    (unless 

1  §  47.    Pattison  v.  Syracuse  National  Bank,  80  N.  Y.  94. 

So  the  existence  and  nature  of  a  corporate  power  may  sometimes  be 
even  in  this  advanced  state  of  the  law  a  question  of  fact,  though  usually 
one  of  law. 

2  In  England,  it  has  been  declared  by  Lord  Campbell  that  the  nature 
of  the  business  of  bankers  is  a  part  of  the  law  merchant,  and  will  be 
judicially  noticed  by  the  courts.  Bank  of  Australasia  v.  Breillat,  6  Moore, 
P.  C.  173.  It  is  the  same  in  the  United  States :  men  of  business  are  pre- 
sumed conclusively  to  know  the  system  by  which  nearly  all  banks  in  the 
country  transact  monetary  affairs,  by  checks,  drafts,  and  certificates  of 
deposit,  and  courts  take  judicial  notice  of  such  customs.  British  & 
American  Mortgage  Co.  v.  Tibballs,  63  Iowa,  468  (19  N.  W.  319). 

2  It  is  money,  not  its  credit,  that  a  bank  is  to   lend.     There  is  too 
VOL.  I. —  9  129 


S  48  BUSINESS  POWERS. 

specially  deposited)  for  a  profit,^  and  to  act  as  agent  in  the 
remission  and  collection  of  money.  If  it  is,  by  its  organic 
law,  a  bank  of  issue,  it  has  one  more  fundamental  purpose, 
namely,  to  provide  the  public  with  a  convenient  currency  in 
the  shape  of  promissory  notes  intended  to  circulate  as  money. 

It  will  be  a  great  aid  to  a  clear  understanding  of  the  cases 
to  keep  these  foundation  facts  in  view,  especially  in  reading 
the  decisions  relating  to  usury.  Every  transaction  of  a  bank 
that  is  really  a  parting  with  its  money  for  a  time  is  regarded 
as  a  loan  so  far  as  usury  is  concerned,  and  the  bank  will  not 
be  allowed  to  make  more  than  lawful  interest  taken  in  ad- 
vance, although  an  individual  might  make  a  greater  profit  by 
an  exactly  similar  proceeding.  It  is  not  the  purpose  of  bank- 
ing to  make  a  profit  by  trafficking,  as  a  merchant  does,  but 
allowing  the  public  to  use  the  bank's  funds  for  a  fair  return. 

But  a  bank  is  entitled  to  receive  indemnity  for  expense  it 
incurs,  as  in  the  remission  or  collection  of  money,  and  may 
make  a  reasonable  charge  for  labor  and  service,  and  if  by  the 
express  terms  of  a  contract  the  principal  is  hazarded,  as  in 
case  of  a  bottomry  loan,  the  bank  may  charge  for  this  risk. 
These  are  none  of  them  charges  simply  for  the  use  or  forbear- 
ance of  money,  and  so  are  not  within  tlie  usury  laws. 

The  business  of  a  bank  is  not  "  traffic,"  or  buying  and  sell- 
ing to  gain  by  advance  in  the  price  received  over  that  given, 
nor  speculation  of  any  kind,  but  receiving  deposits  and  lend- 
ing money  for  the  accommodation  of  the  public  and  the  profit 
of  the  stockholders. 

This  is  the  root  from  which  grows  most  of  the  law  of  banking. 

§  48.  The  Banking  Powers  arc  those  which  are  either  fun- 
damental parts  of  the  business,  or  have  become  so  linked  with 
them  as  to  be  identified  with  the  exercise  of  the  banking 
franchises. 

much  business  done  already  on  baseless  credit  to  need  to  create  corpora- 
tions for  the  purpose.  Johnston  Bros.  i'.  Charlottesville  National  Bank, 
3  Hughes,  G57. 

*  A  bank  is  to  be  conducted  for  the  benefit  of  its  stockholders,  as  well 
as  for  that  of  tfie  public,  and  it  cannot  (unless  every  stockholder  assents) 
give  away  its  money,  or  the  use  of  it. 

130 


WHAT   DEPOSITS   A    BANK   MAY   RECEIVE.  §  48 

The  United  States  statutes  constitute  the  measure  of  the 
authority  of  national  banks,  and  they  cannot  rightfully  exer- 
cise any  powers  except  those  expressly  granted,  or  which  are 
incidental  to  carrying  on  the  business  for  which  they  are 
established.^ 

1.  A  bank  may  receive  special,^  specific,^  and  general  ^  de- 
posits, and  give  security  for  them.     See  §  63. 

0  California  Bank  v.  Kennedy,  167  U.  S.  362-366  (1897)  ;  Logan  Bank 
V.  Townsend,  139  U.  S.  67,  73. 

1  §  48.  In  Whitney  v.  First  National  Bank  of  Brattleboro,  50  Vt.  388, 
the  court  held  that  a  national  bank  had  no  power  to  receive  special  de- 
posits without  profit,  and  if  it  did  it  was  not  responsible  for  their  safe 
keeping,  even  though  received  with  the  acquiescence  of  directors.  The 
ofBcer  receiving  is  the  depositor,  not  the  bank. 

In  First  National  Bank  v.  Ocean  National  Bank,  60  N.  Y.  279,  the 
court  questioned  the  power  of  national  banks  to  receive  special  deposits, 
but  if  the  directors  sanctioned  the  receipt  of  them  the  bank  would  be 
bound.  This  was  one  degree  above  the  zero  of  logic  in  the  Vermont 
case  and  in  National  Bank  v.  Graham,  79  Pa.  St.  106,  the  court  (disagree- 
ing expressly  with  .50  Vt.)  held  that  the  directors  could  authorize  or  sanc- 
tion the  receipt  of  special  deposits  as  being  a  part  of  the  immemorial 
usage  of  banking,  —  indeed  it  was  the  root  from  which  grew  the  whole 
business. 

And  now  the  question  is  set  at  rest  by  the  Supreme  Court  of  the 
United  States  in  First  National  Bank  of  Carlisle  v.  Graham,  conclusive 
100  U.  S.  699,  where  it  is  held  that  a  National  Bank  may  re-  <iecision. 
ceive  special  deposits  gratuitously.  §  8  of  the  National  Banking  Act 
gives  power  to  carry  on  the  business  of  banking  by  "  receiving  deposits  "  ; 
and  special  deposits  are  as  truly  deposits  as  any  other,  and  as  truly  a  part 
of  banking  business  as  it  is  written  down  in  the  history  and  usage  of  the 
commercial  centuries. 

Besides,  the  R.  S.  §  5228  speaks  expressly  of  the  return  of  "  special  de- 
posits "  in  case  of  dissolution,  and  it  is  difficult  to  imagine  why  they 
should  be  returned  if  never  received.  The  construction  put 
on  this  by  the  State  courts,  that  it  referred  only  to  money  de- 
posited for  payment  of  notes  or  other  specific  deposits,  is  entirely  unten- 
able ;  both  "deposits  "  and  "  special  deposits,"  clearly  include  gratuitous 
bailments  for  safe  keeping,  and  the  courts  have  no  right  to  cut  them 
doM-n  or  amputate  a  part  of  the  rights  Congress  has  given  to  national 
banks. 

"  See  §  206.  The  authority  to  receive  specific  and  general  deposits  is 
universally  admitted.    American  Nat.  Bank  v.  Presnall,  48  Pac.  556  (1897). 

3  See  §  288. 

131 


§  48  BUSINESS   POWERS. 

2.  Subject  to  the  usury  laws*  and  charter  restrictions^ 
(if  any)  a  bank  may  loan  money  on  security,^  real  ^"  or  per- 
sonal, or  without  other  security  than  the  riglit  of  action 
against  the  borrower,  as  in  the  case  of  overdrafts  by  agree- 

*  A  bank  must  not  in  any  transaction  gain  more  than  lawful  interest 
for  the  time  it  is  out  of  its  money. 

A  clause  in  the  charter  of  a  bank  authorizing  it  to  lend  money  on  such 
terms  and  rates  as  might  be  agreed  upon,  has  been  held  not  to  convey 
authority  to  charge  a  rate  higher  than  that  allowed  by  the  general  law  of 
the  State  regulating  interest.  Simonton  i\  Lanier,  71  N.  C.  498;  Seneca 
Co.  Bank  v.  Lamb,  26  Barb.  (N.  Y.)  595.  The  discount  charged  in  buy- 
ing notes  should  not  exceed  the  rate  of  interest  allowed  by  law  in  case  of 
a  loan.     Salmon  Falls  Bank  i;.  Leyser,  116  Mo.  551  (22  S.  W.  504). 

5  A  Massachusetts  State  bank  must  not  have  debts  due  in  at  any 
time  to  a  greater  amount  than  double  the  capital  paid  in  (not  including 
debts  due  from  another  bank,  or  from  the  State  or  the  United  States). 
R.  L.  c.  115,  §§  33,  34. 

Either  the  capital,  or  the  capital  and  deposits,  of  the  corporation,  ac- 
cording to  the  regulations  prescribed  in  the  charter,  may  serve  as  the 
basis  upon  which  loans  and  discounts  may  be  made.  Special  deposits  can 
never  serve  as  such  basis,  or  be  included  as  a  part  of  it.  Even  where  the 
statutory  phrase  is  "  the  moneys  actually  deposited  for  safe-keeping,"  it 
■will  be  construed  to  mean  only  general  deposits,  and  not  to  include 
any  description  of  such  as  are  iu  fact  special.  Foster  v.  Essex  Bank, 
17  Mass.  479. 

6  A  Massachusetts  bank  cannot  make  a  loan  in  any  other  way  than  on 
demand.     It  must  be  payable  at  once,  or  it  is  void.     R.  L.  c.  115,  §  51. 

In  Pennsylvania  an  act  of  incorporation  allowed  a  corporation  to  hold 
lands  "mortgaged  or  convej-ed  to  it  in  satisfaction  of  debts  previously 
contracted."  It  was  held  that  a  conveyance  in  trust,  or  any  conveyance 
that  would  put  the  corporation  in  possession,  would  violate  the  law;  it 
could  not  take  the  title  to  the  land,  legal  or  equitable,  except  for  previous 
debts.  But  any  conveyance  merely  with  a  view  to  raising  money  by  sale 
of  the  land,  and  not  to  give  the  corporation  the  ownership,  was  good. 
Baird  v.  Bank  of  Washington,  11  S.  &  R.  (Pa.)  411.  But  see  Chautauque 
Bank  v.  Risley,  19  N.  Y.  369. 

A  national  bank  cannot  loan  on  its  oivn  stock.     Part  II. 
stock  secu-        g  ^-      gy|.  ^  Massachusetts  bank  may  to  the  extent  of  one 
half  the  paid  capital.     R.  L.  c.  115,  §  31. 

A  national  bank  may  take  and  hold  a  chattel  mortgage  to  secure  an 
antecedent  debt.  First  Nat.  Bank  of  Skowhegan  v.  Maxfield,  83  Me. 
576  (22  Atl.  379). 

6«  See  §  74  et  seq. 
132 


WHAT  SECURITY   A   BANK   MAY   TAKE.  §  49 

ment  with  the  directors;  but  this  is  looked  on  with  disfavor 
by  the  courts. 

A  national  bank  cannot  take  real  estate'^  security  by  a  con- 
veyance to  itself  at  the  time  of  the  loan,  or  for  future  loans, 
but  only  for  debts  previously  contracted,  although  if  it  does 
take  concurrent  security  by  trust  deed,  mortgage,  &c. ,  only 
the  United  States  can  object,^  and  the  bank  can  successfully 
sustain  a  suit  for  foreclosure  unless  its  sovereign  interferes, 
though  it  exceeded  its  powers  and  violated  the  supreme  law  of 
the  land  in  taking  the  mortgage.^ 

A  law  enacted  for  the  benefit  of  banks  and  their  depositors 
cannot  be  set  up  as  a  defence  by  a  borrower  from  the  bankJ 

The  practical  workings  of  this  apparently  so  unjust  rule 
are  about  the  same  as  if  the  rational  law  were  put  in  its 
place,  as  we  shall  see  when  we  come  to  speak  of  Ultra 
vires.^ 

§49.    3.    A  bank  may  buy  ^  and  sell  exchange,^  coiu,  and 

^  Savings  Bank  v.  Burns,  104  Cal.  473  (38  Pac.  102)  ;  Lexington  v. 
Union  Nat.  Bank,  22  So.  291  (1897)  ;  Bank  v.  Flathers,  45  La.  An. 
75  (12  So.  243);  Nat.  Bank  v.  Whitney,  103  U.  S.  99;  Fortier  v. 
Nat.  Bank,  112  U.  S.  439  ;  Hennessy  v.  St.  Paul,  54  Minn.  219,  223 
(55  N.  W.  1123)  ;  Bank  v.  Trexler,  174  Pa.  497  (34  Atl.  195) ;  Fifth 
Nat.  Bank  v.  Pierce,  117  Mich.  376  (75  N.  W.  1058)  (1898).  See 
Part  11.  §  28.  National  Bank  v.  Matthews,  98  U.  S.  625.  See  §  74, 
note  7". 

8  See  §  722. 

1  §  49.    See  this  expanded,  §§  72-74. 

The  powers  treated  here  are  usually  expressly  granted,  though  they  are 
so  identified  with  the  business,  as  methods  of  carrying  out  its  fundamental 
purposes,  that  they  are  inherent. 

2  Suppose  N.  in  New  York  owes  P.  in  Paris,  it  is  expensive  to  send 
coin  across  the  water.  So  N.  finds  Y.  in  New  York,  who  is  a  creditor  of 
S.  in  Paris,  and  N.  pays  Y.  money  here,  taking  from  Y.  an  order  directed 
to  S.  to  pay  N.  or  order  the  debt  S.  owes  Y.  N.  orders  payment  to  P.  or 
order,  and  sends  the  bill  to  P.  So  two  debts  are  paid  without  transfer  of 
coin.  Now,  if  there  are  more  debtors  in  New  York  of  Paris  creditors  than 
there  are  creditors  of  Paris  debtors,  bills  on  Paris  will  be  in  demand,  and 
N.  will  have  to  pay  a  little  more  than  the  actual  coin  with  which  he  could 
pay  his  debt  if  he  had  it  in  Paris.  This  is  called  ti  premium,  and  will  never 
be  more,  of  course,  than  the  cost  including  risk  of  sending  the  coin.  But 
if  there  are  more  creditors  than  debtors  in  New  York,  the  creditors  will 

133 


§  49  BUSINESS   POWERS. 

bullion,  and  unless  restricted  ^  it  can  sell  ^  any  negotiable 
Purchase.  papcr  or  Other  property  to  which  it  has  properly 
i)ilc'ount  acquired  a  title ;  but  whether  it  can  inLrcliase 
Negotiate.  negotiable  payer  is  one  of  those  questions  that 
A  bank  ma}'  ^^'^  S^t  tangled  up  in  the  doulJe  meanings  of 
buy  negotia-   -^'ords,  as  Well  as  having  inherent  difficulties,  and 

Die  paper  in  '  °  ' 

the  sense  of     has  been  much  litigated. 

acquiring  .  ,'    .  ^  .         , 

absolute  title  Purchasc  IS  uscd  in  two  senses :  1st,  simply  to 

not  free  as"  indicate  acquirement  of  title  by  any  means  other 

anrndi"-^^  than  dcsccut ;  2d,  to  indicate  that  sort  of  transac- 

viduai  is.  ^Iqjj  which  among  individuals  is  not  subject  to  the 

If  a  national  j_      i      r  i 

bank  passes     control  of  usury  laws. 

compete,  and  to  save  the  expense  and  trouble  of  collecting  their  foreign 
debts  will  take  a  little  less  than  an  actual  equivalent.  This  is  called  a 
discount. 

This  premium  and  discount  are  both  called  exchange,  and  the  rate  of 
exchange  is  the  amount  of  premium  it  will  cost  to  replace  a  sum  of  money 
in  one  country  by  an  equal  sum  in  another,  or  it  is  tlie  difference  in  value 
of  the  same  amount  of  money  in  the  two  countries  by  reason  of  their 
distance. 

Now  the  power  of  a  bank  to  "  buy  exchange  "  (see  Part  TI.  §  8)  means 
simply  the  right  to  buy  bills  of  exchange  at  the  current  rate  of  discount 
or  premium,  and  does  not  give  power  to  buy  bills  at  any  agreed  price,  as 
an  individual  may.  It  is  the  "  exchange  "  that  is  to  be  bought  or  sold, 
not  the  bill  itself,  except  in  that  partial  meaning  of  the  word  purchase,  to 
acquire  title. 

3  A  national  bank  cannot  sell  bills  of  exchange  payable  in  another 
place  for  more  than  the  rate  of  exchange  on  sight  drafts  plus  lawful  inter- 
est (see  Part  II.  §  30),  and  no  overcharge  for  service,  risk,  or  exchange  by 
any  bank  will  be  sustained.  INIerchants'  Bank  v.  Sassee,  33  Mo.  350 ;  Bank 
of  United  States  v.  Davis,  2  Hill  (X.  Y.),  451.  Bills  payable  in  the  same 
place  will  not  be  apt  to  sell  for  more  than  their  value  :  men  will  not  give 
$100  cash  for  $50  in  the  same  place,  and  there  seems  to  be  no  rea- 
son why  banks  should  not  have  the  power  to  sell  negotiable  paper 
they  may  hold  for  as  much  less  than  its  face  as  the  parties  may  agree, 
just  as  individuals  may  ;  but  the  distinctions  as  to  what  are  sales  and 
what  are  loans  must  be  carefully  attended  to.  (See  text  following  this 
reference.) 

Unconstitutional  Restriction.  —  A  State  declaring  "  it  shall  not  be 
lawful  for  any  bank  to  transfer  any  note,  or  other  evidence  of  debt," 
is  unconstitutional,  as  to  banks  already  in  possession  of  such  power. 
Planters'  Bank  v.  Sharp,  6  How.  301. 

134 


PURCHASE  OF  NEGOTIABLE  PAPER.  §  49 

If  this  distinction  is  kept  in  mind  the  cases  on   monevtoA. 

'■  and  takes 

this  subject  become  clear.  A.'sown 

.  1  -n       •  4     1-  note,  or  the 

(a)  if  A.  gives  B.  money,  and  B.  gives  A.  his  note  note  of  b. 
for  tlie  debt,  this  is  a  loan,  not  a  purchase  in  the  sec-  A.'^^eUher  ^ 
ond  sense,  and  must  not  violate  the  usury  statutes.  fv'itimut'"re-'" 

(b)  If  A.  transfers  B.'s  note  to  C.  by  indorse-  course,  the 

^   ^  ''  bank  must 

raent  srenerally,  so  that  A.  becomes  bound  on  tlie    not  gain 

^.  «  .     .  1       1  •       more  than 

note,  there  is  great  conflict  oi  opinion  whether  it  what  would 

is  to  be  considered  a  sale  or  a  loan  as  to  usury,  interest  for 

The  best  opinion  is,  that,  as  the  statutes  against  "J°"c-^,e.^ 

usury  apply  only  to  loan  or  forbearance  of  money,  ^^-  §  ■^'^• 

-,  ,  ,       ,  ,  -1       .    •    .  1     A  ^  But  if  it  does 

and  as  they  are  to  be  construed  strictly,*  such  a  buy  or  loan 

transfer  (unless  a  mere  cloak  for  usury  ^),  not  in-  more,  kF'" 

volving  any  primary  liability  of  A.,  is  not  a  loan,  papj^s'jiot 

but  differs  therefrom  in  the  fact  that   C.  cannot  affected. 

claim  the  money  unconditionally  of  A.,  but  must  deny  its  title 

with    due    diligence  pursue  B.,  and   the    risk  and  United 

expense  involved  in  this  is  an  important  consider-  states. 

A  State  bank 

ation  additional  to  what  occurs  in  case  of  a  loan,    and  under 
and  may  well  be  taken  into  account  in  the  price   trust  conT- 

nF  frnn«5fpr6  P'>"y' 

01  transiei .  ^^^^^  b,^.  j^g 

*  They  are  relics  of  barbarous  ages,  when  men  did  not  know  that  the 
use  of  money  was  as  vaUiable  a  consideration  as  the  tise  of  land,  and  they 
are  to-day  mere  weajjons  with  which  revenge  and  bad  faith  may  bruise  the 
friend  who  has  aided  them.  ]\len  make  no  greater  charge  than  the  laws  of 
nature  proclaim  the  money  is  worth,  and  that  wall  continue  to  be  charged 
and  obtained,  though  the  legislature  devote  themselves  exclusively  to  pre- 
venting it.     A  usury  law  is  a  blot  upon  the  statute-books  of  any  State. 

5  As  it  would  be  if  B.  gave  his  note  to  A.  for  the  accommodation 
of  the  latter,  receiving  no  value,  and  C,  liioiving  this  fact,  bought  at 
greater  discount  than  allowed  by  law  on  loans,  for  in  effect  this  is  lend- 
ing money  on  B.'s  promise  to  pay  a  sum  so  much  greater  as  to  make  it 
usurious.  A.  is  not  a  real  party  in  the  matter.  AVhitworth  v.  Adams, 
5  Rand  (Va.)  333. 

6  National  Bank  of  Michigan  v.  Green,  33  Iowa,  141  (1871)  ;  State 
Bank   v.  Coquillard,  6  Ind.  232.     Binghamton  Trust  Co.  v. 

Clark,  32  App.  Div.  (Hun,  N.  Y.)  151  (1898).     This  is  the      ^''''^' 
opinion  of  Prof.  Parsons,  2  Notes  &  Bills  429  (see  also  2  Contracts,  425), 
and  of  Daniel,  Neg.  Inst.  623.     And  so  far  as  it  narrows  usury,  it  is  the 
best   opinion ;   the  fact  is,  however,  that  all  distinctions  on  usury  are 
irrational.     If  it  did  not  make  such  terrible  confusion  and  useless  litiga- 

135 


§  49  BUSINESS   POWERS. 

organic  laws        The  Same  applies  to  the  transaction  between  the 

be  able  to  ,  r       ,  -n      r  i  .it 

purchase  as     drawer  and  payee  of  a  bill  of  exchange  :  the  drawer 

an  individual     .  -,  i       m      i>    i  i 

can.  IS  only  secondarily  liable. 

tion,  it  would  be  ludicrous  to  see  how  the  judges  flounder  about,  and  put 
down  all  sorts  of  inconsistencies  in  the  reports,  trying  to  determine  what 
constitutes  the  sin  of  usury. 

A  bank  lends  A.  money,  and  takes  B.'s  note  for  it  indorsed  by  A.  This 
is  just  the  same  as  if  A.  kept  B.'s  note  and  gave  the  bank  his  own  for 
the  same  time,  except  that  the  bank  instead  of  A.  now  has  the  trouble 
and  expense  of  collecting  from  B. 

If  A.  indorses  without  recourse,  still  (supposing  B.  to  be  as  good  as  A. 
and  as  near)  as  to  the  bank  the  transaction  is  exactly  the  same  as  if  it 
took  A.'s  note;  the  bank  has  parted  with  so  much  money  for  a  time 
certain,  on  the  promise  of  some  one  to  pay  it. 

Xow  if  the  object  of  usury  laws  is  to  prevent  the  owner  of  money  from 
making  more  than  a  certain  per  cent  (say  six),  by  foregoing  possession 
of  it,  then  all  sales  and  indorsements  by  which  the  person  who  pays  the 
money  will  reap  a  return  of  more  than  six  per  cent  are  usurious. 

If,  however,  the  purpose  of  usury  laws  is  to  prevent  oppression  of  the 
one  to  whom  the  money  is  paid,  then,  as  it  cannot  be  oppression  to  take 
for  a  thing  what  it  is  really  worth  to  him  and  to  others  (and  any  law 
which  compels  one  to  take  less  for  the  use  of  his  property,  or  for  giving  up 
his  rights,  than  they  are  fairly  worth,  is  unjust,  as  it  takes  away  property 
from  one  and  gives  it  to  another  without  a  full  equivalent),  it  follows 
that,  if  six  per  cent  is  proper  for  A.  to  pay  for  the  use  of  the  money  when 
he  gives  his  own  note,  it  is  proper,  and  not  oppressive  for  him,  to  pay  a 
little  more  than  he  indorses  over  B.'s  note,  instead  of  giving  his  own  and 
keeping  B.'s,  for  he  thereby  is  relieved  of  the  trouble  and  expense  of 
collecting  B.'s  note;  and  when  he  indorses  without  recourse,  he  may 
properly  pay  a  little  more  yet,  for  the  risk  of  B.'s  insolvency  is  removed 
from  him ;  and,  carrying  out  the  analysis,  if  he  can,  by  using  the  money, 
draw  from  the  bosom  of  the  earth  twenty  or  forty  per  cent  return  more 
than  he  could  without  it,  why  is  it  oppression  to  ask  him  twelve  or 
fifteen  per  cent  ? 

What  gentle  oppression  it  is  to  ask  one  half  of  the  gain  my  money 
has  enabled  him  to  realize,  and  which  I  might  myself  have  obtained! 
No,  the  oppression  is  in  takiug  away  the  liberty  of  contract,  and  saying 
to  me,  "  No  matter  how  great  return  your  money  may  bring,  nor  what  the 
variations  in  risk,  you  can  never  take  more  than  six  per  cent." 

The  fact  is,  that  the  use  of  power,  whether  it  be  in  the  shape  of  money, 
lands,  or  goods,  ought  to  be  paid  for  at  its  fair  value,  which  varies  with 
the  circumstances  of  every  case. 

Usury  laws  are  built  on  no  firmer  foundation  than  fog,  and  in  the  light 
of  analysis  vanish  like  the  meadow  mists  in  the  morniug  sun.  All  that 
136 


PURCHASE  OF  NEGOTIABLE  PAPER. 


§49 


But  as  it  is 
no  part  of 
Banking 
business  to 
"  traffic"  in 
meicliandise 
or  financial 
securities, 
and  as  tlie 


But  in  other  States  such  a  transfer  by  indorse- 
ment is  held  to  be  usurious ;  some  allowing  the 
holder  to  recover  against  all  parties  but  the  in- 
dorser  ;"  others  hold  that  the  transfer  is  void,  gives 
no  title,  and  no  recovery  is  possible.^ 

(c')    If  A.  transfers  B.'s  paper  to  C.  bv  delivery    fundamental 

^  ^  ^    ^  "  .   /      fact  in  each 

(if  it  is  payable  to  bearer),  or  by  indorsement  with- 
out recourse,  this  (unless  merely  a  cover  for  usury) 
is  a  sale,  and  may  be  for  any  price  on  which  the 
parties  agree.® 

Now  the  question  is,  Can  a  bank  purchase  nego-  tendencj-is 

^  '  1  o  °         to  hold  the 

liable  paper  as  a  private  individual  may  ? 

First,  it  is  clear  that  a  bank  may  purchase  in 
the  sense  of  acquiring  title  ;^*  a  note  is  deposited, 
credited  as  cash,  and  drawn  against,  the  bank  is  a 
holder  for  value  ;  discounting  even  in  its  most  lim- 


of  the  three 
methods  of 
acquiring 
paper  is  the 
same  as  re- 
gards the 
banli,  the 


bank  up  to 
the  usury 
standard"  ia 
all  transac- 
tions. 
If  it  trans- 
gresses, most 
States  hold 
its  title  as  to 

ited  sense,  that  of  mere  lending,  gives  title,  and   prior  parties 


buying  exchange  involves  the  purchase  of  bills  of 
exchange.     See  Part  II.  §  30. 

Second,  a  bank  mat/  have  power  to  purchase  at  any  agreed 
price,  according  to  the  terras  of  its  organic  law ;  but  it  may 
be  laid  down  as  an  almost,  if  not  quite,  universal  principle, 
that  all  transfers  of  negotiable  paper  to  a  bank  are  subject  to 


is  necessary  for  protection  against  extortion  is  the  rule  that  applies  to  all 
contracts,  namely,  that  gross  inadequacy  of  consideration  is  evidence  of 
fraud.  Conscienceless  advantage  must  not  be  taken,  nor  in  case  of  a  bona 
jide  contract  should  improvidence  or  weak-mindedness  (except  of  chil- 
dren and  married  women)  be  protected  or  kept  from  exterminating  itself. 
The  common  law  and  equity  are  adequate,  and  the  real  effect  of  usury 
laws  is  to  make' honest  men  pay  more  for  their  money  than  they  ought, 
in  order  to  cover  losses  that  may  occur  through  advantage  being  taken  of 
the  usury  statutes  by  rascality. 

V  Collier  v.  Nevill,  3  Dev.  (N".  C.)  31.  No  intermediate  illegality  can 
affect  the  liability  of  maker  or  acceptor.    Armstrong  v.  Gibson,  31  Wis.  Gl. 

8  Whitworth  v.  Adams,  5  Rand.  (Va.;  419. 

8  Kicholes  v.  Fearson,  7  Pet.  109. 

»«  Taft  V.  Quinsigamond  Xational  Bank,  172  Mass.  363  (.52  N.  E.  387) 
(1899);  Salmon  Falfs  Bank  v.  Leyser,  116  Mo.  51  (22  S.  W.  504):  Kansas 
National  Bank  v.  Quinton,  18  Pac.  20  (1897). 

137 


§49 


BUSINESS   POWERS. 


usury  laws,  and  that  it  has  no  right  to  take  paper  at  a  greater 
reduction. 

Third,  if  a  bank  does  take  at  a  greater  discount,  then  in 
case  of  a  State  bank  the  consequence  may  be  that  it  cannot 
recover  on  the  paper,  the  transaction  being  held  void,  or  it 
may  be  able  to  recover  as  to  all  prior  parties,  and  only  liable 
to  the  immediate  transferrer.  In  the  case  of  a  national 
bank,  the  best  opinion  is,  that  a  transfer  in  either  of  the 
ways  a,  h,  c,  above,  may  be  made ;  and,  if  usurious,  the  pen- 
alty prescribed  by  the  National  Banking  Act  is  the  only  con- 
sequence ;  the  bank's  title  is  not  affected,  and  prior  parties 
may  be  held.^* 

But  in  Maryland  and  Minnesota  it  has  been  held  that 
"  discounting "  does  not  include  any  transaction  but  a  loan ; 
therefore  a  national  bank  has  no  power  to  acquire  title  by 
transfer  without  recourse,  or  in  any  way  in  which  the  trans- 
ferrer is  not  responsible,  and  that  such  transfer,  being  ultra 
vires,  gives  no  title,  and  the  bank  cannot  recover  on  the  paper. 
These  are,  however,  in  both  branches  reasonless  decisions, 
and  as  to  the  latter  point  Minnesota  has  altered  her  mind, 
and  in  Maryland  the  dissent  was  much  stronger  than  the 
opinion,  and  the  later  decision,  in  57  Md.  128,  is  inconsistent 
with  the  Lazear  case.     (See  Ultra  vires,  §  722.) 

The  word  discount,  by  the  usage  of  the  commercial  world 
and  the  common  voice  of  all  the  dictionaries,  means  simply 
to  buy  at  a  reduction,  and  a  loan  is  only  one  species  of  dis- 
count. It  needs  only  to  look  at  the  National  Banking  Act 
to  see  that  Congress  used  the  word  in  its  broad  sense.  If 
it  means  only  loan,  then  it  is  useless  in  the  eighth  section ; 
for  the  clause  giving  power  to  loan  money  on  personal  secu- 
rity covers  it.  The  thirtieth  section  provides  a  penalty  for 
any  usurious  transaction  ;  but  it  has  been  repeatedly  held 
that  transactions  in  violation  of  this  section  are  not  void, 
and  the  defect  can  be  taken  advantage  i°  of  in  no  other  way 

9"  Nicholson  v.  National  Bank,  92  Ky.  257  (17  S.  W.  627)  (1891); 
Prescott  National  Bank  v.  Butler,  157  Mass.  548  (32  N.  E.  909)  (1893). 
10  Gates  v.  First  National  Bank  of  Montgomery,  100  U.  S.  239;  National 

138 


DISCOUNTING.  §  50 

than  the  one  there  provided.  And  even  though  the  act  did 
not  give  power  to  take  by  absolute  transfer,  the  weight  of 
authority  and  reason  is  that  recovery  can  nevertheless  be  had 
on  the  paper. 

See  for  the  expansion  of  this  matter,  §  48 ;  and  for  the  last 
point,  see  Ultra  vires,  §  722.     See  also  §  61. 

§  50.  4.  A  bank  may  discount  (i.  e.  deduct  from  the  face 
of  the  debt  the  amount  of  lawful  interest  on  its  face  from  the 
time  of  taking  by  the  bank  till  maturity)  and  nego-  Discount, 
tiate  (i.  e.  "  transfer,  sell,  pass,"  sometimes  further  Negotiate. 
meaning  "  procure  by  arrangement  with  another,  settle  by, 
and  arrange  for")  bills  of  exchange,  notes,  and  other  evi- 
dences of  debt.*'  These  are  inherent  powers  identified  with 
banking  as  necessary  and  convenient  methods  of  carrying  out 
its  fundamental  purpose  of  lending  money.  Discounting  is 
a  part  of  the  general  business  of  banking,  and  could  be  done 
even  without  specific  authority  conferred  in  the  incorporating 
act.i  The  holding  back  of  interest  in  advance  is  implied  in 
the  phrase  itself ;  it  is  a  part  of  the  definition  of  the  word. 
But  the  bank,  though  it  can  thus  secure  a  slight  increase  in 
the  actual  amount  of  money  which  it  receives  in  payment  for 
the  use  of  its  funds,  can  do  it  in  no  other  shape  and  to  no 
greater  extent  than  precisely  this.^  Though  if  the  princi- 
pal is  risked  exp>ressly  (i.  e.  its  payment  made  to  depend 
on  a  contingent  event),  the  bank  can  charge  extra  for  this 
risk.' 

Exchange  Bank  v.  Moore,  2  Bond,  170  ;  Prescott  National  Bank  v.  Butler, 
57  Mass.  548  (32  N.  E.  990)  (1893).     See  Usury,  Part  II.  §  134. 

0  §  50.     See  Borrowing,  §  63. 

1  Fleckner  v.  Bank  of  United  States,  8  Wheat.  338. 

2  It  may  take  not  one  particle  more  than  the  legal  rate  of  interest,  but 
it  may  discount,  that  is  to  say,  "  count  off,"  and  keep  this  out  of  its  pay- 
ment at  the  time  when  it  hands  over  the  balance  of  the  loan  to  the  bor- 
rower. This  is  the  meaning  and  the  only  meaning  of  the  words  "  upon 
banking  principles,"  or  "according  to  banking  principles  and  usages," 
sometimes  appended  to  the  word  "discount"  in  charters  and  organic 
laws.  The  addition  signifies  nothing  more  than  the  word  "  discount  " 
would  alone  imply,  and  is  in  fact  mere  surplusage.  M'Lean  v.  Lafay- 
ette Bank,  3  McLean,  587;  Creed  v.  Commercial  Bank,  11  Ohio,  489. 
No  court  will  support  the  reservation  of  more  than  the  legal  rate  of  in- 

139 


S  51  BUSINESS   POWERS. 

§  51.  5.  As  involved  in  the  power  to  receive  deposits,  a 
bank  may  issue  certificates  of  deposits,  which  in  Massachusetts  ^ 
Certificate  of  and  Pennsylvania''  are  not  regarded  as  negotiable 
deposit.  paper  ;   but  in   other  States  ^  they  are   considered 

promissory  notes  (which  seems  clear  upon  any  definition  *  of 
a  note  to  be  found  in  the  authorities),  negotiable  under  the 
same  limitations^  as  notes. 

They  are  used  to  save  carrying  money  ;  but  as  they  do  not 
pass  by  delivery,  but  only  by  indorsement,  they  are  not  in- 
tended to  circulate  as  money  in  the  sense  of  a  banking  law, 
such  as  the  National  or  New  York  law,  and  therefore  the  pro- 

terest,  upon  the  ground  that  this  excessive  rate  is  customarily  reserved 
by  all  the  banks  in  the  neighborhood.  Niagara  County  Bank  v.  Baker, 
15  Ohio  St.  68;  New  York  P"^iremen's  Ins.  Co.  v.  Ely,  2  Cow.  (N.  Y.)  at 
p.  707;  Dunham  v.  Gould,  16  Johns.  (N.  Y.)  367. 

Custom  cannot  vary  statute.  At  least  no  baby  custom.  An  old,  full- 
grown  custom  may,  like  that  of  discount  itself,  which  is  a  real,  substan- 
tial inroad  on  the  usury  law,  and  only  sanctioned  because  the  common 
sense  of  the  judges  is  superior  to  their  respect  for  the  statute;  as  is  shown 
again  in  cases  where  repayment  is  made  expressly  to  depend 
ontingency.  ^^^  contingent  events,  as  loans  on  bottomry  and  respondentia. 
Thorndike  v.  Stone,  11  Pick.  (Mass.)  183. 

1  §  51.    Shuts  V.  Pacific  National  Bank,  186  Mass.  487,  Coburn,  J. 

2  Gillespie  v.  Mather,  10  Pa.  St.  28;  Patterson  v.  Poindexter,  6  Watts 
&Serg.  (Pa.)  227. 

3  Minnesota,  Michigan,  North  Carolina,  Iowa,  Georgia,  Vermont 
Connecticut,  Illinois,  Wisconsin,  Indiana,  Alabama,  and  California.  The 
United  States  Supreme  Court  also  held  a  certificate  of  deposit,  "  paya- 
ble to  order  upon  return  of  this  certificate,"  to  be  negotiable.  Miller  v. 
Austen,  13  How.  218.     See  §  296. 

*  A  promissory  note  "  is  an  open  promise  in  writing  by  one  person  to 
pay  another  therein  named,  or  to  his  order,  or  to  bearer,  a  specified  sura 
of  money,  absolutely  and  at  all  events."     Daniel,  Neg.  Inst.,  §  28. 

6  Of  course,  if  it  is  payable  in  "  current  funds,"  or  anything  else  than 
money,  it  may  not  generally  be  held  negotiable  (otherwise  in  Indiana  and 
New  York).  The  words  "value  received"  are  necessary  in  Missouri. 
International  Bank  v.  German  Bank,  3  Mo.  App.  367.  If  there  are  no 
words  of  promise,  it  is  a  simple  receipt. 

The  words  "  on  return  of  this  certificate  "  do  not  affect  the  contract 
as  to  negotiability  ;  it  creates  no  further  condition  than  is  attached  to  an 
ordinary  note,  except  perhaps  the  statute  of  limitations  does  not  run  until 
demand  made.     See  §  296. 

140 


CERTIFICATES   OP   DEPOSIT.  §  51 

hibition  in  those  acts  of  issuing  notes  to  circulate  as  money 
other  than  those  provided  for  or  named  in  said  acts,  does 
not  interfere  with  the  power  of  a  bank  to  issue  certificates  of 
deposit.^ 

They  may  be  payable  on  demand,  or  on  time,  if  the  cir- 
cumstances justify  the  bank  in  borrowing  on  time  (see  §  63), 
unless  there  is  a  restriction  "^  in  the  organic  law  or  by  statute. 
If  a  bank  cannot  issue  its  negotiable  promissory  note  on  time, 
neither  can  it  issue  a  negotiable  certificate  of  deposit  of  this 
description.  If  the  note  would  be  void,  so  likewise  is  the 
certificate.     If,   however,   the   bank   is    empowered   to   issue 

6  Miller  v.  Austen,  13  How.  218;  Pelham  u.  Adams,  17  Barb.  (N.  Y.) 
384. 

"  A  certificate,  issued  by  a  national  bank,  stating  that  a  person  named 
has  deposited  in  the  bank  a  certain  sum,  payable  to  the  order  of  himself 
on  the  return  of  the  certificate  properly  indorsed,  and  understood  between 
the  bank  and  the  depositor  not  to  be  payable  until  a  future  day  agreed 
upon,  is  not  in  violation  of  the  United  States  Rev.  Stats.  §  5183,  forbid- 
ding national  banks  to  issue  any  other  notes  to  circulate  as  money  than 
such  as  are  authorized  by  its  provisions. 

"  If  the  United  States  Revised  Statutes  forbade  the  issue  of  anyotlier 
notes  whatever  than  such  as  were  therein  authorized,  it  would  be  diffi- 
cult to  hold  this  certificate  to  be  legal.  Miller  v.  Austen,  13  How.  218. 
But  assuming  that  it  might  fall  within  the  general  designation  of  a 
note,  it  cannot  be  considered  as  a  note  intended  to  circulate  as  money, 
within  the  meaning  of  the  statute.  It  requires  to  be  indorsed.  It  was 
understood  not  to  be  payable  till  a  certain  future  date.  It  is  not  in  a 
sum  adapted  for  general  circulation  as  money.  The  form  of  the  instru- 
ment, and  the  incidents  above  mentioned,  show  tliat  it  was  not  intended 
to  circulate  as  money  between  individuals,  and  between  government 
and  individuals  for  the  ordinary  purposes  of  society.  Craig  v.  Missouri, 
4  Pet.,  410,  432;  Briscoe  v.  Kentucky  Bank,  11  Pet.  257,  314,  318; 
Virginia  Coupon  Cases,  114  U.  S.  269,  284.  See  also  Merchants' 
Bank  v.  State  Bank,  10  Wall.  604,  648  ;  where  it  was  held  that  certified 
checks  do  not  fall  within  a  similar  prohibition."  Hunt,  appellant,  141 
Mass.  515  (6  N.  E.  554). 

''  By  Mass.  R.  L.  c.  115,  §  40,  no  promise  to  pay  money  at  a  future  day 
certain  can  be  issued  by  a  bank,  except  for  money  borrowed  of  the  State 
or  a  Massachusetts  savings  bank,  or  for  money  deposited  by  an  assignee 
of  insolvency.  Under  a  statute  against  the  circulation  of  bills  and  notes 
not  payable  on  demand,  a  bank  has  no  power  to  issue  time  certificates  of 
deposit,  and  if  it  does  they  are  void. 

141 


R  52  BUSINESS   POWERS. 

promissory  notes,  subject  only  to  the  restriction  that  it  shall 
issue  none  which  are  designed  to  pass  into  circulation  as 
currency,  but  only  such  as  become  necessary  in  the  ordinary 
course  and  conduct  of  its  affairs,  and  are  strictly  business 
paper,  then  it  may  issue  certificates  of  deposit,  whether  paya- 
ble on  demand  or  otherwise,  subject  only  to  the  same  restric- 
tion. By  reason  of  the  ease  with  which  such  instruments 
may  be  used  for  circulation,  the  courts  have  often  been  rigid 
in  scrutinizing  them,  and  applying  the  strict  letter  of  the  law 
to  them ;  but  they  have  never,  that  we  have  found,  substan- 
tially modified  or  departed  from  the  general  principles  above 
laid  down.^ 

§  52.  6.  A  bank  may  act  as  agent  in  some  financial  deal- 
ings, as  receiving  money  to  pay  notes,^  engaging  to  remit  ^ 
Bank  as  or  collcct  moncy,!  and  procuring  and  exchanging 
agent.  government  securities.'-^     The  bank  can  charge  for 

these  services ;  but  in  these  dealings,  as  in  others,  the  courts 

8  Curtis  V.  Leavitt,  15  N.  Y.  19  ;  Leavitt  v.  Palmer,  3  Comst.  (N.  Y.) 
19;  Barnes  v.  Ontario  Bank,  19  N.  Y.  152;  Bank  of  Orleans  v.  Merrill,  2 
Hill,  295;  Southern  Loan  Co.  v.  Morris,  2  Barr  (Pa.  St.),  175;  Craig?;. 
State  of  Missouri,  4  Pet.  433;  Kilgore  v.  Bulkley,  14  Conn.  362 ;  Laughlin 
V.  Marshall,  19  111.  390;  Bank  of  Peru  v.  Farnswortb,  18  id.  563; 
Lindsey  v.  McClelland,  18  Wis.  481;  White  v.  Franklin  Bank,  22  Pick. 
(Mass.)  181  ;  Bank  of  Chillicothe  v.  Dodge,  8  Barb.  (N.  Y.)  233;  Bank 
Commissioners  v.  St.  Lawrence  Bank,  3  Seld.  (N.  Y.)  513 ;  Cate  v. 
Patterson,  25  Mich.  191;  Pardee  i'.  Fish,  60  N.  Y.  265;  Miller  r.  Austen, 
13  How.  (U.  S.)  218;  Poorman  v.  Mills,  35  Cal.  118,  and  other  California 
cases  therein  cited. 

1  §  52.  See  Specific  Deposit,  §  206.  Collecting  is  part  of  the  banking 
business.  Tyson  v.  State  Bank,  G  Blackf.  (Tnd.)  225 ;  Paint  Co.  v.  Nat. 
Bank,  4  Utah,  353  (9  Pac.  709)  (1S8G),  Taft  u.  Quinisigamond  Xat.  Bank, 
172  Mass.  363  (52  N.  E.  387)  (1899),  Keyes  v.  Bank  52  Mo.  App.  323. 

2  A  national  bank  can  deal  in  and  exchange  government  securities. 
Van  Leuven  v.  First  National  Bank,  54  N.  Y.  671.  Buying  United  States 
bonds  is  highly  meritorious,  as  they  are  intended  to  enable  the  govern- 
ment to  raise  money,  and  banks  have  so  long  acted  as  agents  of  the  United 
States  Treasury  in  the  business  of  investing  their  own  as  well  as  cus- 
tomers' money  in  government  bonds,  without  objection  from  directors  or 
stockholders,  and  with  the  sanction  of  the  general  government,  that  it 
would  be  unjust  now  for  the  courts  to  hold  the  business  ultta  vires.  Cald- 
well V.  National  Mohawk  Valley  Bank,  64  Barb.  (N.  Y.)  333. 

142 


BANK   AS   AGENT.      INCIDENTAL   POWERS.  §  54 

■will  see  that  a  bank  does  not,  under  cover  of  a  charge  of 
service,  obtain  more  than  lawful  interest  for  the  use  of  its 
money. 

If  a  bank  undertakes  to  remit  to,  or  to  collect  in,  a  distant 
place,  it  has  a  right  to  charge  a  reasonable  sum  to  cover  the 
rate  of  exchange,  and  the  labor  and  risk  to  which  it  may  be 
put.^  Such  a  charge,  though  in  the  form  of  a  percentage,  is 
not  interest,  and  is  not  usurious.  But  it  must  be  made  bona 
fide.  If  the  charge  for  labor  or  risk  is  excessive,  or  if  charges 
are  made  for  exchange  when  the  bank  is  not  really  obliged 
to  pay  anything  on  this  account,  or  if  credit  is  not  given 
for  exchange  where  nevertheless  the  bank  actually  receives 
something  on  account  of  it,  then  the  form  of  the  charge  will 
be  regarded  as  only  colorable,  and  it  will  be  considered  that 
usurious  interest  has  been  taken  or  reserved.* 

§  53.    7.  A  bank  has  no  inherent  authority  to  issue  bills  ^ 
or  notes  designed  to  circulate  as  money.     It  is  unlike  those 
powers  previously  considered  in  this  section ;  the 
right   must    be    expressly   given.     See    Part    II.    bank"notes. 
§§  8,  21. 

Such  notes  must  be  negotiable  by  mere  delivery,  payable 
immediately  on  demand,  in  business  hours,  at  any  time  after 
issue,  and  without  interest. 

§  54.  Incidental  Powers  of  Banks  are  such  as  are  neces- 
sary or  convenient  in  the  conduct  of  the  business  set  forth 
above,  but  not  themselves  so  continuously  or  peculiarly  es- 
sential to  the  attainment  of  the  fundamental  objects  of  the 
corporation  as  to  be  considered  a  part  of  the  business  of 
banking. 

It  is  a  general  principle  that,  for  the  purpose  of  accomplish- 
ing the  objects  of  its  creation,  a  corporation  may  act  and  deal 
in  the  same  manner  that  a  natural  person  would.  General  prin- 
if   he   sought   to    accomplish    the    same    end.     It   ^P^t^;i(,jfp^^g 
may  borrow  money  for  those    purposes,  contract    §  68. 

8  Merchants'  Bank  r.  Sassee,  33  Uo.  350. 
*  Bank  of  the  United  States  v.  Davis,  2  Hill  (N.  Y),  451. 
1  §  53.     See  chapter  on  Bank  Bills,  §  633,  and  see  Part  II.  §  21,  and 
R.  L.  c.  115,  §  40,  as  to  bank  notes  of  a  State  bank. 

143 


§  55  BUSINESS   POWERS. 

for  labor  and  materials,  make  purchases,  and  give  notes, 
bills,  bonds,  and  mortgages  in  payment  or  as  security 
therefor.i 

Proceedings,  though  such  as  are  usually  ultra  vires,  will  be 
proper  if  they  are  (1)  necessitated  by  circumstances  essential 
to  the  corporate  well-being,  (2)  could  not  have  been  foreseen  to 
be  necessary  at  the  inception  of  the  corporation,  (3)  are  not 
expressly  forbidden,  (4)  do  not  amount  to  a  course  of  dealing, 
but  are  matters  of  temporary  management.  As  if  a  banker 
lends  money  on  a  ship  and  freight,  and  is  obliged  to  foreclose 
his  security,  he  may,  and  should  as  a  prudent  man,  operate 
the  ship  temporarily.     See  §  78. 

§  55.  The  statutes  of  mortmain  took  away  the  common  law- 
power  of  holding  real  estate.  By  it  "  all  conveyances  by  deed 
Holding  real  or  will  of  realty  to  a  body  corporate,  or  for  its  use, 
estate.  §  74.  ^^,^  ^qi^^  unless  Sanctioned  by  charter  or  act  of 
Assembly."  ^  This  is  law  in  Pennsylvania,  but  in  other  States 
a  corporation  may  acquire  and  hold  real  estate  so  far  as  is 
necessary  and  convenient  for  the  purposes  of  their  creation  ; 
but  not  for  objects  wholly  foreign.^ 

Power  is  usually  expressly  given  to  own  realty  sufficient 
for  a  place  of  business.^  A  national  bank  cannot  take  realty 
as  concurrent  3  security  for  a  loan,  but  may  as  a  substantially 
subsequent  security,  and  State  banks  are  sometimes  restricted 
in  the  same  way.  Any  bank  may  take  real  estate  to  save  a 
debt,  and  may  sell  any  realty  to  which  it  acquires  title.  The 
effect  of  exceeding  its  powers,  and  buying  or  taking  land 
beyond  its  authority,  is  usually  in  this  country  no  more  than 
the  risk  of  forfeiture  of  franchise  at  suit  of  the  sovereign. 
The  title  is  good.     §§  74,  722. 

1  §  .54.  Frye  v.  Tucker,  24  111.  180 ;  Smith  v.  Law,  21  N.  Y.  299 ; 
Clark  V.  School  District,  3  11.  I.  199. 

1  §  55.  3  Binney,  App.  G2G. 

2  First  Parish  in  Sutton  v.  Cole,  3  Pick.  (Mass.)  239  ;  State  v.  Com- 
missioners of  Mansfield,  3  Zab.  (N.  J.)  510  ;  Riley  v.  City  of  Rochester, 
5  Seld.  (N.  Y.)  64.     See  §  72  et  seq. 

'  See  Part  11.  §  28.  And  the  courts  are  very  liberal  in  their  construc- 
tion of  such  authority.     See  §  49. 

144 


IMPLIED    POWERS    OF   CONTRACT.  §  56 

A  corporation  may  receive  personal  property  by   ^^  ^^^^ 
bequest.* 

§  56.  A  bank  has  power  to  make  all  such  contracts  as  are 
necessary  or  usual  as  direct  means  ^  to  attain  the    Contracts. 

...  , .  -,  J.1         rt  See  Restric- 

objects  of  its  nicorporation,  and  no  other."  tious,  §  68. 

"  In  deciding  whether  a  corporation  can  make  a  particular 
contract,  we  are  to  consider,  in  the  first  place,  whether  its 
charter,  or  some  statute  binding  upon  it,  forbids  Test  of  right 
or  permits  it  to  make  such  contract.  And,  if  the  to  contract. 
charter  and  valid  statute  law  are  silent  on  the  subject,  in 
the  second  place,  whether  the  power  to  make  such  a  contract 
may  not  be  implied  on  the  part  of  the  corporation,  as  directly 
or  incidentally  necessary  to  enable  it  to  fulfil  the  purpose  of 
its  existence,  or  whether  the  contract  is  entirely  foreign  to 
that  purpose."  ^ 

The  modern  tendency  is  to  liberal  construction  of  corpo- 
rate power  to  contract.     The  English  decisions  are    .,  , 

'  _  "  _         Modern  ten- 

clcav  ihtit,  p7'ima  facie,  all  its  contracts  are  valid,   dency  lib- 
and  the  burden  is  on  the  party  objecting  to  show 
that  the  law  by  which  it  is  created  expressly  or  by  necessary 
implication  prohibits  it;  and  the  drift  in  the  United  States  is 
in  the  same  direction,  away  from  the  strict  rule  that  held  the 
power  limited  to  that  conferred  or  necessarily  implied.^ 

*  The  common  law  right  of  taking  personal  property  by  bequest  was, 
we  believe,  always  enjoyed  by  corporations  equally  with  individuals,  and 
a  bequest  to  a  corporation  of  its  own  stock  is  as  valid  as  a  bequest  of  any- 
thing else.  Atk.  R.  37  ;  2  Bro.  58;  Phillips  Academy  v.  King,  12  Mass. 
(N.  Y.)  546  ;  In  the  Matter  of  Howe,  1  Paige,  Ch.  (N.  Y.)  214  ;  M'Cartee 
V.  Orphan  Asylum  Society,  9  Cowen  (N.  Y.)437;  Rivanna  Navigation 
Co.  V.  Dawsons,  3  Gratt.  (Pa.)  19. 

1  §  56.  If  the  means  are  reasonahly  and  directly  adapted  to  the  ends  for 
which  the  bank  exists,  they  are  proper;  but  indirect  means  are  not  allow- 
able, though  they  aid  the  same  ends ;  e,  g.,  a  bank  cannot  buy  and  sell 
stocks  to  raise  money  to  lend  or  to  retrieve  its  fortunes,  nor  engage  in  any 
outside  business  or  securities  except  to  save  debt,  or  invest  surplus,  nor 
purchase  land  to  prevent  competition. 

"  A  bank  cannot  go  into  the  mining  business,  and,  a  contract  that 
expressly  requires  it  to  do  so  is  beyond  its  powers.  Weston  v.  Estey,  22 
Col.  334  (45  Pac.  367)   (1896). 

^  Angell  &  Ames  on  Corporations,  §  256. 

8  Converse  v.  Norwich,  &c.  R.  R.  Co.,  33  Conn.  166-179. 
VOL.  I. —10  145 


§  56  BUSINESS   POWERS. 

1.  When  the  charter  of  a  corporation  authorizes  it  to  pur- 
chase land  for  some  specified  purpose,  in  the  absence  of  evi- 
A  contract  is  dcucc  it  wiU  be  presumed  that  any  land  purchased 
brfo"r"proper  ^^  ^^  ^^^  acquired  for  purposes  authorized  by  the 
purpose.  charter.  Even  if  a  corporation  is  forbidden  by 
its  charter  to  hold  or  take  a  title  to  real  estate,  a  convey- 
ance of  land  to  it  is  not  void.  It  is  valid  until  vacated 
by  a  direct  proceeding  by  the  sovereign,  instituted  for  that 
purpose.^ 

"  It  is  competent  for  a  national  bank  to  take  steps  for  the 
recovery  of  its  property  stolen  by  burglars,  and  to  agree  to 
Bank  may  take  like  stcps  for  the  recovery  of  the  property  of 
ment  to"  othcrs  deposited  with  it  for  safe-keeping,  and  stolen 
posit  stolen!"  ^^  the  Same  time;  and  want  of  proper  diligence, 
care,  and  skill  in  performing  such  an  undertaking  is  ground 
of  liability  to  respond  in  damages  for  failure.  But  the  evi- 
dence in  this  case  failed  to  establish  either  such  an  agreement, 
or  the  want  of  diligence  and  care,  and  the  jury  was  properly 
instructed  to  return  a  verdict  for  defendant."^ 

"  As  to  the  second  cause  of  action,  the  facts  stated  in  the 
complaint  seem  to  us  to  be  sufficient,  if  proven,  to  constitute 
a  legal  liability  on  the  part  of  defendant.  It  would  certainly 
be  competent  for  a  national  bank  to  take  measures  for  the  re- 
covery of  its  own  property  lost  in  the  way  described.  If  the 
loss,  as  in  the  present  case,  included  the  property  of  others, 
and  it  was  deemed  best,  having  reference  to  the  bank's  own 
interest,  that  these  measures  should  be  taken  by  the  bank 
alone  for  itself  and  all  concerned,  it  might  lawfully  undertake 
to  act  for  others  thus  jointly  concerned  with  itself,  as  well  as 
for  itself  alone  ;  and  want  of  proper  diligence,  skill,  and  care 
in  the  performance  of  such  an  undertaking  would  be  ground 
of  liability  to  respond  in  damages  for  such  failure."  ^ 

*  Mallett  V.  Simpson,  94  N.  C.  37. 
A  bond  of  a  national  bank,  given  to  secure  the  payment  of  certain 
bonds  and  mortgages  on  realty,  in  which  it  had  an  interest,  was  held  not 
ultra  vires.     Mutual  Life  Insurance  Co.  v.  Yates  Co.  National  Bank,  35 
App.  Div.  (Hun,  N.  Y.)    218  (1898). 

6  Wylie  V.  Korthampton  Bank,  119  U.  S.  361. 
146 


IMPLIED    POWERS.  §  59 

2,  A  contract  whereby  a  person  is  to  furnish  a  national 
bank  with  a  certain  customer  in  consideration  of  which  the 
bank  is  to  turn  over  a  certain  amount  of  fire  insurance,  is  not 
one  within  the  powers  of  a  national  bank,  and  the  bank  may 
avail  itself  of  the  defence  of  ultra  vires  if  sued  upon  the 
contract.^ 

§  57.     3.    It  may  make  all  arrangements  necessary  to  the 
advantageous  settlement  of  claims,  by  or  against  the  company  ; 
as,  for  example,  a  compromise  ^  or   release.     But   settling 
if  the  arrangement  involves   abandonment  of  the   claims. 
bank's  claim  it  must  be  necessitated  by  the  circumstances. 

§  58.     4.    It  may  run  into  debt  by  account  with  a  merchant, 
overdraw  at  another  bank,  and,  in  general,  make   q^oA^  on 
such  monetary  arrangements  as  an  individual  may.   credit. 

§  59.  5.  Any  bank  may  deal  in  Government  securities,  as 
we  have  seen.  (§  52.)  A  national  bank  cannot  buy  ^  or  loan 
on  the  security  of  its  oivn  stock,^  but  State  banks    „    , 

•'  ,  '  Stocks  and 

may,  so  far  as  not  prohibited,^  buy  and  sell  and  loan    bonds, 
upon  their  own  stock.     In  this  country  the  general 
rule  is,  that  any  bank  may  loan  on  the  security  of  the  stocks 
or   bonds   of   other  corporations,^  but   cannot   buy   and   sell 

6  Dresser  v.  Trader's  National  Bank,  165  Mass.  121  (43  N.  E.  567) 
(1896) ;  Davis  v.  Old  Colony  Railroad,  131  Mass.  258. 

^  §  57.  A  bank  may  take  stock  in  compromise  of  a  doubtful  debt 
owing  the  bank.  First  National  Bank  of  Charlotte  v.  National  Exchange 
Bank,  51  How.  Pr.  (N.  Y.)  320. 

0  §  59.     Burrows  v.  Niblack,  84  Fed.  (111.)  Ill  (1898). 

1  See  Part  II.  §  35. 

2  Mass.  R.  L.  c.  115,  §§  31-32,  allow  a  bank  to  loan  on  its  own  stock 
to  an  amount  not  beyond  one  half  the  paid  capital ;  but  it  must  not  pur- 
chase its  stock,  nor  hold  it  more  than  six  months  after  it  becomes  the 
property  of  the  bank  through  non-payment  of  the  loan. 

In  Minnesota  it  has  been  held  that  a  State  bank  cannot,  directly  or 
indirectly,  purchase  shares  of  its  own  stock.  St.  Paul  Trust  Co.  v.  Jenks, 
57  Minn.  248  (59  N.  W.    299). 

3  And  sell  them  if  necessary  to  save  the  debt.  Third  National  Bank 
of  Baltimore  v.  Boyd,  44  Md.  47;  Talmage  v.  Pell,  3  Seld.  (N.  Y.)  328; 
Dearbouru  v.  Union  National  Bank,  58  Me.  273  (1870)  ;  Kennedy  ». 
Savings  Bank,  101  Cal.  495  ;  California  Bank  v.  Kennedy,  167  U.  S.  362, 
366,  367  (Cal.  1897),  citing  National  Bank  v.  Case,  99  U.  S.  628;  First 

147 


§  60  BUSINESS   POWERS. 

them,*  except  to  save  a  debt,^  or  in  order  to  deposit  them  under 
a  law  requiring  such  stocks  to  be  given  as  security  for  circula- 
tion, or  by  reason  of  other  express  authority.^  But  although, 
under  statute,  a  national  bank  is  not  authorized  to  purchase 
its  own  stock,  stock  so  purchased  is  not  void,  and  where  a 
subsequent  purchaser  acquires  the  stock  through  a  simulated 
holder  for  the  bank,  in  ignorance  of  the  fact  that  the  bank 
had  employed  its  funds  in  placing  the  stock,  in  the  name  of 
such  simulated  owner,  and  pays  therefor  in  good  faith,  the 
title  so  obtained  is  good  against  the  bank  and  its  creditors^ 
For  the  consequence  of  dealing  in  stock  beyond  its  power,  see 
Ultra  vires,  §  722. 

§  60.  6.  To  save  a  debt,  a  bank  may  take  real  estate  or 
personal  property,  by  conveyance  or  purchase  at  foreclosure 
sale  of  a  mortgage  held  by  it  as  collateral,  or  other- 
wise, and  may  hold  such  property,  not  permanently, 
but  a  reasonable  time,  to  enable  it  to  realize  advantageous 
sale  of  it.  A  bank  may  even  engage  temporarily  in  a  business 
entirely  foreign,  in  order  to  save  its  claim,  and  in  short  may 

National  Bank  v.  Xational  Exchange  Bank,  92  U.  S.  122,  128  ;  Latimer  v. 
Citizens'  State  Bank,  102  Iowa,  162  (71  N.  W.  225)  (1897) ;  Chemical 
National  Bank  v.  Havermale,  120  Cal.  601  (52  Pac.  1071)  (1898). 

*  It  is  no  part  of  the  banking  business  to  engage  in  "  traffic  "  in  mer- 
chandise or  financial  securities,  nor  is  dealing  in  stocks  an  incident  of 
the  business  in  its  regular  course.  Sackett's  Harbor  Bank  v.  Lewis  Co. 
Bank,  11  Barb.  (N.  Y.)  213 ;  Weckler  v.  First  National  Bank,  42  Md. 
581;  Franklin  Bank  of  Cincinnati  v.  Commercial  Bank,  36  Ohio  St.  350. 
First  National  Bank  r.  Hawkins,  174  U.  S.  364  (1899) ;  Chemical  National 
Bank  v.  Havermale,  120  Cal.  601  (52  Pac.  1071)  (1898);  California  Bank 
V.  Kennedy,  167  U.  S.  362  (Cal.  1897),  and  citations. 

Under  the  Missouri  statute  a  State  bank  may  handle  negotiable 
bonds.     Mount  Vernon  Bank  v.  Porter,  52  Mo.  App.  244.     See  §  77. 

^  Union  National  Bank  v.  Hunt,  7  Mo.  App.  42 ;  Silver  Lake  Bank  v. 
North,  4  Johns.  Ch.  (N.  Y.)  370;  First  National  Bank  of  Charlotte  v. 
National  Exchange  Bank,  51  How.  Pr.  Rep.  (N.  Y.)  320;  Latimer 
V.  Citizens'  State  Bank,  102  Iowa,  162  (71  N.  W.  225)  (1897). 

^  See,  as  to  stocks  required  for  circulation  basis,  Mass.  R.  L.  c.  115, 
§  63.  In  absence  of  statutory  authority  one  corporation  cannot  hold 
stock  of  another.  Franklin  Bank  of  Cincinnati  v.  Commercial  Bank, 
36  Ohio  St.  350. 

'  Wallace  v.  Hood,  89  Fed.  (Kan.)  11  (1898). 
148 


IMPLIED   POWERS.  §  62 

do  any  act  a  prudent  man  would  do  under  the  same  circum- 
stances for  that  purpose.     See  §  78. 

§  61.     7.    It  is  a  general  principle  that  a  corporation  may 
invest  surplus  capital,  that  it  is  unable  to  make  use  of  in  its 
business,  in  outside  investments;    for  example,  a   surplus  cap- 
hank  may  buy  ^  notes,  to  sell  them  at  a  profit,  with   '^i- 
such  capital.     Any  property  which  it   cannot,  by  reason    of 
special  circumstances,  make  immediate  use  of  to  advantage, 
in  its  proper  business,  may  be  let  or  transferred,    j^^^  p^pp. 
A  ferry  company  can  lease  one  of  its  steamers,^  a   ^"J'- 
hotel  company  temporarily  let  a  part  of  its  building  for  offices, 
and  no  doubt  a  bank  may  rightfully  let  or  sell  on  the  same 
principle. 

§  62.  8.  A  bank,  unless  restricted,  can  alienate  ^  or  mort- 
gage ^*  its  property,  real  or  personal,  in  whole  or  part,  but  not 
its  franchises,  for  these  are  special  privileges  that  j^nenajjon  of 
cannot  be  delegated  nor  acquired  by  any  other  P'"°['*^'"'^-^'- 
method  than  that  prescribed  by  statute,  or  by 
special  act  of  the  legislature.  But  a  bank,  being  instituted 
partly  for  the  benefit  of  its  stockholders,  cannot  give  away 
its  property  unless  with  the  consent  of  them  all.     A  dona- 

1  §  61.     See  Lazear  v.  National  Union  Bank  (Md.),  12  Leg.  News,  04. 

2  Brown  v.  Winnisimmet  Co.,  11  Allen  (Mass.),  326. 

1  §  62.  Sharswood  in  8  Phil.  94.  Corporations  aggregate  have  at 
common  law  an  incidental  right  to  alien  or  dispose  of  their  lands  and 
chattels,  unless  specially  restrained  by  their  charters  or  by  statute.  Inde- 
pendent of  positive  law,  all  corporations  have  the  absolute  jus  dlsponendi, 
neither  limited  as  to  objects,  nor  circumscribed  as  to  quantity.  Co.  Lit. 
44  a,  300  6;  1  Sid.  161,  note  at  the  end  of  the  case.  The  case  of  Sut- 
ton's Hospital,  10  Co.  30  6;  1  Kyd  on  Corp.  108;  Com.  Dig.  tit.  Fran- 
chise, F.  11,  18;  2  Kent,  Com.  280;  Mayor  of  Colchester  v.  Lowten,  1  Ves. 
&  B.  226,  237,  240,  244;  Binney's  case,  2  Bland,  Ch.  (Md.)  142. 

By  statute  in  New  York  (c.  409,  1882,  §§  186,  187)  a  bank  cannot 
transfer,  assign,  or  convey  property  exceeding  $1000,  except  in  the  trans- 
action of  its  ordinary  business  or  in  pursuance  of  a  previous  vote  of  the 
board  of  directors.  The  transfer  of  three  bills  at  one  time,  which  in  the 
aggregate  exceed  §1000,  is  a  violation  of  the  law,  although  no  one  of 
the  bills  exceeds  the  statutory  amount.  Atkinson  v.  Rochester  Printing 
Co.,  114  N.  y.  168  (21  N.  E.  178). 

1'  Roberts  v.  Washington  National  Bank,  11  Wash.  550  (40  Pac. 
225)  (1895). 

149 


§  63  BUSINESS   POWERS. 

tion  of  the  funds  of  a  bank  in  aid  of  a  project  outside  the 
regular  banking  business  is  invalid,^  for  example  a  donation 
to  induce  a  manufacturing  company  to  remain  in  town.^ 

§  63.  9.  So  far  as  it  is  involved  in  receiving  deposits,  bor- 
rowing is  a  part  of  banking,  but  borrowing  stricto  sensu,  tak- 
ing a  loan  for  a  definite  time,  instead  of  one  payable 
on  demand  as  ordinary  deposits  are,  is  not^  a  part 
of  the  business  of  banking,  nor  a  necessary  incident  thereof, 
as  a  continuous  practice;  but  (like  every  other  corporation  in 
the  United  States)  a  bank  has^  an  inherent  right  to  borrow 
money  whenever  it  is  reasonably  necessary  in  the  proper 
conduct  of  its  business,  unless  specially  restricted.^  The 
privilege  is  the  child  of  necessity,  and  is  limited  by  the  same 
necessity  or  intrinsic  propriety  which  gives  it  birth.  The 
borrowing  must  be  incidental  to  the  legitimate  banking  busi- 
ness of  the  association,  otherwise  the  act  is  ultra  vires  ;  as  if 
the  money  is  obtained  for  speculation.*    Aside  from  the  theory 

2  §  62.  Robertson  v.  Buffalo  County  National  Bank,  40  Neb.  235 
(58  N.  W.  715)  (1894). 

8  McCrory  v.  Chambers,  48  111.  App.  445. 

1  §  63.  The  business  of  a  bank  is  to  lend,  not  borrow ;  to  discount  the 
notes  of  others,  not  to  get  its  own  discounted.  A  bank  under  certain 
circumstances  may  be  a  temporary  borrower  on  time,  and  give  its  note  on 
time;  but  such  transaction  would  be  so  out  of  the  course  of  ordinary  and 
legitimate  banking  as  to  require  those  making  the  loan  to  see  to  it  that 
the  agent  acting  for  the  bank  had  special  authority  to  borrow  the  money. 
Adams  v.  Cook  Co.  National  Bank,  Blodgett,  J.,  quoted  Ball  on  National 
Banks,  54.  Even,  therefore,  if  it  be  conceded  that  it  is  within  the  powers 
of  the  board  of  directors  to  borrow  on  time,  it  is  yet  obvious  that  a  vice- 
president,  however  general  his  powers,  cannot  exercise  such  a  power 
unless  specially  authorized  so  to  do,  and  it  is  equally  obvious  that  per- 
sons dealing  with  the  bank  are  presumed  to  know  the  extent  of  the 
general  powers  of  the  officers.  Western  National  Bank  v.  Armstrong, 
152  U.  S.  346,  351,  352  (1893). 

2  City  Bank  of  Columbus  v.  Beach,  1  Blatchf.  C.  C.  425;  Bank  of 
Augusta  V.  Earle,  13  Pet.  519;  People  v.  Oakland  County  Bank,  1  Dougl. 
(Mich.)  282;  Tombigbee  R.  R.  Co.  v.  Kneeland,  4  How.  U.  S.  16.  See 
also  6  Mo.  App.  333;  and  Donnell  v.  Lewis  Co.  Savings  Bank,  80  Mo. 
165. 

8  See  §  70. 

■*  Curtis  V.  Leavitt,  15  N.  Y.  9;  Barnes  v.  Ontario  Bank,  19  id.  152; 

150 


IMPLIED   POWERS.  §  64 

of  law,  as  no  one  but  the  bank  can  well  judge  whether  a  loan 
is  reasonably  necessary  or  not,  the  practical  fact  is  that  a 
bank  can  borrow  whenever  it  wishes  to,  and  if  the  money  is 
used  in  its  proper  business  no  fault  will  be  found,  and  even 
if  wrongly  applied  it  will  not  affect  the  validity  of  the  loan  as 
between  the  parties  ordinarily.     (See  Ultra  vires.) 

For  express  statutory  provisions,  see  §  69. 

Whenever  a  bank   may  rightfully  borrow  on  time,  it  can 
give  its  negotiable  note  on  time,^  and  a  bank   may  secure 
persons  who  loan  it  money  by  deposit  or  on  time    Negotiable 
by  a  mortgage  of  its  property,  (but  not  of  its  fran-   on'5imr°^ 
chises.)  and  may  establish  ^  an  investment  depart-   Security, 

'  /  *'  ^  mortgage, 

ment,  in  which  certificates  issued  for  loans  and  etc. 
deposits  are  secured  by  the  transfer  to  a  trustee  of  negotiable 
paper,  to  be  held  by  him  solely  for  the  benefit  of  depositors 
and  others  dealing  with  the  bank,  and  thereby  give  them 
precedence  over  its  general  creditors  not  so  secured.  Such 
a  power  is  a  mere  incident  of  the  right  to  receive  deposits, 
which  by  necessary  implication  gives  power  to  assign  and 
mortgage  negotiable  instruments  as  security  for  them,^  and 
to  do  all  other  acts  that  the  nature  of  such  business  involves, 
on  the  principles  of  prudent  commercial  conduct.  The  re- 
discounting  of  bills  and  notes  is  a  form  of  borrowing  money, 
and  is  not,  as  a  matter  of  law,  out  of  the  usual  course  of 
business  so  as  to  charge  every  one  connected  therewith  with 
the  knowledge  that  it  may  be  in  excess  of  authority.^ 

§  64.   All  corporations  have  power  to  draw  checks   checks  and 
and  indorse  them  and  any  other  negotiable  paper   indorsement. 

Leavitfc  v.  Yates,  4  Edw.  Ch.  (N.  Y.)  134  ;  Safford  v.  WyckofE,  4  Hill 
(N.  Y.),  442 ;  Talman  v.  Rochester  City  Bank,  18  Barb.  (N.  Y.)  123. 

^  Ward  V.  Johnson,  95  111.  215. 

6  Antew  V.  National  Bank,  174  U.  S.  125  (1899).  Another  United 
States  case  has  held  that  a  rediscount  of  paper  is  more  like  a  sale 
than  a  borrowing.  U.  S.  National  Bank  v.  First  National  Bank, 
79  Fed.  296. 

Long  habit  of  a  bank  of  rediscounting  its  bills,  usage  of  other  banks 
in  the  locality  to  do  the  same,  and  knowledge  of  the  directors,  will  estop 
the  bank  to  deny  the  authority  of  the  officers  procuring  the  rediscount. 
Ibid. 

151 


§65 


BUSINESS   POWERS. 


properly  coming  to  them,  as  when  they  receive  a  payment  in 
that  form. 

§  65.  10.  Neither  as  inchided  in  its  powers  nor  incidental 
to  them  is  it  a  part  of  a  bank's  business  to  lend  its  credit.^  If 
Lendin"-  ^  bank  could  lend  its  credit  as  well  as  its  money,  it 
Guarintv  might,  if  it  received  compensation  and  was  careful 
Surety.  ^q  p^f;  jts  name  onlv  to  solid  paper,  make  a  great 

Acconimo-  "  . 

datioii.  deal  more  than  any  lawful  interest  on  its  money 

would  amount  to.  If  not  careful,  the  power  would  be  the 
mother  of  panics,  and  if  no  compensation  was  received,  there 
is  the  additional  reason,  if  any  is  needed,  that  such  a  power 
is  in  derogation  of  the  rights  and  interests  of  stockholders, 
and  at  all  events  could  only  be  exercised  with  the  consent 
of  all. 

Indeed,  lending  credit  is  the  exact  opposite  of  lending 
money,  which  is  the  real  business  of  a  bank,  for  while  the 
latter  creates  a  liability  in  favor  of  the  bank,  the  former  gives 
rise  to  a  liability  of  the  bank  to  another. 

It  is  uniformly  held,  therefore,  that  a  bank  cannot  be  an  ac- 
commodation indorser  or  acceptor,'-^  —  although  if  it  transcends 
Accommo-       its  powcr  in  this  respect,  it  docs  not  follow  the  con- 

dation  .  .  ^.^  .        ^  i  •     i 

surety.  tract  IS  void  (scc  Ultra  vires)  as  to  third  parties 

without  notice,  though  it  will  be  totally  void  in  the  hands  of 

^  §  65.  A  national  Lank  cannot  lend  its  credit.  It  has  no  power  on 
deposit  of  collateral  security  to  guarantee  the  obligation  of  the  person 
making  the  deposit.  Seligman  v.  Charlottesville  National  Bank,  3  Hughes, 
647.  The  counsel  argued  that  a  bank  could  borrow  money  to  aid  its 
customers,  but  the  court  said  that  lending  its  credit  was  another  thing, 
and  not  within  nor  incidental  to  any  of  the  specified  powers  of  the  bank. 
It  does,  upon  analysis,  seem  clear  that,  however  much  on  the  surface  of 
things  borrowing  to  lend  may  resemble  lending  credit,  there  is  a  substan- 
tial difference  in  just  tlie  points  that  make  lending  credit  objectionable. 
1st.  If  a  bank  lends  money  obtained  on  credit  it  only  puts  the  money 
in  its  possession  at  risk  once,  while  by  lending  credit  it  may  put  the  same 
money  under  an  indefinite  number  of  risks.  2d.  By  lending  money  it 
can  only  make  interest  on  money,  and  not  on  breath  and  ink,  as  it  could 
by  lending  credit. 

2  Johnson  v.  Charlottesville  National  Bank,  3  Hughes,  657 ;  National 
Bank  r.  Atkinson,  55  Fed.  465 ;  Bowen  v.  Needles  National  Bank,  87 
Fed.  430  (1898). 

152 


IMPLIED   POWERS.  §  65 

one  having  notice,  —  nor  be  surety  for  another  in  any  business 
in  which  it  has  no  interest  and  can  derive  no  profit ;  as,  for 
example,  the  guaranty  of  a  building  contract.^ 

But  a  warranty  of  goods  sold  by  the  bank,  or  an  indorse- 
ment or  guaranty*  of  a  note  negotiated  by  it,  is  perfectly 
lawful ;  for,  beside  being  rendered  necessary  and    May  war- 
proper  by  the  usual  habit  of  business  and  by  the    l^j^d^uar-' 
nature  of  the  case,  such  transactions  are  not  open    T^^^  °'' '"" 

i  dorse  nego- 

to  the  objections  above.  They  are  not  contracts  ^i^^^'e  paper. 
upon  air ;  the  bank  receives  value  and  has  a  real  interest ; 
with  reasonable  care  the  chance  of  loss  is  small,  no  greater 
than  in  many  other  acts  necessary  in  carrying  on  its  business, 
(no  sum  of  money  is  put  at  more  than  two  risks  ^  by  sucli 
transactions),  and  even  if  loss  occurs  it  is  attributable  to  the 

'  "  If,  in  the  course  of  its  business,  the  bank  finds  it  necessary  to  in- 
dorse for  transfer,  or  otherwise  specially  guarantee  negotiable  commercial 
paper,  (People's  Bank  v.  National  Bank,  101  U.  S.  181,)  it  will  not  be 
claimed  that  the  guaranteeing  of  other  written  contracts  is  included 
within  any  of  its  powers,  general  or  special,  or  is  necessarily  incidental. 
It  is  no  part  of  the  business  of  a  bank,  nor  necessarily  incidental  to  it,  to 
guarantee  a  building  contract,  or  one  for  furnishing  building  materials; 
and  the  defendants  had  no  power  to  make  the  guaranty  which  is  the 
subject  of  this  action."  Norton  v.  Bank,  61  N.  H.  592;  Commercial 
National  Bank  v.  Pivie,  82  Fed.  799  (1897);  Bowen  v.  Needles  National 
Bank,  87  Fed.  430  (1898);  AVatts  v.  Wells,  7  Montreal  L.  R.  (Q.  B.)  387. 

*  People's  Bank  v.  National  Bank,  101  U.  S.  181.  A  bank  may 
transfer  paper  by  indorsement  waiving  demand  and  notice,  and  there 
is  no  reason  why  it  should  not  give  a  guarantee  a  less  onerous  obligation. 
Where  a  president  of  a  bank  negotiates,  for  value,  certain  notes,  and,  at 
the  same  time  executes,  in  the  name  of  the  bank,  a  written  guaranty  of 
payment,  his  authority  to  execute  such  guai-anty  will  be  conclusively 
presumed  in  favor  of  a  purchaser  acting  without  notice  to  tlie  contrary. 
Thomas  v.  City  National  Bank,  40  Neb.  501  (58  N.  W.  943),  1894 ;  Rich 
V.  State  National  Bank,  7  Neb.  201. 

6  It  may  lend  the  money  received  for  the  goods  or  note,  one  risk;  and 
the  warranty  constitutes  another,  but,  with  care  in  acquiring  the  property 
or  note,  not  a  large  one;  and  at  any  rate  the  total  risk  is  only  such  as  is 
necessarily  incident  to  business  transactions,  and  no  door  is  opened,  as  in 
the  case  of  lending  credit,  to  the  indefinite  accumulation  of  risks  piled 
panic  high  on  a  narrow  foundation  of  cash  and  the  frail  ice  of  public 
credulity,  that  may  at  any  time  give  way,  and  the  whole  structure  be 
engulfed. 

153 


§  69  BUSINESS   POWERS. 

carelessness  or  misfortune  of  the  bank  in  acquiring  the  sub- 
ject matter,  not  in  guaranteeing  it,  and  such  agreements  are 
not  dangerous  to  the  financial  health  of  the  community,  but 
beneficial  to  it. 

§  66,  11.  A  bank  can  pay  dividends  out  of  its  earnings 
Dividends.  (and  not  out  of  anything  else),  or  it  may,  and,  if  so 
Surplus.  provided,  must  keep  the  whole  or  a  part  of  its  profits 

for  a  surplus  fund.^ 

§  67.  12.  In  the  absence  of  express  provision,  a  bank  may 
decline  to  enter  upon,  or  discontinue  the  exercise  of,  any 
severable  part  of  its  franchises  or  business  ;  for  example,  a 
bank  may  receive  special  deposits  or  not,  as  it  chooses,  or  act 
as  a  collecting  agent  or  not. 

But  continued  abandonment  of  its  entire  business,  or  ne- 
glect of  any  function  that  is  also  by  the  organic  law  a  duty, 
may  be  a  cause  of  forfeiture.     See  §§  68,  69,  and  722. 

§  68.  Hestrictions.  —  Having  examined  what  a  bank  can 
do,  it  may  be  well  to  glance  briefly  at  the  law  from  the  oppo- 
site point  of  view,  and  note  what  a  bank  cannot  do.  When 
you  have  driven  a  nail,  it  is  a  good  thing  to  hammer  it  a  little 
on  the  under  side.  This  region  of  No  Power  is  traversed  by 
three  lines  in  different  directions. 

1.  The  restrictions  are  such  as  exist  at  common  law,  or 
are  express,  which  last  may  be  declaratory  of,  or  in  deroga- 
tion of,  the  common  law. 

2.  They  may  be  absolute^  or  such  as  place  the  acts  to  which 
they  relate  beyond  the  power  of  the  bank  for  any  purpose  or 
under  any  circumstances  ;  or  conditional^  allowing  the  act 
under  some  circumstances  or  for  special  purposes,  and  pro- 
hibiting it  under  or  for  others.  This  distinction  is  of  much 
weight  in  considering  the  law  of  ultra  vires. 

3.  Violation  of  any  restriction  may  or  may  not  cause  for- 
feiture, according  to  the  principles  set  forth  in  §  722  et  seq. 

§  69.   Express  Restrictions.  —  These  must  be  looked  for  in 

the  organic  law  of  each  bank.     Each  charter  may  differ  from 

every  other ;  but  to  indicate  the  nature  of  the  limitations  to 

be  expected,  we  will  enumerate  the  most  important  ones  found 

1  §  66.   Bank  of  Utica  v.  City  of  Utica,  4  Paige  (N.  Y.),  399. 

154 


LIMITATIONS   IN    ORGANIC   LAW.  §  69 

in  the  National  Banking  Law  and  in  the  statutes  of  Massa- 
chusetts, adding  a  few  words  about  restrictions  relating  to 
the  formalities  of  contracts. 


Place. 

(a)  Business  is  not  to  be  done  away  from  the  bank.^  (Mass. 
&  U.  S.) 

Time. 

(J)  Bank  not  to  begin  business  till  one  half  the  capital  is 
paid,  and  the  organization  certificate  is  made,  and,  in  the 
case  of  a  national  bank,  not  until  the  comptroller  issues  his 
authorization  certificate.^     (Mass.  &  U.  S.) 

Traffic, 
(c)    Not  to  engage  in  trade  or  commerce.^     (Mass.) 

Debts   and   Loans. 

(^d)  Not  to  go  into  debt  beyond  a  specified  limit.^  (Mass. 
&  U.  S.) 

(e)  Not  to  borrow  on  time,  except  from  the  State,  or  a 
Massachusetts  savings  bank,  or  in  the  way  of  deposit  by  an 
assignee  in  insolvency  ;  ^  and  where  the  bank  cannot  borrow 
on  time,  it  cannot  issue  time  paper.     (Mass.) 

(/)  Not  to  make  a  loan  or  discount,  except  it  is  to  be  paid 
on  demand,  and  every  loan  or  discount  otherwise  made  is 
expressly  void,  and  the  bank  forfeits  $500  for  each  offence.^ 
(Mass.) 

(^)  Not  to  allow  debts  due  to  itself  to  accumulate  beyond  a 
fixed  limit.^     (Mass.) 

,  1  §  69.  See  Part  II.  §  8,  and  Mass.  R.  L.  c.  115,  §  30,  no  loan  or  dis- 
count, or  issuance  of  note,  away  from  bank.     See  §  46. 

2  Mass.  R.  L.  c.  115,  §  3.     See  Part  II.  §§8,  14. 

»  Mass.  R.  L.  c.  115,  §  38.     See  above,  §  47. 

*  See  Part  II.  §  36.  The  IVIass.  R.  L.  c.  115,  §§  38,  34,  limit  debts 
due  to  or  from  (a)  bank  to  twice  paid  capital,  not  including  deposits  or 
debts  due  to  or  from  a  bank,  or  from  the  United  States  or  the  State. 

6  Mass.  R.  L.  c.  115,  §  40. 

6  Mass.  R.  L.  c.   115,  §  51. 

155 


§  69  BUSINESS   POWERS. 

(/i)  Not  to  loan  on  security  of  its  own  stock  (Nat.),'  or  only 
to  a  limited  extent  (Mass.).^     (Mass.  &  U.  S.) 

(i)  Not  to  allow  one  person  or  company  to  be  liable  to  the 
bank  to  a  greater  amount  than  one  tenth  of  the  bank's  cap- 
ital.9     (U.  S.) 

(j )  Not  to  loan  to  its  officers  beyond  a  certain  limit,  unless 
by  vote  of  stockholders.^''     (Mass.) 

(7c)  Not  to  loan  to  any  manufacturing  corporation  whose 
financial  officer  is  cashier  of  the  bank.^^     (Mass.) 

Real  Estate. 

(I)  Not  to  take  real  estate  security  for  concurrent  or 
future  loans,  nor  hold  realty  for  other  than  the  specified 
purposes.12     (jj  g.) 

(m)  Not  to  hold  more  real  estate  than  is  equivalent  to 
twelve  per  cent  of  its  capital,  except  what  it  receives  as 
security  for  or  in  payment  of  debts. ^^     (Mass.) 

Interest. 

(n)  Not  to  take  interest,  or  discount,  beyond  a  specific 
limit.i*     (U.  S.) 

(o)  Not  to  pay  interest,  except  on  money  borrowed  of  the 
State,  or  of  a  Massachusetts  savings  bank,  or  an  assignee  in 
insolvency,  or  on  debts  due  another  bank,  or  a  town  or  city  of 
Massachusetts.^^ 

Circulation. 

(jo)  Not  to  pledge  its  circulation  nor  use  it  in  any  way  to 
increase  its  capital. ^^     (U.  S.) 

(s)  Not  to  refuse  to  redeem  its  circulation,  under  penalty 
of  dissolution  and  forfeiture  of  the  bonds  it  has  deposited  with 
the  United  States.i'     (U.  S.) 

'  See  Part  II.  §  35. 

8  Mass.  R.  L.  c.  115,  §  31,  not  beyond  one  half  capital  paid  in. 

9  See  Part  II.  §  29.  lo  Mass.  R.  L.  c.  115,  §  53. 
"  Mass.  R.  L.  c.  115,  §  54.                   12  gee  Part  II.  §  28. 

18  Mass.  R.  L.  c.  115,  §  39.  "  See  Part  II.  §  30. 

15  Mass.  R.  L.  c.  115,  §  40.  "  See  Part  II.  §  37. 

"  See  Part  II.  §§  46-50. 

156 


PROVISIONS  RELATING   TO    FORM.  §  70 

(f)    Not  to  pay  out  certain  bills.^^     (U.  S.) 
(w)  Not  to  issue  more  than  a  given  quantity  of  notes  of 
specified  denominations.^^     $100  penalty.     (Mass.) 

Capital. 

(v)  Not  to  withdraw  any  part  of  capital  by  dividends,  etc.^o 
(U.  S.) 

Provisions  Relating  to   Form.^ 

§  70.  (w)  When  a  statute  says  the  contracts  of  a  bank 
shall  be  signed  in  a  particular  way,  or  by  particular  officers, 
opinions  differ  whether  it  is  to  be  construed  as  Directory  or 
merely  declaring  that  a  contract  so  executed  will   ^"iperauve. 

18  See  Part  II.  §  39. 

19  Mass.  R.  L.  c.  115,  §  74. 

20  See  Part  II.  §  38. 

1  §  70.  Note  on  the  Use  of  the  Corporate  Seal  ix  making 
Corporate  Coxtracts.  —  The  old  rule  of  law  was,  that  a  corporation 
could  do  no  act  save  by  a  deed  executed  under  its  corporate  seal.  But 
this  ancient  principle  has  of  late  years  been  done  away  with  by  the  com- 
pulsion of  the  practical  necessities  of  business  ;  and  in  our  land  and  our 
time  corporations  without  number  transact  their  affairs  with  a  very  in- 
frequent use  of  this  once  indispensable  formality.  In  the  case  of  The 
Bank  of  Columbia  v.  Patterson's  Administrator,  7  Cranch,  299,  the 
Supreme  Court  of  the  United  States  first  absolutely  declared  that  the  old 
rule  could  no  longer  be  regarded  as  law,  and  the  same  has  been  since  con- 
sistently and  frequently  held,  in  cases  not  only  of  banks,  but  of  various 
other  species  of  corporations.  Fleckner  v.  Bank  of  United  States, 
8  Wheat.  33S ;  Mechanics'  Bank  of  Alexandria  v.  Bank  of  Columbia, 
5  id.  326;  Stamford  Bank  y.  Benedict,  15  Conn.  437;  Ridgway  v.  Far- 
mers' Bank,  12  Serg.  &  R.  (Pa.)  256;  Fishmongei's'  Company  v.  Robert- 
son, 5  Man.  &  Gr.  131  ;  6  Scott,  N.  R.  56.  But  the  practical  effect  of 
the  old  rule  is  reduced  to  a  low  point  by  the  doctrine  that  the  class  of 
corporations  which  are  creatures  of  a  statute,  whether  general  or  special, 
are  not  within  the  force  of  the  common  law  rule. 

Then,  too,  the  ancient  rule  simply  required  that,  when  the  corporation 
itself  performed  an  act,  that  act  should  be  done  by  deed  and  with  the  seal. 
This  rule,  strictly  construed,  still  leaves  the  corporation  free  to  create 
agents  to  whom  it  may  delegate  power  to  act  for  it,  and  the  acts  of  such 
agents,  though  binding  the  corporation,  are  yet  not  primarily  the  acts 
of  the  corporation,  and  so  need  not  be  performed  by  deed  nor  evidenced 
by  seal.  Such  are  the  two  favorite  methods  which  jurists  have  adopted 
for  annulling  without  breaking  an  ancient  and  time-honored  principle. 

157 


§  71  BUSINESS   POWERS. 

be  sufficiently  executed  beyond  cavil,  but  not  excluding  other 
methods,^  or  is  it  to  be  considered  as  indicating  the  only  valid 
way  in  which  the  corporation  can  execute  its  contracts.^ 

But  such  a  provision  is  held  not  to  affect  the  ordinary  con- 
tracts made  by  a  cashier  as  an  inherent  part  of  his  office,  for 
these  are  not   made    by  the    corporation  directly, 

Do  not  af-  .  .        "^  ,       p   , , 

feet  matters  and  great  inconvenience  would  follow  construing 

tiue'rwt  in-  sucli  a  provision  to  cover   these  matters  of  daily 

actio" of  \ht  ^"d  hourly  routine.^     (See  Ultra  vires,  and  Infor- 

coiporation.  i^ality,  §  722.) 

Common  Law  Restrictions. 
A  Brief   Restatement   of   the   Negative   Side   of    §§   47-67. 

§  71.  («aj)  A  bank  cannot  sell  or  mortgage  its  franchises. 
(If  it  does,  it  will  be  a  case  of  "  absolute  ultra  vires,^^  for  no 
fact  can  obscure  such  a  transaction.) 

(J)  A  bank  cannot  give  away  its  property,  except  by  con- 
sent of  all  the  stockholders,  though  the  directors  can  release 
a  claim  as  part  of  an  arrangement  the  whole  of  which  is  for 
the  advantage  of  the  bank  under  the  circumstances. 

Either  artifice  accomplishes  sufficiently  satisfactorily  the  desired  end. 
Though  to  make  the  former  apply  it  is  essential  that  there  should  be  a 
statutory  enactment,  which  is  not  wholly  silent  concerning  the  govern- 
ment or  appointment  of  officers  of  the  corporation;  and  the  latter  is 
available  only  when  the  deed  and  corporate  seal  appear  somewhere  in  the 
chain  of  proceedings.  For  the  corporation  must  act  somewhere  and  at 
some  time  in  creating  the  original  agency  and  making  the  primal  dele- 
gation, and  this  act  must  be  accompanied  by  the  common  law  formali- 
ties, since  it  cannot  receive  the  protection  of  the  agency  theory.  But  the 
simple  truth  is,  that  the  elastic  expansion  of  modern  business  has  irrevo- 
cably snapped  the  clumsy  and  useless  ligament  which  older  generations 
found  less  intolerable.  Judges,  in  evading  the  rigidity  of  an  antiquated 
dogma  of  the  law,  have  simply  yielded  to  that  pressure  of  invincible 
necessity  which  the  developments  in  the  conduct  and  systems  of  the  busi- 
ness world  are  every  day  bringing  to  bear  upon  old-world  legal  technicali- 
ties. It  would  only  drag  the  law  into  contempt  to  declare  that  it  requires 
every  check  or  draft,  every  loan  or  discount,  every  indorsement  or  trans- 
fer, made  by  a  bank,  to  be  evidenced  by  a  corporate  deed  and  seal. 

2  Barnes  v.  Ontario  Bank,  19  N.  Y.  152. 

8  See  Safford  v.  Wyckoff,  4  Hill  (N.  Y.),  442. 

158 


COMMON   LAW   RESTRICTIONS.  §  71 

(c)  Nor  traffic  in  merchandise,  stocks,  or  securities. 

(d)  Nor  act  as  agent  in  dealing  in  them,  except  as  stated 
in  §  59. 

(e)  Nor  be  an  accommodation  indorser  (except,  perhaps, 
by  consent  of  all  the  stockholders). 

(/)  Nor  be  a  surety,  except  so  far  as  is  necessarily  inci- 
dental to  its  business. 

(^)    Nor  lend  its  credit  in  any  way. 

(A)  Nor  "  purchase  "  negotiable  paper,  in  the  sense  of 
taking  it  free  from  the  taint  of   usury. 

(z)  Nor  issue  notes  to  circulate  as  money  without  special 
authority. 

(j)   Nor  borrow  on  time,  except  for  banking  necessities. 

(k)  Nor  engage  in  any  foreign  business,  except  so  far  as 
necessary  to  keep  surplus  capital  employed,  or  to  save  a  debt. 

(I)  Nor  declare  dividends  out  of  its  capital.  Nor  assess 
shares,  unless  authorized  by  law,  or  by  express  agreement  of 
the  shareholders.^  There  is  no  inherent  power  to  call  on  the 
stockholders  for  more  funds  to  aid  the  bank's  business,  after 
they  have  paid  the  amount  of  their  stock.  But  if  authorized, 
the  bank  may  issue  new  shares,  giving  the  existing  stock- 
holders the  preference, 

^  §  71.  Tippets  V.  Walker,  4  Mass.  595;  Knowles  v.  Beaty,  1  McLean, 
41 ;  Palmer  v.  Ridge  Mining  Co.,  34  Pa.  St.  288. 


159 


CHAPTER   YII. 

EXPANSIONS  OP  THE  POWERS  OP  A  BANK  IN  REFERENCE  TO 
PURCHASE  OF  NEGOTIABLE  PAPER,  HANDLING  STOCKS,  DEAL- 
ING   IN    REAL    ESTATE,  AND    SAVING    DEBTS. 

§  71.   A.   Analysis. 

§  72.   Power  of  Purchase.     §§  49,  722. 

Cases  affirming  power  to  purchase,  i.  e.  to  acquire  absolute  title ; 
title  otherwise  than  by  loan. 

(a)    Massachusetts. 

(6)    South  Carolina,  Iowa,  Texas. 

(c)   Ohio. 

{d)   Kansas,  Kentucky. 

(e)    New  York. 

(/)    Illinois. 
§  73.     Cases  denying  such  Power.     §§  49,  722. 

(a)  Minnesota. 

(b)  Maryland.    Lazear  Brothers'  case,  and  dissent. 

(c)  Cases  in  form  denying  the  power  of  purchase,  but  using  the  word 

only  in  the  sense  of  power  to  buy  at  any  agreed  price,  without 
reference  to  usury  laws,  which  is  all  they  really  deny. 
§  74.     Real  Estate.     §  12,  n.  4,  §§  54,  169,  747 ;  II.  §§  28,  128. 

May  hold  realty  enough  for  its  business. 

May  buy  in  outstanding  title  of  land  mortgaged  to  it. 

Power  to  sell  implied  from  power  to  buy. 

Power  liberally  construed. 

May  buy,  build  on,  and  sell  lots  adjoining  the  bank  as  a  precaution 
against  fire. 

(b)  Ultra  vires  purchase,  —  only  sovereign  can  object.     §§  75  (c),  750. 

(c)  Previous  debts  in  New  York  mean  concurrent  debts. 

(d)  State  bank  loans  on  real  estate. 

§  75.     National  bank  powers  in  respect  to  real  estate. 

Trust  deed  for  concurrent  loan  or  future  advances  probably 
good  (the  bank  being  the  cestui),  though  a  mortgage  would 
(6)         be  bad,  because  it  gives  title,  and  therefore  violates  R.  S. 
§  5137.     See  Union  National  Bank  v.  Matthews,  U.  S.  S.  C. 
(<f )   Loan  on  personal  security  is  good,  although  a  mortgage  is  also 
taken. 
{e)    Tlie  note  may  be  concurrent  if  the  debt  was  previous. 
(  f)  Trust  deed  to  a  third  party  for  benefit  of  bank  held  good. 

160 


PURCHASE   AND    DISCOUNT.  §  72 

§  76.    Bank  may  be  trustee  of  real  estate  at  common   law.     See  (6) 
but  contra  {e). 
(a)   New  York  law. 
§  77.   Stocks.     §§  59,  164;  II.  §  35. 

National  bank  cannot  buy  its  own  stock  ;  no  titles  passes.     §  59. 

A  bank  may  buy  to  save  debt. 

May  hold  other   stocks  as  collateral,  but  cannot  traffic  or  speculate 

in  them, 
(a)   National  bank  cannot  sell  railroad  bonds  on  commission. 
{b)    But  may  take  to  save  debt. 
§  78.   Sating  Debts.     §§  60,  77  a,  b. 

May  carry  on  an  iron  mill  in  order  to  make  itself  good. 
May  buy  in  land  or  outstanding  title,  or  may  sell  its  claim  and  transfer 
the  note. 

§  72.  AfErmative  Cases  on  the  Power  of  Banks  to  purchase 
Negotiable  Paper,  and  whether  Discounting  covers  more  than 
lending  on  responsibility  of  the  transferrer.  See  Alvey's 
dissent,  §  73  h. 

(Mass.)  (a)  Dealing  in  checks  is  part  of  the  usual  business 
of  banking,  and  would  be  within  the  general  powers  of  a  bank 
without  special  mention.  But  II.  §  8,  in  the  clause  relating 
to  discounting  and  negotiating  promissory  notes  and  other 
evidences  of  debt,  gives  express  power  to  buy  the  checks  of 
individuals,  whether  payable  to  bearer  or  order.^ 

(S.  C.)  (la.)  (Tex.)  (6)  A  draft  drawn  by  a  seller  against 
a  buyer  in  favor  of  a  national  bank,  by  which  it  is  discounted 
or  purchased  with  the  bill  of  lading  attached,  passes  title  to  the 
goods  and  draft  to  the  bank.^'*  The  draft  is  a  bill  of  ex- 
change, and  its  purchase  is  not  beyond  the  powers  conferred 
by  Congress  upon  national  banks.^ 

1  §  72.    First  National  Bank  ».  Harris,  108  Mass.  514. 

i«  Ayres  v.  Dorsey  Produce  Co.,  101  la.  141  (70  N.  W.  Ill)  (1897). 

2  Union  National  Bank  v.  Rowan,  23  S.  C.  339.  But  the  United  States 
cases  cited,  viz.  Union  National  Bank  v.  Matthews,  98  U.  S.  621,  and  Na- 
tional Bank  v.  Whitney,  103  U.  S.  99,  seem  only  to  support  the  proposi- 
tion, that,  whether  a  bank  has  power  to  buy  negotiable  paper  or  not,  only 
the  United  States  can  object.  Freeman  v.  Bank  of  Commerce,  3  Tex. 
(App.)  338  (1887);  Ayres  v.  Dorsey  Produce  Co.,  101  la.  141  (70  N.  W. 
Ill)  1897.  It  was  held  in  the  latter  case  that  the  provision  that  a 
national  bank  cannot  hold  title  to  any  property,  except  iu  satisfaction  of 
a  previous  indebtedness,  did  not  apply. 

VOL.    I.  — 11  161 


§  72  EXPANSIONS   OF   THE   POWERS   OF   A    BANK. 

(Oliio.)  (c)  In  a  case  concerning  the  purchase  of  an  in- 
land draft  or  bill  of  exchange,  the  court  used  the  following 
comprehensive  language :  "  It  seems  to  be  the  idea  of  coun- 
sel making  the  objection,  that  negotiable  paper,  perfect  and 
available  in  the  hands  of  the  holder,  is  not  the  subject  of 
purchase  by  a  national  bank  at  any  rate  of  discount.  This 
view  we  think  entirely  erroneous.  We  see  nothing  in  the  act 
of  Congress,  nor  in  reason,  tvhy  a  borrower  may  not  obtain  the 
discount  by  a  bank  of  the  existing  notes  and  bills  of  others  of 
which  he  is  the  holder,  as  well  as  of  his  oivn  paper  made 
directly  to  the  bank.  It  is  true  that,  as  between  natural  per- 
sons, the  purchase  of  such  paper,  ivhen  made  in  good  faith,  and 
not  as  a  disguise  for  a  loan,  is  not  subject  to  the  usury  laws  ; 
hut  it  is  otherwise  as  to  a  bank.  In  the  business  of  banking, 
the  purchasing  and  discounting  of  paper  is  only  '  a  mode  of 
loaning  money.'  "  ^ 

(Kansas.)  (Ky.)  (i)  Purchase  maybe  by  discount.  In  the 
case  of  individuals  the  purchase  of  negotiable  paper,  when  in 
good  faith  and  not  a  disguise  for  a  loan,  is  not  the  subject  of 
usury  laws.  It  is  otherwise  as  to  a  bank ;  it  may  buy,  or 
simply  loan  money  to  the  owner,  holding  him  responsible  ; 
in  either  case,  it  must  not  gain  more  than  the  legal  interest 
in  advance.* 

(N.  Y.)  (e)  Statutory  authority  to  discount  includes  power 
to  buy  notes.^ 

To  buy  or  purchase  a  debt  is  always  in  commerce  termed 
to  discount  it.^ 

"  To  discount  includes  to  buy,  for  discounting  is  at  mostf 
but  another  name  for  buying  at  a  discount."^ 

«  Smith  V.  Exchange  Bank,  26  Ohio  St.  141. 

*  Pape  V.  Capitol  Bank  of  Topeka,  20  Kans.  440.  The  judge  quoted 
Bouvier's  definition  of  Discount:  "  To  discount  signifies  the  act  of 
buying  a  bill  of  exchange  or  promissory  note  for  a  less  sum  than  that 
■which  upon  its  face  is  payable."  The  word  means  simply  "  cutting  off." 
The  purchase  need  not  be  at  a  certain  per  cent.  A  "  lumping  discount" 
is  sufficient  within  the  National  Banking  Law.  Nicholson  v.  National 
Bank,  92  Ky.  251  (17  S.  W.  627)  (1891). 

8  Atlantic  State  Bank  v.  Savery,  18  Hun  (N.  Y.),  36. 

«  Tracy  v.  Talmage,  18  Barb.  (N.  Y.)  462, 

162 


PURCHASE   AND   DISCOUNT.  §  73 

(111.)  (/)  A  note  taken  in  the  usual  course  of  business 
may  be  deemed  to  have  been  "discounted"  (within  R.  S. 
5136)  though  the  term  "  purchase  "  might  apply  to  the  trans- 
action." Purchase  may  be  made  by  discount  as  well  as 
"  loan,"  i.  e.  the  absolute  title  to  the  note  may  pass  to  the 
bank  ;  if  the  customer  assumes  any  responsibility,  it  is  a  loan  ; 
if  he  does  not,  it  is  an  advance  made  to  him  in  consideration 
of  the  transfer  without  recourse,  or  by  delivery  in  case  of 
paper  payable  to  bearer.  If  the  bank  takes  more  than  the 
law  allows,  it  is  usury  in  one  case  as  in  the  other,  but  the 
word  "  purchase  "  properly  applies.'^ 

§  73.  Negative.  —  1st,  Cases  denying  that  a  bank  can  ac- 
quire valid  title  otherwise  than  by  loan,  under  the  power  to 
discount. 

(a)    In  Minnesota  1  it  is  said,  it  cannot  be  the  case  that 
"  the  power  to  purchase  and  traffic  in  promissory  notes  as  a 
species  of  personal  property  belongs  to  any  bank   ^. 
as  a  necessary  incident  to  its  existence,  or  to  the   State  bank 

P  (•    -i  ,        1         ,.      .  cannot  buv 

exercise  ot  any  ot  its  powers  as  a  bank  of  circu-    because  it" 
lation  and  deposit  alone  "  ;  and  "  having  no  corpo-  iTfy'the""'' 
rate  capacity  to  make  the  contract   of   purchase,    "s"""-^' i^^s. 
the  plaintiff  never  acquired  any  title  to  the  note  in  suit,  and 
the  attempted  act  of   purchase  was  strictly  ultra  vires,  and 
conferred  no  rights  whatever." 

"It  is  conceded  that  plaintiff's  only  title  to  the  note  in 
question  rests  upon  its  absolute  purchase,  as  a  chose  in  action, 
from  one  Patterson,  the  then  owner,  for  a  specific  sum  agreed 
upon  and  paid  at  the  time  of  the  purchase.  Patterson  did 
not  indorse  the  note,  nor  expressly  assume  any  obligation  in 
connection  with  the  transfer." 

"Under  the  act  in  question,  the  business  of  banking  is 
authorized  to  be  carried  on  '  by  discounting  bills,  notes,  and 
other  evidences  of  debt,  and  by  loaning  money  on  real  and 
personal  security'  (sect.  13),  and  the  rate  of  interest  allowed 
to  be  charged  for  such  discounts  and  loans  is  limited  to  twelve 
per  cent  taken  in  advance  (sect.  33).     The  obvious  intent  of 

^  First  National  Bank  v.  Sherburne,  14  111.  App.  566. 

1  §  73.     Farmers  &  Mechanics'  Bank  v.  Baldwin,  23  Minn.  201,  204. 

163 


S  73  EXPANSIONS   OP   THE   POWERS   OF   A   BANK. 

this  legislation  was  to  secure  to  the  public  business  loans  and 
accommodations  at  what  was  then  regarded  reasonable,  and 
not  exorbitant,  rates  of  interest ;  and  also  to  protect  the  share- 
holders of  banks,  and  the  banks  themselves,  against  the  risk 
of  loss  from  inadequate  securities,  such  as  would  likely  be 
taken  under  the  tempting  influences  of  high  rates  of  interest, 
regulated  only  by  the  necessities  of  borrowers,  and  the  cupid- 
ity of  bank  directors.  If,  however,  as  is  claimed  on  the  part 
of  plaintiff,  associations  organized  under  this  enactment  pos- 
sess the  unlimited  power  of  dealing  in  promissory  notes  and 
other  evidences  of  debt,  as  property  and  choses  in  action,  the 
same  as  individuals,  then  obviously  this  restriction  upon 
the  rate  of  interest  is  a  practical  nullity ;  as  the  bank  has 
the  power  to  evade  it  at  any  time  by  simply  buying  the  paper 
instead  of  loaning  money  upon  it." 

It  has  also  been  said,^  generally,  that  purchasing  or  traf- 
ficking in  promissory  notes  is  not  a  legitimate  part  of  the 
National  banking  business,  properly  so  called,  and  that  a 
bank  cannot    j^^nk   holdinff   a   note    by   purchase   has   no   title 

buy  negotia-  "  j      i 

bie  paper.       thereto. 

"The  word  ''negotiating'  as  used  in  this  section, likewise  in 
sect.  29  of  the  same  statute  (U.  S.  Rev.  Stat.,  sect.  5136),  is 
used  in  the  ordinary  and  appropriate  transitive  sense,  to  indi- 
cate, not  an  act  of  purchase,  but  one  of  transfer,  whereby  the 
negotiated  paper  is  passed  from  the  holder  or  owner,  and  put 
into  circulation. 

"  In  the  absence  of  any  authoritative  exposition  of  the  Fed- 
eral statute  in  this  regard,  the  principle  settled  in  the  Farm- 
ers and  Mechanics'  Bank  v.  Baldwin  must  be  regarded  as 
decisive  of  the  present  case." 

"  A  borrower  may,  as  was  held  in  Smith  v.  Exchange 
Bank  of  Pittsburg,2«  cited  by  appellant,  obtain  the  discount 
by  a  bank  of  the  existing  notes  and  bills  of  others,  of  which 
he  is  the  holder,  as  well  as  of  his  own  paper  made  directly  to 
the  bank,  and  the  bank  will  thereby  acquire  a  valid  title  to 
such  paper,  because  it  makes  the  purchase  by  discount,  or 

2  First  National  Bank  of  Rochester  i;.  Pierson,  24  Minn.  141,  142. 
2«  3  Central  Law  Jour.  623  ;  s.  c,  26  Oh.  St.  141. 
164 


PURCHASE   AND   DISCOUNT.  §  73 

through  the  exercise  of  its  discounting  powers.  But  where 
the  acts  of  the  parties  and  the  circumstances  surrounding  the 
transaction  clearly  rebut  any  presumption  arising  from  the 
indorsement,  —  and  indisputably  the  real  nature  of  the  trans- 
action intended  by  the  parties  to  be,  in  the  language  of  the 
court  below, '  an  out  and  out  purchase  of  the  note,  and  not 
discounting  it,  or  lending  money  on  the  credit  of  it,'  —  the 
mere  fact  of  indorsement  is  not  sufficient  to  warrant  the 
court  in  treating  the  transaction  as  something  different  from 
what  was  intended." 

These  Minnesota  cases  do  not  seem  to  contemplate  the 
alternative  of  holding  that  a  bank  may  acquire  title  by  pur- 
chase as  distinguished  from  loan,  and  yet  that  its  power  of 
purchasing,  as  well  as  its  power  of  lending,  must  be  exercised 
within  the  limits  its  organic  law  prescribes. 

The  last  case  is  overruled  in  33  Minnesota  as  to  the  point 
that  a  national  bank  may  recover  on  a  note  taken   Last  case 

overruled  on 

ultra  vires  (which  see).  one  point. 

(J))  Though  a  national  bank  may  invest  its  surplus  capi- 
tal in  notes  (but  not  its  mere  daily  surplus),  it  can-   „     ,    , 

.  -1  1  ■         jt  11  Maryland. 

not  buy  or  acquire  title  otherwise  than   by  loan  ; 
and  if  it  does,  it  cannot  recover  on  such  notes.^     Alvey,  J., 
Bartol,  C.  J.,  and  Irving,  J.,  dissenting.     As  this  was  a  very 
strongly  argued  case,  we  give  it  at  some  length. 

Majority  opinion :  "  The  evidence  shows  that  Winchester 
and  Son,  note  and  bill  brokers,  were  employed  by  Lazear 
Brothers  to  sell  the  note  of  July  22,  1872,  to  any  purchasers 
willing  to  buy,  and  that  it  was  sold  to  the  appellee,  over  the 
counter  of  its  banking-house,  at  nine  per  cent  discount,  for  La- 
zear Brothers,  the  drawers,  who  received  the  proceeds  of  sale. 
None  of  the  bank  officers  were  informed  that  the  Winchesters 
were  acting  for  Lazear  Brothers,  nor  were  the  latter  told  to 
whom  the  note  had  been  sold.  The  note  was  sold  to  the 
bank  on  the  8th  day  of  July,  1872.  The  president  of  the 
bank  testified  that  the  note  in  question  was  purchased  by 
order  of  the  board  of  directors,  and  that  he  had  an  impres- 
sion, he  believed,  that  Lazear  Brothers  were  to  get  the  proceeds 

8  Lazear  Brothers  v.  National  Union  Bank  (Md.),  12  Leg.  News,  64. 

165 


§  73      EXPANSIONS  OF  THE  POWERS  OF  A  BANK. 

of  it.  He  further  proved  that,  after  the  customers  of  the 
bank  were  served,  it  sometimes  invested  its  surplus  proceeds 
in  notes.  We  are  of  opinion  that  this  transaction  was  an  out 
and  out  purchase  by  the  bank,  and  that  such  purchase  was 
without  authority,  and  that  the  bank  acquired  no  title  to  the 
note,  and  cannot  recover  thereon  in  this  suit.  While  we  do 
not  mean  that  a  national  hank  may  not  invest  its  surjjlus  capi- 
tal in  notes,  we  are  of  opinion  that  it  has  no  authority  to  use 
such  surplus  funds,  as  may  remain  on  hand  from  day  to  day, 
for  the  purpose  of  buying  notes.  National  Bank  of  Roches- 
ter V.  Pierson,  Thompson's  Bank  Cases,  637 ;  Farmers  and 
Mechanics'  Bank  v.  Baldwin,  23  Minn.  198.  If  any  other 
construction  were  given  to  such  a  transaction  as  this,  the  in- 
tention of  Congress  to  prohibit  national  banks  from  buying 
and  selling  notes  would  be  entirely  defeated,  and  those  insti- 
tutions would  be  at  perfect  liberty  to  decline  making  discounts 
for  their  customers,  and  afterwards  to  buy  up  the  very  paper 
which  had  been  offered  for  discount  and  refused,  at  such  price 
as  the  bank  might  choose  to  give.  The  note  of  the  22d  of 
June,  1872,  for  five  thousand  dollars,  was  acquired  by  the 
appellee  by  purchase,  without  authority  to  make  such  purchase, 
and  it  is  not,  therefore,  entitled  to  the  note,  and  cannot 
recover  upon  it." 

Dissent  by  Alvey,  J.  :  "  If  Lazear  Brothers  had  presented 
the  paper  in  person,  and  obtained  the  money  upon  the  terms 
upon  which  the  brokers  obtained  it,  there  would  then  have  been 
no  question  as  to  the  legality  of  the  title  acquired  by  the  bank  ; 
that,  it  is  conceded,  would  have  been  a  discount.  But  it  is 
contended,  and  it  is  so  held  in  the  opinion  of  the  majority  of 
this  court,  that,  as  the  note  was  obtained  from  Winchester  and 
Son,  bill  brokers,  without  disclosure  at  the  time  from  them 
that  the  money  was  for  the  benefit  of  the  makers  of  the  note, 
therefore  it  was  a  purchase  of  the  note  as  contradistinguished 
from  a  discount,  and  that  the  transaction  was  ultra  vires  and 
consequently  no  title  to  the  note  was  transferred  to  the  bank. 
To  this  proposition  I  cannot  assent. 

"  Now,  without  invoking  the  aid  of  any  implied  power  pos- 
sessed by  the  bank  to  enable  it  to  carry  on  the  banking  busi- 
166 


PURCHASE   AND   DISCOUNT.  §   (3 

ness,  it  is  expressly  authorized,  as  we  have  seen,  to  discount 
and  negotiate  promissory  notes.  What,  then,  is  the  meaning 
of  the  word  '  negotiate,'  according  to  its  ordinary  acceptation 
among  business  men  ?  According  to  the  most  approved  lexi- 
cographers, its  meaning  is  '  to  transfer,  to  sell,  to  pass,  to 
procure  hy  mutual  intercourse  and  agreevient  with  another, 
to  arrange  for,  to  settle  by  dealing  and  management.'  Web- 
ster's and  Worcester's  Diet.  This  term  would  seem  to  be 
comprehensive  enough  for  all  the  requirements  of  the  case  ; 
but,  by  allowing  the  full  meaning  to  the  more  exact  and  im- 
portant term, '  discount,'  all  doubt  whatever  would  seem  to 
be  removed.  To  discount  is  to  deduct  a  sum  of  money  from 
the  debt  in  consideration  of  its  being  paid  before  the  usual 
or  stipulated  time  for  payment.  In  the  case  of  Fleckncr 
V.  Bank  of  United  States,  8  Wheat.  350,  Judge  Story,  in 
delivering  the  opinion  of  the  court,  having  occasion  to  define 
a  discount  by  the  bank  said  :  '  Nothing  can  be  clearer  than 
that,  by  the  language  of  the  commercial  world,  and  the  settled 
practice  of  banks,  a  discount  by  a  bank  means,  ex  vi  termini, 
a  deduction  or  drawback  made  upon  its  advances  or  loans 
of  money,  upon  negotiable  paper,  or  other  evidences  of 
debt,  payable  at  a  future  day,  which  are  transferred  to  the 
bank.' 

"  Purchase  may  be  by  way  of  discount,  equally  as  a  loan 
may  be  made  by  that  means.  When  the  party  receiving  the 
proceeds  of  the  paper  discounted  is  himself  either  maker  or 
indorser,  and  the  discount  is  made  on  his  responsibility,  he 
receives  the  money  as  a  loan,  for  he  is  bound  to  return  it  ; 
hut  if  he  is  iyi  no  way  hound  on  the  pajjer,  he  receives  the 
money  as  an  advance,  and  as  a  consideratio7i  for  the  transfer  of 
the  paper.  Both  transactions  are,  according  to  the  established 
practice  aiid  usage  of  banks,  discounts,  though  the  latter  is  in 
effect  a  purchase  by  the  bank.  The  act  of  discounting  sim- 
ply has  reference  to  the  deduction  from  the  face  amount  of 
the  paper  the  time  it  has  to  run  to  maturity,  and  the  rate 
of  that  deduction  ;  but  whether  the  transaction  amounts  to  a 
loan  or  a  purchase  on  the  part  of  the  bank,  depends  upon 
other  facts  and  conditions  of  things. 

167 


§  73  EXPANSIONS   OF   THE  POWERS   OF   A    BANK. 

"  Suppose  the  payee  of  a  promissory  note  payable  to  order 
takes  it  to  a  bank,  and  procures  the  money  on  it,  less  the  rate 
of  discount,  upon  indorsement  without  recourse ;  would  not 
that  be  strictly  a  discount  within  the  meaning  of  the  law,  not- 
withstanding it  would  not  be  a  loan  upon  the  responsibility  of 
the  party  obtaining  the  money  ?  Such  a  transaction  would 
not  be  a  loan  at  all,  according  to  the  correct  meaning  of  the 
term ;  and  if  it  be  a  discount,  according  to  the  modes  and 
usages  of  banking,  why  should  not  any  third  party  holding 
paper  payable  to  bearer,  or  indorsed  in  blank,  be  able  to  nego- 
tiate that  paper  with  the  bank,  by  way  of  discount,  and  trans- 
fer a  good  title  to  the  bank,  notwithstanding  his  name  might 
not  appear  upon  the  paper,  or  he  incur  any  liability  in  respect 
to  it.  I  cannot,  I  must  confess,  perceive  the  reason  for  the 
distinction  that  has  been  made  in  this  case.  It  should  be  rec- 
ollected that  it  is  not  the  rate  of  discount  with  reference  to 
which  the  parties  deal,  that  determines  the  question  of  the 
validity  of  the  transfer  of  the  paper,  or  the  title  of  the  bank, 
though  the  latter  may  have  exacted  and  received  more  than 
the  lawful  rate  of  discount.  All  the  business  of  the  national 
banks  is  done  under  the  restrictions  prescribed  by  the  act  of 
Congress;  and  the  rate  of  discount  is  expressly  prescribed 
among  the  various  regulations  contained  in  the  act  for  the 
government  of  the  banking  business  ;  and  for  taking,  receiv- 
ing, or  charging  any  greater  rate  of  interest  or  discount  than 
is  by  the  act  allowed,  the  bank  subjects  itself  to  the  penalties 
prescribed  by  sect.  5198  of  the  Revised  Statutes ;  but  the  title 
to  the  paper  is  not  thereby  affected." 

2d.  Cases  which  deny  the  power  of  purchase  of  negotiable 
paper,  but  use  the  word  merely  to  exclude  transactions  not 
controlled  by  usury  laws,  and  do  not  mean  that  a  bank  can- 
not acquire  title  to  negotiable  paper  absolutely  by  indorsement 
without  recourse. 

(c.)  The  banking  law  of  New  York  authorized  banks  to 
"  carry  on  the  business  of  banking  by  discounting  bills,  notes, 
Miscellaneous  and  otlicr  evidences  of  debt,  ...  by  buying  and 
ATrbank  selling  .  .  .  bills  of  exchange,"  &c.  It  has  been 
frrsubjecuo  held,  that  this  did  not  authorize  a  bank  to  purchase 
168 


PURCHASE   AND   DISCOUNT.  §  74 

a  bill  or  note.  The  distinction  became  essential  in  "^^^1]^^^^^^^ 
connection  with  the  point  of  usury.  If  the  bank  f_;^*j^^j"^t^^jj°j 
could  onlv   discount  bills  and  notes,  it  could  not    fact,  though 

"  ...  T>    4-    'f     ••(-     the  same 

evade  the    statutes   controlling   usury.     ±)Ut  it   it   transaction 
could  buy  bills  and  notes,  it  could  buy  them  at  any   S-JS^" 
price  which  might  be  agreed  upon  with  the  seller,   ^^jj^'J  l^'p^,. 
and  so  practically  evade  the  statute.     The  question   f^^^^^^f^^^ 
therefore  was,  which  character,  that  of  discount  or   the  taint  of 
that  of  purchase,  should  be  given  to  a  completed   "'"''^' 
transaction.     The  court  gave  to  it  the  character  of  a  discount, 
on  the  ground  that  the  bank  could  discount,  but  could  not 
buy,  mercantile  paper ;  and  the  taint  of  usury  was  therefore 
held  to  inhered 

Power  to  discount  notes  is  not  power  to  purchase  them. 
The  right  of  purchasing  is  an  entirely  distinct  and  independ- 
ent one,  which  may  or  may  not  be  enjoyed  by  any  bank, 
according  to  the  circumstances  of  its  particular  case  and  the 
language  of  its  incorporating  act.  If  possessed,  it  is  simply  a 
right  to  buy  the  notes  in  the  market  for  their  fair  market 
value,  whatever  that  may  be.  It  must  be  a  bona  fide  transac- 
tion of  bargain  and  sale.  If  it  be  colorable  only,  and  resorted 
to  for  the  purpose  of  covering  up  a  usurious  dealing,  it  will  be 
treated  as  a  usurous  contract.'^ 

§  74.  Powers  in  Relation  to  Real  Estate.  —  Ordinarily,  it  is 
no  part  of  the  banking  business  to  hold  or  deal  in  real  estate. 
No  general  ridit  to  do  so  can  be  considered  to  be   ^   ,    , 

®  °  .  Realty  for 

inherent  in  a  bank.     Certain  obvious  cases,  how-   its  own  pUice 

,.,.,.  .  ,1  1  J  of  business 

ever,  in  which  it  is  eminently  proper,  almost  even   „r  to  secure 
necessary,  that  a  bank  should  be  able  to  acquire,  to   '^''^'• 
hold,  and  to  sell  land  and  interest  in  land,  will  suggest  them- 
selves at  once  to  every  mind.     Thus,  it  may  often,  especially 
in  small  towns,  be  impossible  to  obtain  a  building  with  the 

*  Niagara  County  Bank  v.  Baker,  15  Ohio  St.  G8,  upon  authority  of 
cases  cited  in  the  next  note. 

5  See  Fleckner  v.  Bank  of  the  United  States,  8  Wheat.  338  ;  Talmage 
V.  Pell,  3  Seld.  (N.  Y.)  328;  Dunkle  v.  Renick,  6  Ohio  St.  524  ;  M'Lean 
V.  Lafayette  Bank,  3  McLean,  587 ;  Philadelphia  Loan  Co.  v.  Towner,  13 
Conn.  259. 

169 


§  74       EXPANSIONS  OF  THE  POWERS  OF  A  BANK. 

suitable  appliances  for  security,  unless  the  corporation  can 
buy  land  and  erect  a  structure  for  itself.  The  mortgage  or 
conveyance  of  real  estate  to  it  may  often  be  the  only  means 
by  which  debts  owing  to  it  can  be  secured  or  discharged.  If 
a  bank  should  come  into  possession  of  land  in  perfect  good 
faith  for  either  of  these  purposes,  and  should  hold  it  or  sell 
it  only  in  due  and  bona  fide  prosecution  of  these  objects,  it 
seems  unreasonable  to  imagine  that  the  most  rigorous  court 
of  justice  would  declare  the  transaction  illegal.  But  the 
necessity  of  discussing  the  question  of  the  abstract  legality  of 
such  proceedings  has  nearly  alvvays  been  saved  by  the  inser- 
tion in  charters  and  organic  laws  of  clauses  specifi- 
Usuaiiv  the     callv  enabling  banks  to  acquire,  hold,  and  sell  real 

organic  law  •'  ^  .  . 

is  explicit.       estate  for  these  purposes.^     The  legislative  expres- 

Power  to  sell  r.  i      i  •  • 

implied  irom  siou  of  this  powcr  of  coursc  cxcludes  its  exercise 

chalet  °^"  otherwise  than  in  precise  accordance  with  the  statu- 

oJustanci'in^  tory  provisious.     The  holding,  acquiring,  or  selling 

Power  liber-  ^^  ^^^^  greater  extent,  in  any  other  manner,  or  for 

ally  con-  auv  Other  end,  than  is  therein  set  forth,  would  be 

strued.  " 

unquestionably  illegal .^  Ihe  power  to  purchase 
land,  or  take  it  in  mortgage  or  by  absolute  conveyance,  with- 
out the  additional  expression  of  the  power  to  sell  it  or  to  assign 
the  mortgage,  will  by  necessary  implication  confer  those  powers 
also,  and  even,  it  has  been  held,  the  power  to  mortgage  it.^ 
And,  although  a  national  bank  cannot  engage  in  the  business 
of  buying  and  selling  personal  property,  it  may  sell  real  estate 
lawfully  acquired,  and,  may  take  personal  property  for  it.^" 
Further,  it  must  be  regarded  as  appurtenant  to,  or  even  a  part 
of,  the  power  to  take  land  in  mortgage  or  pledge,  that  the 
bank  should  also  be  permitted  to  deal  in  reference  to  the  land 
or  interest  therein,  thus  acquired,  in  any  manner;  as,  for  ex- 
ample, by  buying  in  any  outstanding  title  or  interest,  or  in 

1  §  74.   Thoraaston  Bank  v.  Stimpson,  21  N.  E.  195. 

2  :Metropolitan  Bank  v.  Godfrey,  23  111.  579. 

8  Jack.son  c.  Brown,  5  Wend.  (N.  Y.)  590;  Curtis  r.  Swartwout, 
1  X.  Y.  Leg.  Obs.  406 ;  Roberts  v.  Washington  National  Bank,  11  Wash. 
550  (40  Pac.  225),  (1895). 

^  First  National  Bank  v.  Reno,  73  la.  145  (34  N   W.  796). 
170 


TAKING   LAND   FOR  PREVIOUS   DEBTS.  §  74 

any  other  way  whatever,  that  may  prove  desh-able  for  render- 
ing the  security  more  perfect  or  more  available.^  The  courts 
seem  generally  to  have  been  inclined  to  construe  the  privileges 
of  this  nature  conferred  upon  banks  in  a  very  liberal  way. 
The  foregoing  cases  and  instances  certainly  do  not  appear  to 
trespass  beyond  strict  justice ;  but  others  can  be  added  where 
the  bounds  of  reasonable  construction  have  been  much  more 
freely  extended. 

(a)  Thus,  a  bank  authorized  to  hold  as  much  real  property 
as  might  be  necessary  for  its  immediate  accommo-    ^^^^  ^^^^ 
dation  was  held  to  have  the  right  to  buy  up  the  land   build  mi ' 
in  the  neighborhood  of  its  banking-house,  to  erect   adjoining  the 

1       1  11     J.1  baniv  as  a 

fire-proof  buildings  thereon,  and  then  sell  these  precaution 
out  again  ;  the  end  being,  of  course,  the  greater  *^''""' 
security  of  its  own  building.^  And,  a  bank  may  enter  into  a 
contract  to  secure  free  entrance  of  light  and  air  into  its  bank- 
ing house.^"  The  case  of  Baird  v.  Bank  of  Washington^  con- 
tains a  long  and  interesting  dissertation  upon  the  rights  which 
were  conferred  upon  the  bank  by  a  clause  in  the  act  of  incor- 
poration, allowing  it  to  hold  "such  lands  as  were  bona  fide 
mortgaged  or  conveyed  to  it,  in  satisfaction  of  debts  previously 
contracted  in  the  course  of  its  dealings."  The  reasoning  and 
language  of  the  court  will  apply  to  a  great  number  of  similar 
clauses  in  other  incorporating  acts,  in  which  language  essen- 
tially identical  with  this  is  of  frequent  occurrence.  It  was 
declared  that  the  right  to  commute  debts  for  lands  was  gen- 
eral, and  was  not  limited  to  cases  where  any  doubt  existed  as 
to  the  perfect  safety  of  the  debt.  The  effect  of  the  words  em- 
ployed was  simply  to  prohibit  colorable  commutation,  whereby 
a  real  purchase  might  be  effected  under  a  technical  disguise. 
Provided  the  debt  was  pre-existing,  and  was  a  bona  fide  one, 
that  is  to  say,  not  contracted  originally  with  the  purpose  of 

4  Ingraham  v.  Speed,  30  Miss.  410 ;  Cockrill  v.  Abeles,  86  Fed.  505 
(1898). 

6  Banks  v.  Poitiaux,  3  Rand.  (Va.)  136. 

S"  First  Presbyterian  Cliurch  v.  National  Bank,  57  N.  J.  L.  27  (29 
Atl.  320). 

6  11  Serg.  &  R.  (Pa.)  411. 

171 


§  74       EXPANSIONS  OF  THE  POWERS  OF  A  BANK. 

being  discharged  bj  the  conveyance  of  real  estate,  the  con- 
vejance  would  be  strictly  valid ;  although,  without  it,  the 
safety  of  the  debt  must  be  unquestionable.  The  court  also 
added,  as  a  semhle,  that  if  the  conveyance  were  made  to  trus- 
tees for  the  bank,  with  the  intent  to  raise  money  by  selling  it, 
and  not  with  a  view  to  holding  it  permanently,  neither  the 
letter  nor  the  spirit  of  the  statute  would  be  violated. 

(h)  Further,  the  opinion  was  expressed,  on  the  strength  of 
the  decision  in  Leazure  v.  Hillegas,^  that,  even  if  the  bank 
_  ,  ^^  should  take  from  a  debtor  real  estate,  which  it  had 

Only  the  .  ' 

sovereign        DO  right   to  hold,  the   title   of  the   bank   therein 

can  object.  ^  ^       ^  t     f  •,  ^  ^  ^  • 

would  be  deieasible  only  at  the  instance  of  the 
State  ;'^''  that,  if  the  title  should  be  set  aside  in  a  process  thus 
instituted,  the  land  would  not  revert  to  the  party  granting  to 
the  bank,  but  would,  apparently,  fall  into  the  State  itself; 
yet  that  the  debtor  would  have  been  fully  acquitted  and  dis- 
charged from  his  indebtedness,  and  the  loss  would  have  to  be 
borne  wholly  by  the  bank.  This  view,  though  properly  only 
an  ohiter  dictum,  was  expressed  with  a  good  deal  of  confidence, 
and  apparently  upon  a  mature  consideration  of  the  whole  sub- 
ject.    It  is  certainly  difficult  to  see  why  it  is  not  sound. 

(c)  Where,  by  its  charter,  a  bank  was  authorized  to  take 
mortgages  in  security  for  debts  previously  contracted,  it  was 
N.  Y.  adjudged  by  Chancellor  Kent,  that,  if  the  loan  and 

Bank^r  "mortgage  were  concurrent  acts,  and  intended  so  to 

North.  j^g^  ii  ^^g  ^qi  fi  g^gg  within  the  reason  and  spirit  of 

the  restraining  clause  of  the  statute,  which  only  meant  to  pro- 
hibit the  banking  company  from  investing  their  capital  in  real 
property  and  engaging  in  land  speculations.  "  A  mortgage 
taken  to  secure  a  loan,  advanced  bona  fide  as  a  loan,  in  the 
course,  and  according  to  the  usage,  of  banking  operations, 
was  not,  surely,"  says  he,  "  within  the  prohibition."  * 

'  7  Serg.  &  R.  (Pa.)  313. 

'«  Hennessy  v.  St.  Paul,  54  Minn.  219  (55  N.  W.  1123) ;  Bank  v.  Flath- 
ers,  45  La.  An.  75  (12  So.  243) ;  Savings  Bank  v.  Burns,  104  Cal.  473  (38 
Pac.  102)  ;  Smith  v.  First  National  Bank,  45  Neb.  444  (63  N.  W.  796) 
(1895)  ;  Hall  v.  Farmers'  Bank,  145  Mo.  418  (46  S.  W.  1000)  (1898); 
National  Bank  v.  Mathews,  98  U.  S.  628. 

8  Silver  Lake  Bank  v.  North,  4  Johns.  Ch.  (N.  Y.)  370. 

172 


NATIONAL   bank's   POWER   TO    DEAL   IN   REALTY.  §  75 

A  similar  decision  has  been  made  in  Virginia,^  the  court 
quoting  Kent  in  the  Silver  Lake  case  :  "  Previously  contracted  ? 
how  long  previously  ?  must  it  be  a  month,  a  week,  a  day,  or  a 
minute  ?  "  Of  course,  this  is  mere  jugglery  with  words.  If  the 
legislators  said  •'  previously  "  they  did  not  mean  concurrent, 
and  no  such  hair-splitting  can  prove  that  there  is   „    „ 

I  o  L  Kent  .s  rea- 

no  difference  between  those  terms.     The  other  argu-   soning 

.    .  doubted. 

ment  of  Kent  quoted  above,  based  on  the  spirit  oi 
the  law, is  better;  and  still  it  may  well  be  asked  how  we  are 
to  know  what  the  object  of  a  law  is,  except  by  what  the  legis- 
lature says,  and  especially  how  we  are  to  know  what  means  the 
lawgivers  meant  to  have  used  to  accomplish  their  purposes  ex- 
cept by  looking  to  these  words ;  and  when  they  have  said 
"  previously,"  is  it  complimentary  to  their  intelligence,  to  say 
nothing  of  any  further  implication,  to  hold  that  they  meant 
concurrent  ? 

{d)  A  commercial  bank  incorporated  under  the  California 
code  may  loan  on  a  real  estate  mortgagci"^ 

§  75.  A  National  Bank  may  deal  in  realty  as  follows  (see 
11.  §28):- 

(1)  It  may  buy  and  hold  what  it  needs  for  its  own  use  as 
a  bank. 

(2)  It  may  take  mortgage  or  trust  deeds  as  security  for  a 
debt  previously  contracted,  and  may  buy  in  the  land  at  a  judg- 
ment sale  under  such  deed  or  mortgage. 

(3)  It  may  buy  land  sold  under  any  judgment  held  by  it. 

(4)  It  may  take  a  conveyance  of  land  in  satisfaction  of 
previous  debt. 

(5)  It  may  buy  land  or  outstanding  title,  when  such  action 
is  necessary  to  save  a  debt  due  it  (and  the  bank  is  the  one  to 
exercise  its  discretion  as  to  such  necessity),  even  though  the 
land  exceeds  the  debt,  if  the  security  of  the  debt  is  the  real 
object.^ 

It  cannot  hold  possession  of  real  estate  more  than  five 
years,  except  under  the  first  clause. 

9  31  Grattan  (Va.),  228. 

10  Bank  v.  Hemme  Company,  105  Cal.  376  (38  Pac.  963). 
1  §  75.     Upton  r.  National  Bank  of  South  Reading,  120  Mass.  153. 

173 


§  75       EXPANSIONS  OF  THE  POWERS  OF  A  BANK. 

Pveai  security       (^a)  Whether  a  national  bank  can  take  real  estate 

on  concurrent  ^    '  i       7     r 

loans.  security,  by  mortgage  or  trust  deed,  lor  a  concur- 

rent loan,  is  doubtful.^" 

New  York ,2  Illinois,^  Missouri,*  say  that  the  national  law 
clearly  forbids  a  bank  to  take  real  security  for  concurrent  or 
future  advances. 

(6)  The  United  States  Supreme  Court  in  Union  National  Bank 
V.  Matthews,^  after  saying  that  the  implication  is  clear  that  a 
loan  on  real  estate  is  forbidden,  proceeds  to  declare  the  spirit 
and  intent  of  the  prohibition  to  be  the  prevention  of  haz- 
ardous investments  by  the  bank,  the  keeping  of  its  money  in 
the  regular  channels  of  business,  and  the  prevention  of  accu- 
mulation of  masses  of  real  estate  in  their  hands,  and  that  the 
intent,  not  the  letter,  is  to  govern. 

The  court  further  says,  that,  as  there  was  only  a  deed  of 
Trust  trust  vesting  the  legal  title  in  a  third  person,  the 

deed.  bank  had  taken  no  title  to  land  and  so  in  any  event 

had  not  violated  §  5137. 

These  sections  do  not  prohibit,  in  terms,  the  mortgage  of 
real  estate  to  a  third  party,  to  be  held  by  the  mortgagee  in 
trust  to  secure  a  loan  made  by  a  national  bank.  Hence, 
where  a  loan  was  made  upon  the  individual  note  of  one  part- 
ner in  a  firm  indorsed  by  his  copartner,  and  the  maker  mort- 
gaged real  estate  to  secure  the  indorser,  with  the  agreement 
that  in  case  of  default  the  security  should  inure  to  the  benefit 
of  the  bank,  it  was  held  that  the  transaction  was  valid,  and 
that  the  bank  could,  by  proceedings  in  equity,  reach  and  avail 
itself  of  the  security.® 

The  result  seems  to  be,  that  a  conveyance  wliich  carries  the 
legal  title  to  the  bank,  if  for  a  concurrent  loan  or  future  ad- 
vances, is  unlawful ;  but  a  trust  deed  or  mortgage  giving  legal 

^^  A  national  bank  has  authority  to  take  an  assignment  of  a  note  and 
mortgage  upon  real  estate  for  money  loaned  the  mortgajjee.  First 
National  Bank  i;.  Andrews,  7  Wash.  261  (34  Pac.  913)  (1893). 

2  Crocker  v.  Whitney,  71  N.  Y.  161. 

«  Fridley  v.  Bowen,  87  111.  151. 

*  Matthews  v.  Skinner,  62  Mo.  329. 

6  98  U.  S.  621.     See  §  754,  ultra  vires. 

®  First  National  Bank  v.  Haire,  36  Iowa,  443. 

174 


POWER  OF  DEALING  WITH  REALTY.  §  75 

title  to  a  third  person  for  the  benefit  of  the  bank  and  as  security 
for  such  loan,  is  lawful. 

(c)  One  thing  the  Matthews  case  did  make  perfectly  clear, 
viz.  that  whether  right  or  wrong,  if  a  national  bank  takes 
real  estate  by  mortuage,  trust  deed,  or  conveyance 

1  TT        •  1      O  •  1  Y.^&Ct  of 

absolute,  no  one  but  the  United  States  in  the  person  ultra  vires. 
of  the  comptroller  can  object ;  the  transaction  is  eigii  object. 
perfectly  good  and  enforceable  between  the  parties. 

A  number  of  State  cases  had  ruled  otherwise  on  this  point, 
but  these  decisions  are  now  fossils,  buried  deep  under  this 
recent  deposit,  but  as  they  may  be  interesting  in  connection 
with  State  statutes,  I  will  keep  some  of  those  I  have  dug  up, 
and  arrange  them  for  exhibition  in  a  sort  of  museum  note  in 
Part  II. 

{d)    M.  obtained  a  loan  from  a  national  bank  on  short  time 
paper,  and  deposited  as  security  a  note  of  W.  se-   Merchants 
cured  by  mortgage  ;  the  bank  had  the  note  of  M.   £',^'|,^^ 
and  other  personal  security.  Hears. 

The  court  said  a  national  bank  could  lend  only  on  personal 
security,  but  if  the  debtor  makes  default,  or  at  any  time  after 
the  loan  is  actually  made,  the  bank  may  take  real  security 
unless  so  soon  after  as  to  indicate  that  the  transaction  was  only 
colorable,  and  "  really  a  part  of  the  original  understanding." 

But  in  this  case  the  personal  security  was  ample  at  the 
time,  and  the  loan  was  therefore  on  personal  security,  and  not 
within  the  prohibition,  though  a  mortgage  was  also  taken  ; 
and  if  the  personal  security  becomes  insufficient,  and  the  bor- 
rower is  insolvent,  the  bank  can  maintain  a  bill  to  foreclose 
the  mortgaged 

True,  the  loan  was  on  personal  security,  and  therefore  good. 
But  as  §  5137  forbids  taking  a  mortgage  for  any  other  pur- 
pose than  to  secure  a  previous  debt,  as  between  the  United 
States  and  the  bank  taking  the  mortgage,  it  could  hardly  be 
sustained  as  proper. 

(c)  And  where  an  indebtedness  already  existed,  and  an 
arrangement  was  made  whereby,  in  payment  of  this  and  to 

''  Merchants'  National  Bank  of  Chicago  v.  Mears,  8  Bissell,  158  (1878). 

175 


§  76  EXPANSIONS    OF   THE   POWERS   OP   A    BANK. 

secure  the  bank  against  loss,  a  new  note  secured  by  a  mortgage 
was  executed,  it  was  held  that  such  new  note  and 

Ine  note 

may  be  con-     mortgage  Were  valid,  as  being  taken  in   pursuance 

curr6nt  if 

the  debt  is  of  the  power  of  the  bank  to  adopt  reasonable  and 
previous.  necessarj  measures  for  the  collection  and  security  of 
debts ;  a  power  necessarily  incident  to  the  power  of  banking.^ 

§  76.  Bank  as  Trustee  of  Realty.  —  In  this  country  the  gen- 
eral or  common  law  rule  is,  that  corporations  may  be  seised 
of  lands,  and  hold  other  property  in  trust,  for  purposes  not 
foreign  to  their  institution. ^ 

In  many  States  there  are  statutory  provisions  upon  this 
matter. 

(a)  In  New  York  there  is  an  act  concerning  money  corpora- 
tions, which  decides  that  no  conveyance,  assignment,  or  trans- 
fer of  any  effects  for  the  benefit,  use,  or  security  of  any  such 
corporation  shall  be  valid,  unless  made  directly  to  the  cor- 
poration. This  refers  to  moneyed  corporations  chartered  by 
the  legislature  of  that  State,  and  has  no  application  to  foreign 
corporations.  And  if  land  be  conveyed  in  trust  for  the  benefit 
of  a  foreign  corporation,  the  corporation,  under  the  provisions 
of  another  act,  will  only  incur  the  penalty  of  not  being  able 
to  maintain  an  action  on  the  deed  ;  but  the  conveyance,  for  all 
otber  purposes,  will  be  good.^ 

(b)  Justice  Story,  in  Vidal  v.  The  Mayor,^  said  there  was 

no  objection  to  a  corporation  taking  realty  in  trust 
for  a  purpose  not  strictly  within  the  scope  of  its 

direct  objects,  as  for  the  benefit  of  a  stranger  or  another 

corporation. 

(c)  Kent   says   corporations    have   no    powers   not    given 

them,  and  therefore  cannot  be  trustees  in  a  matter 

Kent, 

where  they  have  no  interest. 

«  Shinkle  v.  First  National  Bank  of  Ripley,  22  Ohio  St.  516. 

1  §  76.  2  Kent,  Com.  226.  See  First  Parish  in  Sutton  v.  Cole,  3  Pick, 
(^lass.)  237-239,  249;  M'Girr  v.  Aaron,  1  Penn.  (Pa.)  49;  Greene  v. 
Dennis,  6  Conn.  304;  Theological  Seminary  of  Auburn  v.  Cole,  18  Barb. 
(X.  Y.)  360. 

2  Wright  V.  Douglass,  10  Barb.  (X.  Y.)  97. 

3  Vidal  V.  Mayor,  2  How.  128. 

176 


DEALING   IN   STOCKS.  ,  §  77 

But  if  property  is  granted  or  devised  to  tliem  partly  for 
their  use  and  partly  for  the  use  of  others,  they  can  execute  the 
latter  trust  as  a  necessary  incident  to  the  former.^ 

It  is  pretty  well  agreed  that  only  the  State  can  object  to  the 
corporation's  right  to  take  land  in  trust.^ 

§  77.    Cases  upon  the  Pow^er  of   Banks  in  Relation  to  Stocks. 

—  See  §59. 

A  national  bank  cannot  buy  its  own  stock,  and  no  title 
passes  to  it,^  although,  in  Wallace  v.  Hood,^"  it  was  held  that 
stock  so  purchased  was  not  void. 

Where  a  bank  buys  its  own  stock  to  protect  itself  from  loss 
it  may  sell  the  same  on  credit,  and  take  the  buyer's  note  as 
collateral  security.  The  buyer,  if  already  a  stockholder,  can- 
not avoid  the  sale  on  the  ground  of  false  representations  made 
to  him  by  the  officers  of  the  bank  as  to  its  stock  and  condition.^ 

A  bank  cannot  speculate  or  traffic  either  in  financial  securi- 
ties or  in  merchandise.  It  has  been  held  not  to  be  incidental 
to  the  banking  business,  nor  an  implied  power  pertaining  to  a 
bank,  to  buy  or  sell  stock  or  bonds.^  But  it  may  take  and 
hold  them  as  collateral  security,  and,  in  case  of  their  loss,  will 
be  liable  only  as  an  ordinary  bailee ;  that  is,  if  there  has  been 
an  absence  of  proper  and  sufficient  care  on  its  part.^  The 
measure  of  damages  will  be  the  value  of  the  bonds  at  the  time 
of  the  loss.5  A  bank  need  not  be  prohibited  by  its  organic 
law  from  engaging  in  such  traffic.  For  it  owes  its  powers  as 
it  owes  its  existence  to  the  terms  of  that  charter  or  law.  It 
is  not  restricted  like  an  individual  from  the  exercise  of  a  wide 
range  of  other  powers,  which,  in  the  absence  of  restriction,  it 
would  enjoy ;  but  its  power  to  do  any  act  at  all  is  due  wholly 

4  In  re  Howe,  1  Paige  (N.  Y.),  214. 

5  Wade  V.  American  Col.  Soc,  7  Smedes  &  M.  (Miss.)  697. 

1  §  77.  Meyers  v.  Valley  National  Bank,  18  National  Bankruptcy 
Register,  34. 

i«  89  Fed.  11  (1898). 

2  Union  National  Bank  v.  Hunt,  7  Mo.  App.  42. 

8  First  National  Bank  of  Charlotte  v.  National  Exchange  Bank  of 
Baltimore,  39  Md.  600;  Weckler  v.  First  National  Bank,  42  Md.  581  •, 
Logan  Bank  v.  Townsend,  139  U.  S.  67  (1891). 

4  Third  National  Bank  of  Baltimore  v.  Boyd,  44  Md.  47. 

6  Ibid. 

VOL.   I.— 12  177 


§  77       EXPANSIONS  OF  THE  POWERS  OF  A  BANK. 

to  the  legislation  of  which  it  is  a  creature,  and  must  be  either 
the  direct  or  necessarily  incidental  gift  of  that  legislation. 
When,  therefore,  it  is  specifically  permitted  to  conduct  a 
banking  business,  it  has  no  power  to  do  any  other  species  of 
business ;  not  because  it  has  been  stripped  in  any  manner  of 
that  power,  but  because  that  power  has  never  attached  to  it. 
A  bank  may  however  do,  on  isolated  and  especial  occasions, 
or  for  certain  purposes,  what  it  cannot  do  generally,  and  for 
all  purposes.  It  cannot  buy  and  sell  merchandise,  but  it  can 
take  merchandise  from  a  debtor,  if  this  is  the  only  way  to 
save  the  amount  of  the  debt ;  and  of  course,  having  taken 
property  of  any  nature  for  this  proper  purpose,  it  may  sell  it 
in  any  manner  that  will  bring  the  best  price.  It  may  pur- 
chase public  stocks  in  order  to  deposit  them,  under  a  law 
requiring  such  stocks  to  be  deposited  as  a  security  for  cir- 
culation ;  or  in  order  to  invest  its  surplus  funds  in  them ;  it 
may  loan  upon  them  as  security,  and  sell  them  if  need  be  to 
save  the  debt.  But  it  cannot  "  traffic  "  in  them ;  it  cannot  buy 
them  with  the  view  to  sell  them  shortly  at  an  anticipated 
advanced  price.  Such  would  not  fall  within  any  department 
of  the  general  province  of  banking,  which  alone  the  asso- 
ciation can  carry  on,  and  which  it  must  carry  on  only  in 
the  manner,  with  the  powers,  and  for  the  objects  directly 
set  forth  or  necessarily  implied  in  the  law  of  the  corporate 
existence.^ 

In  a  case  in  Vermont,  indeed,  it  was  once  said  that  a 
clause  in  a  bank  charter  prohibiting  the  bank  from  dealing  in 
any  goods,  wares,  merchandise,  or  commodities,  was  in  dero- 
gation of  the  common  and  ordinary  powers  of  the  corporation. 
The  full  breadth  of  this  language  would  certainly  set  the 
doctrine  of  the  case  at  variance  with  the  views  expressed 
above.     But  the  reasoning  in  support  of   those  views  is  too 

6  Comstock  I'.  Willoughby,  Hill  &  Den.  (N.  Y.)  271 ;  Talmage  v.  Pell, 
3  Seld.  (N.  Y.)  328;  Leavitt  v.  Yates,  4  Edw.  Ch.  (N.  Y.)  134;  Sackett's 
Harbor  Bank  v.  President  of  Lewis  County  Bank,  11  Barb.  (N.  Y.)  213; 
Portland  Bank  v.  Storer,  7  Mass.  433 ;  Weckler  v.  First  National  Bank  of 
Hagerstown,  42  Md.  581.  See  also  Curtis  v.  Leavitt,  15  N.  Y.  9,  which, 
properly  interpreted,  supports  the  above  doctrine. 

178 


DEALING   IN   STOCKS.  §  77 

clear,  and  the  authorities  are  too  strong,  to  be  brought  within 
the  range  of  doubt  by  this  solitary  adjudication  ;  more  espe- 
cially since  the  sweeping  statement  of  the  legal  theory  in  that 
opinion  was  enunciated  for  the  insignificant  purpose  of  pro- 
tecting the  bank  in  a  purchase  of  shares  in  its  own  capital 
stock,  a  proceeding  which  could  have  been  defended  at  much 
less  expense  of  questionable  generalization."     See  §  59. 

(a)  A  national  bank  cannot  engage  in  selling  railroad  or 
mortgage""  bonds  on  commission.  In  Maryland^  the  court 
say:  — 

"  To  the  usual  attributes  of  hanking,  consisting  of  the  right 
to  issue  notes  for  circulation,  to  discount  commercial  paper, 
and  to  receive  deposits,  this  law  adds  the  special  Md. 
power  to  buy  and  sell  exchange,  coin,  and  bullion  ;  j^rTt'N^atfonai 
but  we  look  in  vain  for  any  grant  of  power  to  ^^'^^• 
engage  in  the  business  charged  in  this  declaration.  It  is  not 
embraced  in  the  power  to  '  discount  and  negotiate  '  promissory 
notes,  drafts,  bills  of  exchange,  and  other  evidences  of  debt. 
The  ordinary  meaning  of  the  term  '  to  discount '  is  to  take 
interest  in  advance,  and  in  banking  it  is  a  mode  of  loaning 
money.  It  is  the  advance  of  money  not  due  until  some  future 
period,  less  the  interest  which  would  be  due  thereon  when 
payable.  The  power  '  to  negotiate  '  a  bill  or  note  is  the  power 
to  indorse  and  deliver  it  to  another,  so  that  the  right  of  action 
thereon  shall  pass  to  the  indorsee  or  holder.  No  construction 
can  be  given  to  these  terms,  as  used  in  this  statute,  so  broad 
as  to  comprehend  the  authority  to  sell  bonds  for  third  parties 
on  commission,  or  to  engage  in  business  of  that  character. 
The  appropriate  place  for  the  grant  of  such  a  power  would  be 
in  the  clause  conferring  authority  to  '  buy  and  sell '  ;  but  we 
find  that  limited  to  specific  things,  among  which  bonds  are 
not  mentioned,  and  upon  the  maxim,  Uxpressio  unius  est 
exclusio  alterius,  and  in  view  of  the  rule  of  interpretation  of 
corporate  powers  before  stated,  the  carrying  on  of  such  a  busi- 
ness is  prohibited  to  these  associations."  ^ 

'  Farmers  &  Mechanics'  Bank  v.  Champlain  Trans.  Co.,  18  Vt.  131. 
'«  Farmers'  National  Bank  i'.  Smith  77  Fed.  129  (1896). 
8  Weckler  v.  First  National  Bank,  42  Md.  581. 

179 


§  78  EXPANSIONS   OF   THE   POWERS    OP   A    BANK. 

Dealing  in  stocks  is  not  distinctly  prohibited  by  the  act,  but 
such  prohibition  is  implied  from  a  failure  to  grant  the  power. 
Yet,  in  adjusting  a  contested  claim,  the  bank  may  pay  more 
than  its  value,  so  as  to  obtain  stocks  in  an  honest  effort  to 
avoid  loss  ;  and  then  it  may  sell  such  stock  in  the  market. 
Such  transactions  do  not  amount  to  a  dealing  in  stocks. 
Subject  to  the  restrictions  of  the  act,  the  bank  can  do  what  a 
natural  person  may  lawfully  do.^ 

A  national  bank  is  not  by  its  charter,  nor  by  its  statutory 
nor  its  incidental  powers,  authorized  to  act  as  broker  or  agent 
in  the  purchase  of  bonds  or  stocks.^*^ 

(5)  In  the  honest  exercise  of  the  power  to  compromise  a 
doubtful  debt  owing  to  the  bank,  it  can  hardly  he  doubted 
that  railway  stocks  may  he  accepted  in  payment  and  satis- 
faction, with  a  view  to  their  subsequent  sale  and' conversion 
into  money,  so  as  to  make  good  or  reduce  the  anticipated 
loss.^i 

The  power  to  buy  or  sell  stocks  of  other  corporations  by  a 
national  bank,  for  its  own  use,  is  nowhere  delegated  to  it,  nor 
is  it  an  incident  of  banking  business,  except  as  stocks  are 
taken  as  security  for  a  debt.  A  national  bank  holding  stocks 
as  security  may,  for  its  own  protection,  on  a  foreclosure  for 
default  in  payment  of  the  debt,  become  the  purchaser  to 
prevent  loss.^^ 

§  78.   Saving  Debt.  — See  §§  60,  77  5. 

A  Georgia  bank,^  to  secure  a  claim,  levied  on  the  Stonewall 
Q^  Iron  Works,  and  B.,  the  manager  of  said  works, 

Reynolds,  told  the  bank  that,  if  he  could  work  off  the  raw 

assignee,  v. 

Simpson  material  on  hand,  convert  it  into  pig  iron,  and  sell 

it,  the  debt  due  the  bank  could  be  paid,  but  he 

must  have  supplies  to  do  this.     The  bank  thereupon  furnished 

^  First  National  Bank  of  Charlotte  v.  National  Exchange  Bank,  2 
Otto  1-22. 

10  First  National  Bank  of  Allen  town  v.  Hoch,  7  Weekly  Notes  of  Cas. 
(Penn.)  298. 

11  First  National  Bank  of  Charlotte  v.  National  Exchange  Bank,  51 
How.  Pr.  (N.  Y.)  -620. 

12  Burley  v.  Bowen,  quoted  in  Ball  on  National  Banks,  pp.  51,  110. 
1  §  78.    Reynolds,  assignee,  v.  Simpson  &  Ledbetter,  74  Ga.  474. 

^180 


SAVING    DEBTS.  §  78 

the  means  to  carry  on  this  business,  and  the  court  held  its 
action  intra  vires. 

"  "When  a  banking  corporation  acquires  possession  of  prop- 
erty, either  by  a  lien  thereon,  or  by  the  purchase  of  the  same 
for  the  payment  of  a  debt  due  to  it,  and  expends  money  on  it, 
or  furnishes  supplies  either  for  its  preservation  or  to  carry  on 
the  business  in  which  such  property  is  employed,  with  a  view 
to  rendering  it  productive,  in  order  to  satisfy  the  debt  the 
bank  holds  against  the  former  owner  of  the  property,  it  is 
not  chargeable  with  exceeding  its  corporate  powers  by  en- 
gaging in  a  business  beyond  the  scope  and  purpose  of  its 
creation. 

"  Whether  the  bank  used  its  power  of  collecting  its  debt  as 
a  pretext  for  embarking  in  a  business  foreign  to  that  for 
which  it  was  created,  and  which  it  was  authorized  to  conduct, 
or  whether  it  made  a  proper  use  of  it  in  furtherance  of  its 
legitimate  business,  was  fairly  submitted  to  the  jury,  and  their 
verdict  is  upheld  by  the  evidence."  ^ 

A  national  bank  lawfully  holding  a  mortgage  on  real  estate 
may,  to  protect  its  interests,  purchase  a  prior  mortgage  on 
the  same  real  estate,^ 

Under  the  United  States  Revised  Statutes,  §  5137,  a  na- 
tional bank  may  purchase  at  sheriff's  sale  land  mortgaged 
to  it  in  good  faith,  as  security  for  a  debt  previously  con- 
tracted.^ Under  Michigan  statute  a  bank  may  foreclose  a 
mortgage  by  advertisement.^" 

It  was  agreed  between  the  maker  and  the  accommodation 
indorser  of  a  promissory  note,  that  it  should  be  "  used  "  only 
at  a  certain  bank.  The  bank,  having  knowledge  of 
the  agreement,  allowed  the  maker  from  time  to 
time  to  draw  money,  holding  the  note  as  collateral  security. 
Held,  that  the  bank  might  sell  its  claim  against  the  maker, 
and  transfer  the  note  to  the  purchaser  as  collateral.* 

2  Holmes  i;.  Boyd,  90  Ind.  332. 
•  Heath  v.  Second  National  Bank,  70  Ind.  107. 

8«  1  How.  Stat.  (Mich.)  §  3142;  3  How.  Stat.  (Mich.)  §  3208  b;  Gage 
V.  Sanborn,  106  Mich.  269  (64  N.  W.  32). 
4  Proctor  V.  Whitcomb,  137  Mass.  303. 

181 


§  78  EXPANSIONS   OF  THE  P0\7ERS   OF   A   BANK. 

A  national  bank  that  has  loaned  money  on  timber  land 
Bank  may        ^^Ji  to  save  itself,  buj  in  the  land  at  foreclosure 
timber*  or'^       Sale,  and  cut  and  sell  the  timber.^ 
agree  to  get  ^^  agreement  by  a  bank  to  procure  the  release 

mortgage.  of  a  mortgage  held  by  a  third  person  on  lands 
upon  which  the  bank  also  holds  a  mortgage,  if  made  to  save 
the  debt  due  the  bank,  is  not  ultra  vires.^ 

A  mortgage,  given  to  a  bank  by  its  president  to  secure  a 
loan  made  by  him  contrary  to  the  statute,  is  not  invalid,  if 
its  object  is  to  restore  the  money  thus  illegally  loaned.^ 

5  Roebling  v.  First  National  Bank,  30  Fed.  744. 

6  McCrath  v.  National  Mohawk  Valley  Bank,  10  N.  E.  R.  862  (N.  Y., 
April,  1887). 

T  Dunn  V.  O'Connor  25  App.  Div.  (Hun,  N.  Y.)  73  (1898). 


182 


CHAPTER  VIII. 

OFFICERS   AND    AGENTS.  —  GENERAL   PRINCIPLES. 

§  79.   Analysis. 

§  80.  The  principles  of  estoppel,  ratification,  intent  of  parties  to  contract, 

"qui  facit  per  alium,"'  etc.,  and  the  rules  of  agency  in  general, 
are  what  we  have  to  keep  in  mind. 
§  81.  The  fourth  question  as  to  banking  business,  "  How  ?  " 

(a)   What  the  stockliolders  must  do. 
(6)    What  the  stockholders  may  do. 
§  82.  When  agents  are  necessary ;  the  questions  arising  from  their 

employment;  and  the  facts  precedent  and  subsequent  to 
be  considered. 
When  the  Agent's  Act  is  that  of  the  Bank. 
§  83.  As  between  the  bank  and  the  agent. 

§  84.  As  between  the  bank  and  its  sovereign. 

§  85.  As  between  the  bank  and  a  surety  on  the  bond  of  an  officer  of  the 

bank. 
§  86.  As  between  the  bank  and  third  persons  generally. 

Contractual  Acts  in  General. 
§  87.  May  not  bind  either  bank  or  agent. 

§  88.  But  one  or  both  may  be  liable  on  the  facts, 

(a)  Account  for  benefit. 
(6)  Agent  liable  in  case. 
§  89.  When  third  person  may  hold  bank  (general  rules). 

(«)   Ultra  vires  acts,  two  classes  of  cases. 
§§  90,  91.     When  bank  can  hold  third  party  (general  rules). 

(a)  Ratification. 

(b)  Ultra  vires. 

§  92,  When  the  agent  holds  third  party  (general  rules). 

Contractual  Acts.  —  Intent  of  Parties. 
§  93.  Exclusive  credit  to  agent. 

§  94.  Exclusive  credit  to  bank. 

When  agent  contracts  in  his  own  name  as  agent,  but  fails  to  sus- 
tain his  authority. 
§  95.  Concurrent  credit. 

(a)  Presumption  when  agent  contracts  in  his  own  name.    §  144  c. 
(6)  When  agent  does  not  disclose  his  principal. 

(c)  Note  payable  to  cashier  may  be  sued  on  by  the  bank. 
{d)  Land  bought  for  bank  by  president  in  his  own  name. 

183 


§  79  OFFICERS   AND    AGENTS.  —  GENERAL   PRINCIPLES. 

§  96.     Contractual  Acts.  —  Attthority  of  Agent. 

§  97.  Actual   authority  by   organic   law,   vote,   usage,   verbal    order   of 

superior,  and  tacit  approval,  or  by  necessity.     See  §  165. 
§  98.  Inferred  or  apparent  authority.     See  98  (i),  (e),  (/),  (n)  ;  §§  114,  142, 

151,  153,  165  c,  d,  174  a. 
(a)  Course  of  action  by  an  officer  without  objection  from  bank. 

See  §  171  jr. 
(6)  Legal  and  proper  appointment  inferred. 
De  facto  officers. 

(c)  Inherent  powers    inferred   from    occupancy   of    office.     See 

§  171,  d,  e. 
Expansion  of  §  98. 

(d)  Test  question, — Would  a  prudent  man  suppose   the  officer 
,  had  authority,  judging  from  the  conduct  of  the  bank,  as 

known  to  him,  actually  or  constructively  ? 
{h)  Third  party  has  notice  if  he  knows  a  fact  which  would  lead  a 
man  of  ordinary  prudence  to  an  inquiry  which  would  dis- 
close the  truth, 
(t)  Authority  cannot  be  inferred  beyond  what  could  legally  be 
given  by  the  power  whose  conduct  is  the  basis  of  inference. 
{/)  Ultra  vires  acts  may  bind. 
{g)  Bank  may  restrict  or  enlarge  inherent  powers,  but  not  to 

affect  parties  without  notice. 
(j)  Substitution  of  one  officer  for  another. 

Receipt  of  money  by  paying  teller. 
(k)  Representations.     §  103. 
Notice  to  agent.     §  104. 
(/)    Holding  out  by  usage. 

Opinion  of  U.  S.  S.  C. 
Bank  may  be  bound  to  innocent  party,  even  though  the  officer 
acts  fraudulently  or  ultra  vires, 
(l-n)  i     Acts  witliin  the  ordinary  scope  of  an  office  bind  the  bank  in 
favor  of  an  innocent  third  party,  though  the  charter  limits 
the  officer's  powers  unknown  to  such  party.     %98f. 
§  99.     Contractual  Acts.  —  Adverse  Interest  of  Agent.    §§  109, 125,  b,  e, 

136, 167  e. 
§  100.  Revocation. 

§  101.  Ratification. 

(a)  Constructive  knowledge  of  facts  not  enough. 

(b)  Ratification  by  stockholders. 

(c)  Retention  of  proceeds  ratifies. 

{d)  Directors' approval  or  acquiescence.     §§  25  a,  168^. 
§  102.     Tortious  Acts  in  General. 

Agent's  responsibility  to  bank.     §§  128,  147,  172. 
(a)  Agent's  responsibility  to  third  party.     §§  128,  147,  172,  717. 
(6)  Bank's  responsibility  to  an  agent. 

Bank's  responsibility  to  sovereign.     §  722. 
(c)  Bank's  responsibility  to  third  person. 

Grounds  of  liability  in  tort ;  authorization,  ratification,  con- 

184 


OFFICERS    AND    AGENTS. — GENERAL   PRINCIPLES.  §79 

trol,  or,  in  some  cases,  the  fact  of  being  in  the  best  position 

to  prevent. 
General  rule  of  bank's  liability. 
Ultra  vires  tort.     §  727/ 
Wilfulness  not  the   test ;  bank  liable  for  tort  in  course  of 

business,  even  though  contrary  to  express  directions. 

(d)  Statement  of  the  law  by  U.  S.  S.  C. 

Bank's  responsibility  for  correspondent  or  notary.     §  264. 

(e)  Cases   on   the   bank's   liability   for   negliyence.      §  9,  n.  16; 

§§  2G4,  430,  461,  482  e,  761. 
(e)  and  (A)  Tort  beyond  officer's  scope  ;  cask  of  gold.     §§  201,  202. 
(/')    Banks  do  not  warrant  tlie  general  honesty  of  officers. 
{())    Negligence  of  directors  in  selecting  officer. 

Bank  not  responsible  for  remote  result,  felony  intervening, 
case  of  stolen  bills.     §  658. 
§  103.    Representations.    §  42  c,  2,  §§  124,  145,  167,  168,  203. 

General  rule.     May  amount  to  fraud,  warranty,  or  contract. 

§  167. 
Information  as  to  past  transactions  is  courtesy,  unless  it  bears 
on  present  or  future  dealings.     §  167  c.     See  also  b. 
(a)  When  an  agent's  power  is  ascertained,  a  third  person  may 
take  his  representations  as  to  any  extrinsic  fact  peculiarly 
within  the  agent's  knowledge,  and  not  ascertainable  by  a 
comparison  of  the  act  done  with  the  terms  of  the  agent's 
power,  and  pertaining  to  the  business  for  which  the  agent 
has  actual    or  implied  authority.     What   representations 
shall  be  considered  as  so  pertaining  to  the  duty  of  an  agent 
is  much  controlled  by  usage.     An  agent's  representations 
can  never  be  taken  to  prove  his  own  authority, 
(c)  Falsehood  told  by  one  officer  to  another. 
{d)  Teller's  assertion  that  an  indorsement  is  genuine, 
(e)    Representations  in  agent's  own  business,  as  known  to  party 
with  whom  he  is  dealing,  will  not  affect  the  bank. 
§  104.     Notice  to  the  Bank.     §  9,  n  9 ;  §§  133,  146,  166. 

Grounds  of  decision,  communication,  and  identity. 
§  105.  Credibility. 

§  106.  Adverse  interest. 

§  107.  Special  duty  to  receive  such  notice. 

§  108.  Did  the  agent  act  for  the  Bank  in  the  matter  ? 

If  so,  did  the  information  come  during  such  action,  or  previously  ; 

(a)  and  if  the  latter,  then  how  long  before,  and  was  there  an 

(e)  (g)  adverse  interest,  and  did  the  third   party  know  of  the 

agent's  having  notice,  and  not  of  his  adverse  interest. 

§  110.  Ratification  adopts  an  act  with  all  the  agent's  notice,  previous  or 

contemporaneous.     §§  101,  168  g. 
§  111.  When  notice  to  agent  does  not  affect  the  bank. 

§  112.  Notice  to  a  single  director. 

Question  as  to  the  justice  of  holding  bank. 

185 


§  80  OFFICERS   AND   AGENTS. —  GENERAL   PRINCIPLES. 

(a)  Louisiana  court  favors  requiring  notice  to  a  majority,  or 

to  tlie  board. 

(b)  Conclusion  upon  the  argument. 

§  113.  A  note  on  the  competency  of  bank  officers  as  witnesses  for  the 

bank. 
§  986.    De  facto  Officers.] 

§  80.  Except  by  way  of  illustration,  it  would  be  superfluous 
to  cite  cases  upon  the  maxim,  Quifacit  per  alium  facit  per  se, 
or  the  principles  of  estoppel  and  ratification,  and  that  the  es- 
sence of  a  contract  is  the  intent  of  the  parties,  which  underlie 
a  great  part  of  this  chapter,  or  those  familiar  propositions 
which  flow  from  these  axioms,  and  are  assumed  as  the  basis 
of  decision  throughout  the  country. 

The  business  of  an  incorporated  bank  ^  can  of  course  be 
conducted  only  by  agents  of  the  corporation,  or,  as  they  are 
commonly  styled,  officers  of  the  bank.  It  is  in  the  corporate 
shape  that  nearly  all  the  banking  business  in  the  United 
States  is  carried  on ;  though  the  English  system,  by  which 
private  individuals  and  partnerships  enter  into  the  banking 
business,  is  by  no  means  unknown  among  us.  Even  in  this 
latter  species  of  arrangement,  however,  the  individual  or 
partnership,  if  the  business  be  tolerably  large,  must  appoint 
clerks  or  agents,  who  must  perform  the  functions,  and  may 
often  assume  the  titles,  of  certain  of  the  bank  officers,  —  not 
of  president  or  directors,  of  course,  but  of  cashier,  teller, 
bookkeeper,  and  the  like.  In  either  case,  the  official  or 
clerk  is  in  fact  strictly  the  agent  of  the  corporation,  partner- 
ship,  or  individual ;  and  in  general  terms  it  may 
agency  sup-     be  Stated  that  the  ordinary  rules  of  the  law  of 

plies  the  .-.  i        c 

rules  of  this     agcucy  Will  apply  tor  the    settlement  or   all   ap- 
propriate questions.     These  rules  will  govern  all 
transactions  in  which  the  corporation  or  its  officials  are  par- 

^  §  80.  The  "  associations  "  of  New  York,  organized  under  the  stat- 
utes of  that  State,  differ  only  in  some  slight  and  insignificant  particu- 
lars from  ordinary  corporations.  For  all  the  purposes  of  the  matters  now 
under  discussion,  they  may  be  regarded  as  corporations.  The  National 
Banking  Act,  §  8,  especially  declares  that  all  organizations  under  its  pro- 
visions, though  called  "  associations,"  shall  yet  have  the  legal  character 
of  corporations. 

186 


OFFICERS   AND    AGENTS.  —  GENERAL   PRINCIPLES.  §  82 

ties,  just  as  much  as  they  govern  all  transactions  in  which 
the  individual  and  his  clerk  are  parties.  It  makes  no  dif- 
ference that  the  principal  is  a  corporate  body,  and  that  the 
agent  has  an  official  designation.  His  title  serves  only  to 
show  in  what  class  of  dealings,  for  what  purposes,  and  with 
what  powers,  he  is  accredited  as  an  agent ;  and  the  simple 
legal  relationship  of  principal  and  agent,  as  it  is  well  under- 
stood in  its  constant  occurrence  between  individuals,  is  to  be 
found  with  precisely  the  same  legal  attributes  beneath  the 
corporate  impersonality  and  the  official  dignity  .^ 

§  81.  The  fourth  question  concerning  banking  business 
was,  "  How  ?  "  And  in  considering  the  manner  in  which  it 
is  done,  the  chief  fact  calling  upon  our  attention  is  that  nearly 
the  whole  of  it  must  by  the  nature  of  the  case  be  carried  on 
through  agents. 

(a)  Some  acts  may  be,  some  must  be,  done  by  the  body  of 
stockholders ;  for  example,  the  election  or  removal  of  direc- 
tors, the  increase  of  capital,  a  voluntary  dissolution,  what  the 
or  abandonment,  or  any  act  involving  a  change  in  ^^^^^^  ^^  ^n" 
the  organization  of  the  bank,  must  be  done  by  the  ^^y^"- 
stockholders ;  and  any  transaction  infringing  on  the  private 
rights  of  stockholders,  as  a  gift  of  the  bank's  property,  or  a 
call  upon  the  shareholders,  requires,  in  the  absence  of  statu- 
tory provision,  the  consent  of  every  one  of  the  stockholders 
to  make  it  completely  valid. 

(b)  Beside  these  things,  which  must  be  attended  to  by  the 
corporate  body  itself,  there  are  many  others  which  may  or 
may  not  belong  to  its  sphere  of  action,  according  to  its  char- 
ter or  the  statute  under  which  it  is  organized,  and  the  action 
of  the  corporation  itself  in  the  disposal  of  its  powers.  For 
example,  the  power  of  making  by-laws  may  be  in  the  body  of 
stockholders,  or  in  the  board  of  directors  (H.  §  8)  ;  and  even 
where  the  whole  power  of  management  and  of  making  by- 
laws resides  in  the  directors,  the  stockholders  may  be  called 
upon  by  them  for  advice  and  instructions. 

§  82.   However,  no    such    unwieldy  body  as   that   of  the 

2  Frankfort  Bank  v.  Johnson,  24  Me.  490 ;  Atlantic  Bank  v.  Merchants' 
Bank,  10  Gray  (Mass.),  532. 

187 


§  83  OFFICERS    AND    AGENTS.  —  GENERAL   PRINCIPLES. 

shareholders  could  ever  receive  deposits,  certify  checks,  col- 
lect debts,  or  do  any  of  tlie  acts  that  make  up 
a£?ents,  and  the  daily  routine  of  business.  Agents  are  neces- 
quentq^ue's-  sary,  and  their  introduction  upon  the  scene  of 
*"'"^"  action  gives  rise   to  complicated    and    important 

questions.  What  liabilities  exist  between  the  officer  and  the 
bank  ?  When  is  the  act  of  the  agent  the  act  of  the  bank  ? 
When  is  the  individual  agent  responsible  to  the  third  party  ? 
The  problem  resembles  that  of  the  three  bodies  in  astron- 
omy, and  is  one  of  the  most  interesting  in  legal  dynamics. 
Many  facts  have  to  be  considered  in  seeking  a  solution.  The 
The  facts  to  agent  (A.)  may  or  may  not  have  actual  authority 
be  consiJ-  from  the  bank  (B.)  or  from  the  board  to  perform 
Precedent.  the  act  OH  behalf  of  the  bank.  The  third  party 
(C.)  may  know  A.  is  acting  for  B.,  or  not.  B.'s  conduct  may 
be  such  as  to  lead  C.  naturally  to  infer  that  A.  acts  with 
its  approval.  A.  may  make  representations,  or  have  certain 
knowledge,  during  and  affecting  the  transaction.  C.  may 
have  notice  of  restrictions  on  A.'s  power,  or  of  other  facts 
bearing  on  the  matter,  or  he  may  give  exclusive  credit  to  A. 
The  act  may  be  intra  vires  of  the  bank,  or  ultra  vires,  and 
C.  may  or  may  not  have  notice  of  this.  A.  may  know  he  is 
going  beyond  his  authority,  or  on  the  facts  as  known  to  him 
his  act  may  be  within  bounds,  and  yet  some  fact  out  of  sight 
make  it  really  wrongful.  An  agent's  action  may  be  subse- 
quently approved  by  the  bank  or  the  board  of  direc- 
facts.  tors,  or  they  may  take  the  benefit  of  it  and  make 

no  objection,  or  retain  A.  in  their  service  after  knowing  of  his 
wrong  conduct. 

§  83.  The  question  of  greatest  import  in  the  matter  before 
us  is,  Where  is  the  boundary  between  individual  and  corpo- 
rate responsibility  ?  when  is  the  agent's  act  that  of  the  bank, 
and  when  is  it  merely  his  private  affair  ? 

As  between  the  bank  and  the  officer  his  act  is  the  bank's 
only  when  it  is  done  with  the  bank's  own  consent  or  approval, 
_    ,  or  is  ratified  by  it  with  a  knowledge  of  the  facts, 

Bank  v.  -^  o  ' 

Officer.  or  when  it  is  done  by  authority  or  approval  of  a 

superior  officer,  the  subordinate  having  no  notice  of  any  fact 
188 


QUESTIONS  GROWING  OUT  OF  AGENCY.        §  84 

making  the  order  of  the  superior  wrongful,  or  when  it  is  rati- 
fied by  a  superior  officer  who  could  lawfully  have  authorized 
it.  Otherwise  as  between  the  bank  and  the  agent,  the  latter 
is  responsible  for  all  loss  directly  resulting  from  his  conduct 
in  the  business  of  the  bank,  wliich  fails  to  come  up  to  the 
standard  of  reasonable  skill  and  competency,  ordinary  care 
and  attention  to  the  duties  of  his  office,  strict  obedience  to 
the  law  on  the  facts  reasonably  within  his  knowledge,  and  a 
course  of  conduct  unstained  by  any  bad  faith. 

The  right  of  action  of  the  bank  against  an  oflScer  for  his 
wrongful  or  fraudulent  act  seems  not  to  be  barred  by  the 
Statute  of  Limitations,  if  his  act  has  only  been  known  to 
himself  during  the  period.  It  is  his  duty  to  disclose  the 
fact  to  the  bank,  not  the  duty  of  the  other  officers  to  inquire 
of  him.  Thus,  where  the  president  of  a  bank  receives  money 
of  the  bank,  to  be  applied  in  payment  of  a  specific  debt,  but 
does  not  so  apply  it,  and  the  bank  remains  in  ignorance  of 
the  fact  until  it  is  subsequently  compelled  to  pay  to  the  cred- 
itor, the  president  cannot,  when  sued  by  the  bank,  set  up  the 
Statute  of  Limitations  in  his  defence.^ 

§  84.  As  between  the  bank  and  the  State,  there  is,  by  the 
nature  of  their  duties,  a  wide  difference  between  the  acts  of 
the  board  and  those  of  any  other  agent.  If  the  Bank  v.  Sov- 
former  does  any  act  in  the  management  of  the  ®'""g°- 
bank's  business  or  its  property  which,  upon  facts  known  to 
them  or  which  might  be  known  by  the  exercise  of  reasonable 
diligence,  is  a  violation  of  the  law  under  which  the  bank  is 
organized,  it  is  the  act  of  the  bank,  and  however  innocent 
the  stockholders  may  be,  may  cause  a  forfeiture ;  they  have 
intrusted  the  management  to  the  directors,  and  must  abide 
the  result.     (See  Forfeiture.) 

The  directors  are  the  real  brain  and  judgment  and  control 
of  the  bank,  and  for  the  protection  of  the  public  their  action 
must  be  deemed  that  of  the  bank,  so  far  as  its  business  and 
property  are  concerned ;  otherwise  the  bank  could  defy  for- 
feiture, and  violate  the  law  with  impunity,  by  a  continual 
change  of  officers. 

1  §  83.    Atlantic  National  Bank  v.  Harris,  118  Mass.  147. 

189 


§  85  OFFICERS    AND    AGENTS.  —  GENERAL   PRINCIPLES. 

But  if  any  subordinate  officer  breaks  the  law,  the  question 
is,  Did  the  bank  or  the  board  authorize  tlie  act,  or  knowingly 
permit  it  or  adopt  it,  by  retaining  the  wrongdoer  or  the 
benefit  of  the  transaction  knowing  the  facts  ?  If  so,  the 
bank  is  liable  to  forfeiture  on  the  reasoning  above.  When, 
however,  the  act  was  unauthorized,  and  the  directors  have 
exercised  due  care  in  supervision,  and  when  the  fact  comes 
to  their  knowledge  they  repudiate  and  so  far  as  possible  undo 
the  wrong,  it  is  not  deemed  the  act  of  the  bank,  but  that 
of  the  individual  officer,  for  which  he  may  suffer  the  penalty 
of  the  law. 

The  difference  in  the  two  cases  lies  in  the  locus  of  control. 
The  reins  are  in  the  hands  of  the  directors,  and,  if  they  do  not 
do  their  duty  in  the  selection  of  horses  or  harness,  or  drive 
improperly,  the  owner  of  the  coach  may  well  be  held ;  but  if 
no  fault  attaches  to  them  or  to  the  owner,  it  would  be  carrying 
liability  to  a  great  extent  to  hold  the  latter  for  the  stumbling 
of  one  of  the  horses.  If  those  in  control  of  the  bank  obey  the 
law,  the  public  will  be  little  exposed  to  wrong,  or  excess  of 
power ;  and  no  necessity  for  the  public's  protection  existing, 
as  in  the  case  of  the  board,  it  would  be  hardly  fair  to  pun- 
ish the  innocent  stockholders  for  the  occasional  fault  of  a 
subordinate. 

If  the  board  violates  the  law  by  action  entirely  aside  from 
any  handling  of  the  property  or  business  of  the  bank,  as  if 
they  form  a  conspiracy  to  do  some  felony  or  overthrow  the 
government,  of  course  that  is  not  the  act  of  the  bank  ;  it  must 
be  done  in  the  course  of  their  management  of  the  bank,  its 
interests,  or  property. 

§  85.  Between  the  bank  and  the  surety  upon  the  bond  of 
an  officer,  no  act  of  the  board,  nor  of  any  one  beside  the 
Bank  V.  stockholders,  can  relieve  the  surety  from  liability 

Surety.  f^j,  |-|-^g  guaranteed  officer's  breach,  unless  it  is  other- 

wise nominated  in  the  bond.  The  very  purpose  of  the  bond  is 
to  secure  the  bank  against  the  fraud  or  incompetence  of  the 
officer,  and  its  value  would  be  slight  if  the  fraud  or  incompe- 
tence of  another  officer  precedent  or  subsequent  were  to  be 
the  death  of  the  surety's  obligation.  (See  Official  Bonds.) 
190 


CONTRACTS.  —  WHO   IS   BOUND.  §  87 

§  86.  "We  will  now  consider  the  last  phase  of  the  problem 
in  which  the  bank  is  a  factor.  When  is  the  bank  responsible 
to  third  parties  for  the  act  of  its  agent,  and  when    ^    , 

'^  .  .  Bank  v. 

can  the  bank  hold  third  parties  upon  their  dealings  third  parties 
with  A.  ?  A  distinction  must  be  carefully  noted. 
The  questions,  when  is  A.'s  act  B.'s  act,  and  when  is  B. 
hound  hy  the  act,  are  very  different  questions.  The  latter  is 
not  a  question  of  agency.  B.  may  act  himself,  and  yet  not 
be  bound,  as  in  case  of  a  void  contract,  or  an  act  which  is  dam- 
num absque  injuria,  where  no  responsibility  attaches  in  con- 
sequence of  his  act.  In  the  case  of  a  bank,  when  it  is  once 
determined  that  a  certain  act  is  that  of  the  corporation,  the 
question  whether  it  is  bound  by  the  act  in  contract,  or  respon- 
sible for  it  as  a  tort,  or  a  crime,  is  one  with  which  we  are  not 
concerned  here,  as  it  does  not  depend  upon  the  principles 
of  agency.  It  may  just  be  noted  in  passing,  that,  if  the  act  is 
intra  vires,  the  bank  is  bound  just  as  a  private  person  would 
be ;  if  ultra  vires,  its  responsibility  depends  on  principles 
discussed  in  §  722  et  seq. 

The  question  for  us  here,  and  it  is  one  of  great  importance,  is 
this :  Wlien  is  an  agent's  contract,  tort,  knowledge,  representa- 
tion, payment,  or  other  act,  that  of  the  bank  as  to  third  parties  ? 

§  87.  Contractual  Acts.  —  First,  of  acts  from  which  arise 
contract  liabilities,  considering  them  in  relation  to  sucli  lia- 
bilities, as  distinguished  from  liabilities  in  tort. 

A  transaction  of  the  agent  A.  may  create  a  contract  be- 
tween the  bank  B.  and  a  third  party  C,  or  between  A.  and  C, 
or  both  in  one  transaction  ;  or  though  one  of  these  ^^^^^^^ 
relations  is  sought,  they  may  all  fail ;  as  if  A,  act  bound  on  the 
beyond  or  without  authority  from  B.,  or  the  contract 
is  in  such  form  that  it  cannot  legally  be  the  act  of  B.  (as 
a  deed  in  A.'s  name),  or  if  C,  knowing  that  A.  is  acting  as 
an  agent,  gives  exclusive  credit  to  him,  and  with  one 
or  other  of  these  facts  which  prevent  B.'s  liability  on  the 
transaction  there  co-exists  a  fact  preventing  it  from  being 
A.'s  contract,  as  when  he  uses  no  words  in  a  written  contract 
that  can  charge  himself,  and  in  any  case  where  there  are  no 
circumstances  showing  that  any  credit  was  given  to  A. 

191 


§  89  OFFICERS   AND    AGENTS.  —  GENERAL   PRINCIPLES. 

(There  are  other  cases  where  the  contract,  though  the  act 
of  A.  or  B.,  does  not  hind  either,  as  where  the  party  whose 
act  the  contract  is,  is  incapable,  or  the  consideration  fails,  or 
is  immoral  or  against  policy,  or  void  by  statute,  or  ultra  vires  ; 
but,  as  said  above,  these  are  matters  outside  the  subject  of 
this  division.) 

§  88.  Although  the  transaction  may  not  be  such  as  to  hold 
either  the  agent  or  the  bank  on  the  contract,  yet  one  or  both 
may  be  held  by  obligations  implied  by  law  on  the  facts. 

Thus  a  committee  of  a  corporation  contracting  for  the 
company  with  full  authority  used  their  individual  seals  instead 
of  the  corporate  seal,  which  is  essential  to  the  making  of  a 
corporate  deed,  drawing  therefor  an  instrument  that  was 
not  their  own  contract,  for  they  could  not  individually  deed 
away  the  company's  land,  nor  the  company's  contract,  because 
of  its  form ;  yet,  as  they  acted  with  due  authority,  assumpsit 
could  be  brought  against  the  company  founded  on  the  obli- 
gation of  the  stipulations  in  the  instrument. 

(a)  So  benefits  of  any  kind  received  under  a  transaction  that 
fails  as  a  contract  express,  must  be  accounted  for,  and  in  any 
Benefit  re-  ^asc  whcrc  an  agent  A.  fails  to  give  the  third  person 
ceived  must     Q   g^  rio;ht  of  action  against  the  bank  according  to 

be  accounted  =>  °  ,  " 

for-  the  tenor  of  his  agreement,  and  is  not  himself  bound 

on.  the  contract,  still  A.  is  liable  to  C.  in  case,  unless  the  fail- 
ure of  the  contract  is  due  to  facts  equally  within  the  contenv- 

Apent  liable    vlation  of  both  parties  A.  and  C. ;    as  if  A. 's  au- 
to third  -',      .  'p  ,  .     ,  •  11 
party.            thority  were  by  tacts  unknown  to  him  revoked. 

§  89.  Two  things  chiefly  must  be  taken  into  consideration 
in  determining  to  whom  belongs  a  given  contractual  act : 
1st,  the  intent  of  the  parties,  their  understanding  as  to  whom 
credit  is  given,  in  the  transactions  ;  2d,  the  authority  of  the 
agent,  actual,  inferred,  or  arising  by  ratification. 

(a)  The  general  principles  are  :  — 

First.  Unless  the  case  comes  under  the  fifth  head  below, 
C.  has  a  right  to  consider  the  act  of  A,  to  be  that  of  B.  when- 
ever A.  and  B.  are  really  identical  in  the  matter  (whether  A. 
Third  party  discloscd  to  C.  that  he  was  acting  for  B.  or  not,  ex- 
hoids  bank,  (jept  that  an  undisclosed  principal  cannot  be  subse- 
192 


CONTRACTS.  —  WHO    IS   BOUND.  §  89 

qnently  held  to  his  injury,  as  if  he  has  settled  with  A.  while 
still  having  reason  to  believe  that  C.  is  giving  exclusive  credit 
to  A.),  and  whenever  B.'s  conduct  has  been  such  as  to  warrant 
a  man  of  ordinary  prudence  in  concluding  that  A.  is  acting 
for  B.  with  his  approval  and  consent. 

For  example,  a  national  bank,  with  the  knowledge  of  its 
officers,  was  in  the  habit  of  receiving  money  on  deposit,  and 
issuing  certificates  therefor,  sometimes  in  its  own  name,  some- 
times in  that  of  Van  Campen,  the  president.  This  course  of 
business,  being  known  to  and  permitted  by  the  officers,  was 
with  authority  as  to  third  parties,  and  the  bank  was  held 
liable  to  a  depositor  who  took  a  certificate  purporting  to  be 
issued  by  Van  Campen  personally,  the  depositor  believing  it 
to  be  the  obligation  of  the  bank,  and  so  accepting  it.^ 

(^)  Also,  if  A.'s  act  ostensibly  and  avowedly  for  B.  is  after- 
ward, with  knowledge  of  the  facts,  ratified  by  the    ^    .^     . 

'  °  .  -        .  Ratification. 

power  which  could  have  given  previous  authority. 

(c)   And  one  class  of  cases  goes  a  step  beyond  all  this,  and 
holds  that,  even  when  C.  knew  that  the  officer  or  the  board 
were  acting  ultra  vires  of  the  bank,  and  therefore  of  course 
beyond  their  authority,  yet,  if  the  bank  receives  and    Benefit  re- 
retains  the  benefit  of  the  transaction,  it  cannot  in-    uura  vires, 
terpose  the  plea  of  ultra  vires  in  a  suit  upon  the    Jfsesf^'Vee 
contract.     This  amounts  to  sustaining  against  the   §  '^'^-• 
principal  a  contract  made  by  an  agent  beyond  his  authority, 
for  it  is  not  necessary  that  the  stockholders  should  act  in  the 
matter  ;  it  is  sufficient  if  the  hoard  of  directors  receive  and  retain 
the  benefit  for  the  bank.     This  applies,  of  course,  only  to  exe- 
cuted contracts,  no  agent's  executory  contract  ultra  vires  of  the 
bank  can  bind  it,  whether  C.  knew  or  not  of  its  true  character. 

((^)  Another  less  numerous  but  more  consistent  class   of 
cases  hold  that  the  act  of  an  agent  beyond  his  authority,  and 
known  by  C.  actually  or  constructivelv  to  be  so.   True  rule 
IS  not  the  act  or  tlie  bank  as  to  C,  and  it  cannot   uitm  wes 
be  held  on  the  contract^  although  if  it  has  received    §  722. 

1  §  89.  West  V.  First  National  Bank  of  Elmira,  20  Ilun  (N.  Y.),  408. 
See  Smith  v.  Rathburn,  88  N.  Y.  660;  Germania  Ins.  Co.  v.  R.  R.  Co., 
72  N.  Y.  91 ;  Upton  v.  Tribilcock,  91  U.  S.  50. 

VOL.  I.— 13  193 


§  90  OFFICERS   AND    AGENTS.  —  GENERAL   PRINCIPLES. 

benefit  by  reason  of  the  transaction,  it  must  account  for  the 
same. 

(e)  In  general  all  acts  of  an  agent  that  are  done  officially ,2 
and  that  fall  within  the  scope  of  his  powers  and  duties,^  are 
in  law  the  acts  of  the  corporation  itself.  Whether  these  be 
rightful  or  wrongful,  innocent  third  parties  have  the  right  to 
regard  them  in  this  light,  and  the  law  will  thus  construe  them. 
In  like  manner,  knowledge  obtained  by  the  agent  in  his  offi- 
cial capacity,  and  within  the  scope  of  his  agency,  will  affect 
the  corporation;  and  declarations  made  by  him  in  the  like 
manner,  and  within  the  like  range,  will  bind  the  corporation. 
But  acts  done,  knowledge  obtained,  or  declarations  made, 
beyond  such  scope,  or  not  in  an  official  capacity,  do  not  affect 
the  company  at  all.^ 

The  bank's  liability  to  third  parties  is  not  affected  by  the 
fraud  of  the  officer  upon  the  bank  in  the  transaction,  if  it  was 
unknown  to  such  third  party .^ 

§  90.  Second.  The  bank  can  hold  a  third  person,  C,  as 
to  a  contract  made  with  it  directly,  so  far  as  its  agent  was 
Bank  holds  really  acting  for  it  (under  authority  directly  from 
third  party,  ^j^g  organic  law,  or  from  the  bank  itself,  or  from 
the  lawful  order  of  a  superior  or  recognized  usage,  or  neces- 
sity), unless  exclusive  credit  was  given  to  A.  under  the  fifth 
head  below,  and  so  far  as  his  action,  though  without  actual 
authority,  was  ostensibly  for  the  bank,  and  with  knowledge  of 
the  facts  has  been  adopted  or  ratified  by  that  body  which 
could  have  authorized  the  act  previous  to  its  performance, 
[bearing  in  mind,  however,  that  although  the  general  rule  is 

2  Hughes  V.  Bank  of  Somerset,  .5  Litt.  (Ky.)  45. 

3  New  Hampshire  Savings  Bank  v.  Downing,  16  N.  H.  187. 

*  Bank  of  Cohimbia  v.  Patterson's  Adm'r,  7  Cranch,  297  ;  Fleckner  v. 
Bank  of  United  States,  8  Wheat.  338;  Atlantic  Bank  v.  Merchants'  Bank, 
10  Gray  (Mass.),  532;  Fulton  Bank  v.  N.  Y.  &  Sharon  Canal  Co.,  4  Paige 
(N.  Y.),  137  ;  Boom  v.  City  of  Utica,  2  Barb.  (N.  Y.)  104;  New  England 
F.  &  M.  Ins.  Co.  V.  Schettler,  38  111.  166 ;  Wright  v.  Georgia  R.  R.  & 
Banking  Co.,  34  Ga.  330;  Wyraan  v.  Hallowell  &  Augusta  Bank,  14  Mass. 
62 ;  Salem  Bank  v.  Gloucester  Bank,  17  id.  1 ;  Madison  &  Indianapolis 
R.  R.  Co.  V.  Norwich  Saving  Soc,  24  Ind.  457. 

6  Citizens'  Savings  Bank  v.  Blakesley,  42  Ohio  St.  645. 

194 


CONTRACTS.  —  WHO    IS   BOUND.  §  93 

that  ratification  discharges  an  agent  from  responsibility  to  his 
principal,  (or  to  the  third  person,  C,  except  so  far  as  ex- 
pressly bound  by  the  contract,)  and  makes  the  act  of  the  same 
effect  as  if  with  antecedent  authority,  yet  C.  cannot  be  af- 
fected injuriously  by  the  ratification  where  his  conduct  in  the 
meantime  must  depend  on  the  question  whether  the 

1       T    A       ^-  cannot  be 

act  was  with  power  at  the  time;  tor  example,  it  A.  prejudiced  by 
without  authority  demand  B.'s  goods  from  C,  no 
ratification  can  make  C.'s  refusal  a  conversion,  for  the  delivery 
to  A.  would  not  have  been  good.  So,  if  A.  makes  an  unauthor- 
ized demand  for  a  debt  due  to  B.  from  C,  a  ratification  will  not 
prevent  C.  from  pleading  a  previous  tender ;  for  if  he  had 
paid  A., it  would  have  been  no  discharge  of  the  debt.  So  also 
notice  of  dishonor  by  a  stranger  is  not  good  by  ratification.^] 

Also,  if  a  third  person,  C,  hold  the  bank,  B.,  to  a  contract 
made  by  A.  without  actual  authority,  and  not  ratified,  B.  can 
hold  C.  to  a  fulfilment  of  his  own  part  of  the  agreement. 

(5)    And,  under  the  first  head,  there  is  a  class  of  cases 
holding  that  the  bank  can  hold  C.  to  his  part  of  an  ultra  vires 
contract  when  C.  has  received  a  benefit  from  the    jjn^a  vires. 
transaction  which  he  cannot  or  will  not  give  up.^ 

§91.  Third.  If  A.  acts  neither  really  nor  ostensibly  for  the 
bank,  it  cannot  assume  the  contract. 

§  92.  Fourth.  If  A.  avowedly  contracts  for  the  bank,  but  is 
himself  the  real  principal,  he  must  give  the  third  person,  C, 
notice  of  his  real  character  before  he  can  sue  him,  and  if  the 
fact  that  the  bank  was  supposed  by  C.  to  be  a  party  entered 
into  the  consideration,  A.  cannot  hold  C.  at  all,  if  the  contract 
is  executory  on  A.'s  side,  nor  can  he  in  any  case  avoid  any 
defence  C.  could  have  made  if  A.  had  told  the  truth. 

§  93.    Fifth.     Intent  of  the  Parties.  —  If  the  third  person, 
C.  (not  being  ignorant  of  the  existence  of  a  principal  behind 
A.,  to  whom  he  might  have  given  credit  if  known),   j,^^,^^.^,^ 
ffives  exclusive  credit  to  the  agent.  A.,  as  where  a   credit  to  the 

.  agent. 

bond  is  given  in  A.'s  name,  or  the  circumstances 

1  §  90.    Stanton  v.  Blossom,  14  Mass.  116.         2  See  ultra  virex,  §  722. 

195 


§  95  OFFICERS   AND    AGENTS.  —  GENERAL   PRINCIPLES. 

show  that  the  contract  was  intended  to  be  exclusively  between 
A.  and  C,  the  bank  can  neither  sue  nor  be  sued  on  the  con- 
tract, though  it  may  be  entitled  to  the  benefit  of  it,  or  con- 
cluded by  it,  and  entitled  to  collateral  rights,  and  subject  to 
and  entitled  to  remedies  growing  out  of  it. 

§  94.    Sixth.     If  the  third  party,  C,  gives  exclusive  credit 
to  the  bank,  the  agent  is  not  generally  liable  on  the  contract, 
though  he  may  be  liable  in  case  of  any  misrepre- 
credit  to  the       scntatiou  Or  fraud  ;  however,  if  A.  contracts  in  his 
^^  '  own   name    as    agent,  adding   his    representative 

character,  and  he  fails  to  sustain  his  right  to  this  addition, 
his  name  will  stand  without  the  annex,  and  he  will  be  person- 
ally bound  by  the  contract,  if  it  is  one  he  could  make  himself.^ 

§  95.  Seventh.  Whenever  it  is  the  understanding  of  the 
parties  A.  and  C.  to  a  contract,  that  credit  is  given  to  both 
Concurrent  ^^^^  agent.  A.,  and  the  bank,  B.,  or  both  A.  and  B. 
credit.  ^rc  really  interested  in  the  contract,  or  one  is  a 

party  and  the  other  interested,  it  is  the  contract  of  both 
A.  and  B.,  except  that  only  the  named  parties  to  a  sealed  con- 
tract can  sue  or  be  sued  directly  on  the  contract,  and  that, 
whenever  exclusive  credit  is  given  to  A.,  and  the  understand- 
ing is  that  the  principal  is  not  to  sue  or  be  sued  on  the  con- 
tract, this  excludes  B.  from  action  on  the  contract  directly. 
But  A.'s  right  to  sue  on  a  concurrent  contract  is  subordinate 
to  that  of  B.,  (as,  if  B.  sues  first  or  discharges  C,  A.'s  right  is 
superseded,)  except  when  A.  has  a  lien  or  other  interest  in 
the  subject  matter  of  the  agency,  then  he  may  enforce  his 
right  against  both  B.  and  C. 

(«)  There  is  a  concurrent  contract  by  presumption  of  law 
whenever  A.,  having  authority  to  make  a  contract  (not  under 
Presumption  scal),  makcs  it  in  his  own  name,  unless  the  cir- 
JIo,°f";!°;?,"  cumstances  make  it  clear  that  exclusive  credit  was 

Truct  IS  111 

A.'s  name.  given  to  A.,  and  both  parties  intended  that  no  re- 
sort should  be  had  by  or  against  the  bank  on  the  contract  in 
any  event.     And  this  whether  A.  des^.iibes  himself  as  an  agent 

1  §  94.     See  §  128  n. 

196 


CONTRACTS.  —  WHO   IS   BOUND.  §  95 

or  not,  and  whether  the  third  party,  C,  knew  of  the  principal, 
B.,  or  not.^  Either  A.  or  B.  can  sue  and  be  sued  in  such 
cases,  A.  as  the  party  to  the  contract,  B.  as  the  party  in  inter- 
est, and  for  whose  benefit  the  contract  was  made. 

(5)  When  A.  does  not  disclose  tbat  he  is  acting  as  an  agent 
for  B.,  C.  cannot  be  held  to  have  elected  to  give  exclusive 
credit  to  A. ;  for,  not  knowing  of  any  one  else  in  the  matter, 
he  had  no  chance  to  make  the  election  which  might  have  re- 
sulted if  he  had  known  A.  was  acting  as  agent,  and  this 
holds  except  where,  as  in  the  case  of  a  foreign  agent,  it  would 
be  a  conclusion  of  law  that  exclusive  credit  was  given  to  A,, 
even  though  B.  were  known. 

If  A.  contracts  in  his  own  name,  and  his  principal  afterward 
becomes  known,  C.  may  elect  which  he  will  hold.^ 

(c)  A  note  payable  to  the  cashier  of  a  bank,  being  the  prop- 
erty of  the  bank,  is  by  fair  construction  a  contract  with  the 
bank,  and  it  can  sue  in  its  own  name,  as  the  real      Note  to 
party  in  interest.^     It  can  also  be  sued  on  by  the      ^^^^^^''^r- 
cashier.*     So  an  order  payable  to  "  D.  H.  Neale,  Pres.,"  may 
be  the  subject  of  suit  by  the  corporation  as  the  real  party .^ 

((Z)  So,  where  land  conveyed  in  trust  to  secure  a  debt  due 
the  bank  was  sold  under  a  prior  incumbrance,  and  the  presi- 
dent boudit  the  land,  taking  a  deed  in   his  own   ,    ^,      ^, 

°  ^  7  o  Land  boufjht 

name,  delivering  the  note  held  by  the  bank,  and    '"  name  of 

'.  '^         .         1,1  1,11     president. 

giving  his  own  note  tor  the  balance  secured  by  deed 
of  trust,  it  was  held  that,  as  the  facts  clearly  showed  the  pur- 
chase to  have  been  for  the  bank,  and  that  the  president  had 
power  to  make  it,  although  the  president  was  the  legal  party, 
yet  in  equity  the  bank  must  relieve  the  estate  by  paying  the 
note  given  by  the  president.^ 

And  this  is  an  agreement  with  the  whole  current  of  reason 
and  decision,  though  Walker  and  Scholfield,  JJ.,  dissented.^ 

1  §  95.     Story  on  Agency,  §  160  a. 

2  2  Smith's  L.  C.  375. 

«  Commercial  Bank  v.  French,  21  Pick.  (Mass.)  486.     Lookout  Bank 
V.  Aull,  93  Tenn.  647  (27  S.  W.  1014)  (1894). 
*  Johnson  v.  Catlin,  27  Vt.  89. 

5  Eastern  R.  R.  Co.  v.  Benedict,  5  Gray  (Mass.),  561. 
«  Libby  v.  Union  National  Bank,  99  111.  622. 

197 


§  97  OFFICERS   AND    AGENTS.  —  GENERAL   PRINCIPLES. 

§  9G.  Authority  of  Agent.  —  A  third  party,  C,  can  hold  the 
bank  to  A.'s  act  as  if  it  wore  the  bank's  own  act,  if  A.  had 
actual  or  inferred  authority.  The  converse,  however,  is  not 
true  ;  for,  as  was  seen  under  the  first  head,  some  cases  hold 
the  act  B.'s  where  there  was  no  authority,  either  actual  or 
inferred,  and  ratification  may  transfer  A.'s  act  to  B. 

§  97.  Eighth.  Actual  Authority  is  really  existing  a  priori 
ground  for  holding  the  act  of  A.  to  be  that  of  B.  It  may 
arise, — 

(1)  By  the  organic  law,  as  in  case  of  the  power  of  directors 
of  a  national  bank.     (II.  §  8.) 

(2)  By  action  of  the  corporate  body. 

(3)  By  lawful  vote  or  verbal  order  of  the  board  of  directors, 
or  other  superior  officer  to  the  one  doing  the  act.  But  if  the 
superior  exceeds  his  powers  in  giving  the  command,  there  is 
no  actual,  though  there  may  be  inferred  authority. 

(4)  By  appointment  to  an  office  to  which  certain  powers 
belong  inherently,  so  far  as  these  are  not  restricted  by  the 
bank  or  the  directors. 

(5)  By  a  long  continued  course  of  dealing,  or  series  of 
acts  with  the  knowledge  of,  and  without  objection  from,  the 
power  which  could  expressly  authorize  the  acts.  This  is  the 
way  in  which  inherent  powers  arose.  They  are  usages  judi- 
cially ascertained,  the  latest  addition  of  large  importance 
being  the  inherent  authority  of  a  cashier  to  certify.  But 
no  authority  is  born  of  a  series  of  acts,  if  each  one  is  done 
under  special  authority.     (See  7  below.) 

(6)  By  necessity.  Whenever  an  emergency  exists  calling 
for  immediate  action  for  the  manifest  interest  of  the  bank, 
the  officer  has  authority  to  do  the  act  by  necessity. 

(7)  Performing  an  act  a  series  of  times,  but  each  time 
under  special  authority,  creates  no  general  authority.  The 
No  usage  fact  that  an  act  has  been  several  times  done  by 
special  au^  ^'^  officcr,  who  has,  however,  on  each  occasion 
thority.  performed  it  in  pursuance  of  a  vote  or  instruc- 
tions of  the  directors,  does  not  constitute  such  a  custom  for 
him  to  do  the  act  as  to  make  it  binding  upon  the  bank  when 

198 


INFERRED    AUTHORITY    OF   OFFICER.  §  98 

he  does  it  without  such  authority ;  and  this  is  the  case  even 
where  the  outside  party  with  whom  he  is  dealing  knows  that 
the  act  or  duty  has  been  frequently  performed  by  him  in  the 
past.  Thus,  where,  by  verbal  consent,  or  under  direction  of 
the  investment  committee  of  the  directors  of  a  savings  bank, 
the  treasurer  had  frequently  assigned  mortgages  to  a  pur- 
chaser, it  was  held  that  no  such  general  or  implied  authority 
for  him  to  execute  assignments  of  mortgages  arose  as  to 
make  his  assignment  of  one  valid,  in  a  case  where  he  did  so 
without  instruction  from  the  committee,  though  the  assignee 
knew  that  such  assignments  had  often  previously  been  exe- 
cuted by  this  officer.! 

§  98.  Ninth.  Inferred  Authority  of  an  agent  is  such  as 
reasonably  appears  to  exist  upon  the  facts  of  which  the  party 
C,  dealing  with  him  as  agent,  has  actual  or  constructive 
knowledge,  though  in  fact  there  may  be  no  actual  authority. 
C.  in  this  matter  must  be  held  to  a  knowledge  of  the  law 
and  of  facts  to  which  he  would  have  been  lead  by  the  exercise 
of  such  diligence  as  men  of  ordinary  prudence  display  under 
similar  circumstances,  and  to  correct  reasoning  upon  such 
facts. 

It  is  important  to  remember  that  no  authority,  actual  or 
inferred,  can  arise  except  by  law,  or  the  act  of  the  bank,  or  of 
a  superior  officer.  A.  himself  cannot,  by  any  mere  words  or 
acts  of  his  own,  create  or  enlarge  his  powers.  The  inference 
must  be  from  the  conduct  of  those  who  can  command  him, 
and  it  must  be  a  reasonable  inference  from  the  facts  fairly 
within  C.'s  reach.  For  example,  if  the  directors  order  the 
cashier  to  make  a  loan,  and  C.  has  no  notice  that  it  is  ultra 
vires  as  being  beyond  the  legal  limit,  his  inference  that  it  is 
with  authority  is  proper. 

(a)  If  A.  openly,  and  for  a  long  time,  does  certain  things 
without  special  authority,  and  there  is  no  objection  from  the 
directors,  C.  properly  infers  A.'s  authority ;  for  if  ^^^^^^  ^^  ^^^ 
the  directors  knew  of  A.'s  conduct  it  is  a  clear  case   tion  without 

objectiou. 

of  estoppel,  and  if  this  action  was  so  open  and  long 

1  §  97.   Holden  v.  Phelps,  135  Mass.  61. 

199 


§  98  OFFICERS    AND   AGENTS.  —  GENERAL   PRINCIPLES. 

continued  that  they  would  have  known  of  it  by  reasonal)Ie 
diligence,  the  bank  cannot  take  advantage  of  the  neglect  of 
its  agents  in  their  duty,  as  against  one  misled  and  injured 
thereby. 

(S)    If  the  directors  allow  A.  to  perform  the  duties  of  a 

given  office  for  a  length  of  time,  a  third  person,  C, 
pch.iinrnt       is  justified   in   inferring  his  regular  appointment 

and  autiiority  to  act  according  to  the  customs 
of  that  office,  and  the  same  principle  applies  to  the  directors 
themselves. 

0£5cers  de  Facto. 

The  bank  will  be  bound  by  the  acts,  within  the  scope  of  his 
apparent  agency,  of  any  one  who  is  its  officer  de  facto.  The 
bank  holds  him  out  as  its  officer,  and  as  having  the  right 
and  duty  to  perform  certain  functions ;  and  it  is  as  fully  re- 
sponsible as  if  this  right  and  duty  had  been,  in  every  stage 
of  its  growth,  perfect.  Such  facts  as  that  he  has  never  been 
regularly  or  formally  inducted  into  office,  that  all  the  requisites 
for  his  entry  upon  the  active  performance  of  its  duties  have 
not  been  complied  with,  —  even  that  originally  he  was  not 
legally  eligible  for  the  office,  —  will  not  suffice  to  free  the 
bank  from  its  liability  upon  the  acts  which  it  has  permitted 
him  to  do  in  its  behalf.  Thus,  directors  coming  into  office 
through  formalities  purporting  to  be  legal  and  sufficient,  are 
directors  de  facto,  and  if  their  election  was  actually  illegal,  they 
can  yet  only  be  ousted  by  writ  of  quo  warranto.  One  formally 
appointed  cashier  may  bind  the  bank  as  a  teller,  if  he  is  al- 
lowed as  a  matter  of  fact  to  perform  the  functions  of  a  teller. 
Neither  does  the  fact  that  one  appointed  to  an  office  fails  to 
take  the  oath,  or  to  file  the  bond,  which  may  be  prescribed  by 
statute  or  bj^-laws,  vitiate  or  invalidate  any  of  the  acts  done 
by  him  during  his  actual  incumbency. ^     In  the  cited  case  of 

1  §  98.  Bank  of  the  United  States  v.  Dandridge,  12  Wheat.  64  ;  Minor 
V.  Mechanics'  Bank  of  Alexandria,  1  Pet.  46 ;  Delaware  &  Hudson  Canal 
Co.  V.  Pennsylvania  Coal  Co.,  21  Penn.  St.  131 ;  Cooper  v.  Curtis,  30  ^le. 
488;  Smith  v.  Bank  of  the  State,  18  Ind.  327;  Baird  v.  Bank  of  Wash- 
ington.  11  Serg.  &  E.  (Pa.)  411.  See  §  40. 
200 


INFERRED    AUTHORITY.  §  98 

Baird  v.  Bank  of  Washington,  less  than  a  quorum  of  the  direct- 
ors elected  a  person  to  fill  a  vacancy  in  their  board.  The 
proceeding  was  of  course  irregular  and  illegal.  But  the  per- 
son so  chosen  appeared  at  a  subsequent  meeting  and  voted. 
His  presence  and  his  vote  were  necessary  to  make  a  majority 
in  the  quorum  then  present.  Nevertheless,  the  action  taken 
at  the  meeting,  and  only  taken  by  his  assistance,  was  sus- 
tained as  binding  the  bank,  on  the  ground  that  he  had  come 
in  under  color  of  title,  had  never  been  ousted,  and  so  was  a 
director  de  facto. 

An  assignment  executed  by  bank  officers  after  their  term 
had  expired,  under  authority  from  stockholders  granted  be- 
fore, held  valid  ;  the  charter  providing  that,  if  election  did 
not  take  place  on  the  proper  day,  the  corporation  should  not 
be  deemed  dissolved.  The  president  and  cashier  were  officers 
de  facto,  if  not  dejure^'* 

(c)  Whenever  A.  really  holds  an  office,  or  C.  properly  in- 
fers that  he  does,  the  powers  inherent  in  such  office  are,  in 
the  absence  of  notice  of  restriction,  properly  in-  inherent  pow- 
f erred  to  belong  to  A.  An  official  title  denotes  ^rs  inferred. 
certain  powers  and  duties,  and  the  officers  of  a  bank  are  held 
out  to  the  public  as  having  authority  to  act  according  to  the 
general  usage,  practice,  and  course  of  business  of  such  office 
in  such  institutions ;  and  their  acts  within  this  scope  bind  the 
bank  in  favor  of  third  persons  having  no  knowledge  that 
their  position  does  not  truly  represent  their  power.^ 

(c?)  This  matter,  being  of  much  importance,  will  be  ex- 
panded to  some  degree  in  order  fully  to  illustrate  the  opera- 
tion of  the  principle. 

Expansion.  —  Any  person  who  deals  innocently  with  the 
ao-ent  or  officer  of  a  corporation  within  the  scope  of  that 
agent's  or  officer's  functions  will  be  fully  protected,  and  will 
have  his  contract  enforced    by  the  law.     This   rule   accords 

i»  Milliken  v.  Steiner,  .56  Ga.  251. 

2  Minot  c.  Mechanics'  Bank  of  Alexandria,  1  Peters,  46,  70;  Fleckner 
V.  Bank  of  United  States,  3  Wheat.  360,  361 ;  Frankfort  Bank  v.  Johnson, 
24  :Me.  490;  Merchants'  Bank  v.  State  National  Bank,  10  Wall.  604;  Cooke 
V.  State  National  Bank,  52  N.  Y.  96. 

201 


§  98    OFFICERS  AND  AGENTS.  —  GENERAL  PRINCIPLES. 

SO  perfectly  with  both  law  and  justice  that  it  has  never  been 
directly  assaulted,  save  in  one  class  of  cases.  These  are 
where  the  agent,  acting  indeed  within  the  general  and  ordi- 
nary scope  of  the  agency,  is  yet  in  fact  contravening  some 
express  order,  or  exceeding  some  special  limitation  of  au- 
thority, imposed  upon  him  in  derogation  of  his  natural  and 
usual  power.  When  such  cases  have  arisen,  corporations 
have  sometimes  sought  to  avoid  responsibility  by  insisting 
that,  since  their  agent  had  exceeded  his  powers  he  had  not 
The  test  bound  his   principal.     In   such    cases   the   simple 

question.  qucstiou  is,  whcthcr  or  not  the  third  party  dealing 
with  the  agent  had  a  right  to  suppose  that  the  agent  was 
dealing  within  the  scope  of  his  authority.  If  the  ordinary 
functions  of  an  agent  are  well  known,  a  secret  limitation  of 
those  functions  will  not  be  allowed  to  operate  to  invalidate 
his  act  done  in  excess  of  the  secret  limitation,  but  within  the 
ordinary  scope.  The  secret  limitation  can  take  effect  only 
when  notice  of  it  is  directly  brought  home  to  the  third  party. 
Any  other  rule  would  open  wide  the  door  to  endless  deceit 
and  false  dealing.^  As  a  general  principle,  this  is  sufficiently 
clear  and  well  established.  But  in  the  case  of  banking  corpo- 
rations it  is  liable  to  confusion  from  the  uncertainty  attend- 
ant upon  the  knowledge  which  any  individual  has  of  the  real 
limits  of  the  powers  and  duties  of  any  particular  officer.  If 
a  statute  defined  accurately  the  acts  which  each  officer  should 
be  competent  to  perform,  this  difficulty  would  be  decreased. 
But  in  the  absence  of  such  enactments  every  board  of  direc- 
tors may  assume,  and  very  many  in  fact  do  assume,  to  define 
the  functions  of  the  respective  officers  according  to  their  own 
notions  of  propriety  in  such  matters.  Or  it  may  be  that  the 
board  will  conceive  it  preferable  to  attempt  no  such  definition, 
but  simply  to  appoint  one  person  to  be  "  cashier,"  another  to 
be  "  receiving  teller,"  another  to  be  "  paying  teller,"  and  so 
on  through  the  various  offices.  Now  in  either  of  these  cases 
it  is  natural,  indeed  it  is  necessary,  that  a  third  person  should 

8  IVIayall  v.   Boston  &  Maine  R.  R.  Co.,  19  N.  H.  122;  Farmers  & 
Mechanics'  Bank  v.  Champlain  Transportation  Co.,  23  Vt.  186;  Clarke 
National  Bank  v.  Bank  of  Albion,  52  Barb.  (X.  Y.)  592. 
202 


INHERENT   AUTHORITY.  §  98 

suppose  that  these  various  officers  are  empowered  to  perform 
the  duties  which  the  ordinary  usage  and  method  in  the  trans- 
action of  banking  business  leave  in  the  hands  of  such  officers. 
Upon. this  supposition  it  is  practically  necessary  that  the  pub- 
lic should  act  in  dealings  with  the  bank.     Certainly  the  sup- 
position is  sufficiently  vague.     The  basis  of  usage  on  which  it 
rests  is  little  more  stable  than  a  quicksand.     It  is  not  uni- 
form in  different  cities,  often  not  in  different  institutions  in 
the  same  city,  and  perhaps   is  not  permanent  in  the   same 
city  or  institutions  throughout  a  long  course  of  years.     Still, 
a  small  nucleus  of  certainty  has  grown  by  degrees  into  exist- 
ence amid  the  great  uncertainty.     The  word  "  cashier  "  means 
something ;   the  word  "  teller "  means  something.     This  is 
shown  very  conclusively  by  the  frequency  with  which  directo- 
rial boards  content  themselves  with  simply  installing  a  person 
in  one  or  other  of  these  offices  without  any  effort  to  name  the 
appurtenant  duties,  but  assuming  by  unavoidable  implication 
that  of  course  there  is  a  certain  well-known  range  of  powers 
and  duties  as  naturally  and  necessarily  constituting  the  office, 
and  as  publicly  known  and  understood  to  do  so,  as  if  they 
should  be  embodied  in  a  written  vote.     Courts  have  many 
times  recognized  the  same  fact,  and  have  decided  that  presi- 
dent, directors,  cashier,  and  teller  have  or  have  not   either 
exclusive  or  concurrent  powers  to  do  acts  of  the  nature  desig- 
nated in  the  particular  case.     For  example,  the  power  to  dis- 
count is  exclusive  in  directors,  as  such.     The  power  to  draw 
checks  is  in  the  cashier  by  virtue  of  his  office.     The  president 
qua  president  is  empowered  to  defend  suits  and  engage  counsel 
on  behalf  of  the  bank.     There  are  then  certain  classes  of  acts 
which  the  law  recognizes  as  properly  to  be  performed  by  certain 
officers.     These  classes  may  be  enlarged  by  future  decisions. 
The  only  absolute  limit  yet  established  is  when  judicial  dicta 
have  declared  some  special  power  7iot  to  be  inherent  in  some 
special  officer.     Starting  then  from  this  position,  that  there 
are  certain  powers,  only  a  portion  of  which  are  yet  known  by 
the  certain  knowledge  which  grows  out  of  a  judicial  ruling, 
which  belong  to  and  constitute  a  certain  office,  it  is  clearly 
reasonable  and  just  that  the  public,  and  any  individual  mera- 

203 


§  98  OFFICERS   AND   AGENTS.  —  GENERAL   PRINCIPLES. 

ber  thereof,  dealing  with  a  person  notoriously  filling  such  an 
office,  should  have  the  right  to  presume,  in  the  absence  of 
expi'css  notification  to  the  contrary,  that  such  person  has  such 
powers.  It  may  be  that  a  board  of  directors  could  by  vote 
declare  that  their  cashier  should  not  have  power  to  draw  a 
check.  But  if  they  still  allow  him  to  fill  the  office  of  cashier, 
as  to  all  third  parties  dealing  with  him  in  ignorance  of  this 
unusual  limitation,  he  must  still  be  allowed  to  bind  the  bank 
by  the  exercise  of  this  customarily  inherent  authority.  That 
he  has  exceeded  the  scope  of  his  agency  may  be  urged  by  the 
bank  against  him  personally,  and  may  be  an  abstract  truth  ; 
but  it  is  one  which  public  policy  will  never  allow  the  bank  to 
set  up  against  the  claim  of  a  third  party  who  dealt  in  igno- 
rance of  this  peculiar  and  extraordinary  limitation.  If  there- 
fore the  corporation,  or  any  authority  within  and  on  behalf  of 
the  corporation,  undertake  to  set  strange  limits  to  the  powers 
which  it  will  allow  to  be  exercised  by  its  officers,  it  must  either 
refrain  from  giving  to  these  officers  the  titles  usually  regarded 
as  indicative  of  such  powers,  and  for  that  reason  equivalent 
to  a  general  holding  out  of  them  to  the  world  as  possessing 
such  powers,  or  it  must  bring  home  to  persons  dealing  with 
them  a  knowledge  of  the  limitations  it  has  seen  fit  to  draw 
round  the  offices.  Otherwise  the  corporation  will  be  bound 
by  acts  of  its  president  within  the  scope  of  the  ordinary  and 
legally  inherent  duties  and  powers  of  a  president;  by  acts 
of  its  cashier  within  the  scope  of  the  ordinary  and  legally 
inherent  duties  and  powers  of  a  cashier  ;  and  so  on,  through 
the  whole  range  of  offices. 

(e)  Obviously  the  names  and  titles  by  which  the  various 
agents  are  denominated  are  intended  to  designate,  and  must 
An  official         \)q  presumed  to  designate,  the  nature  and  scope  of 

notes  cer-  their  respective  agencies.     If  a  banking  corpora- 

tain  powers  .  .  .,..,,         .  ,         1  •   1    • 

which,  in  tiou  givcs  to  an  mdividual  a  title  which  in  ordinary 

the  absence  t        ^  •  ^  •        i  j       i      t  i  i_    '  c 

of  notice  to  banking  parlance  is  attached  to  a  certain  range  or 
bincUhe'^^'^"^'  powcrs  and  duties,  it  cannot  afterwards  be  heard 
banic  as  to         f;o  sav  that  the  secret  instructions  of  the  corporate 

third  par-  '  ' 

ties.  government,  or  the  peculiar  by-laws  adopted  by  it, 

have  deprived  the  officer  of  these  powers  and  duties,  or  any 
204 


INHERENT   AUTHORITY.  §  98 

of  tliem.  One  dealing  with  tlie  officer  of  a  bank,  within  the 
ordinary  and  legal  scope  of  such  an  officer's  authority,  is  enti- 
tled in  justice  and  at  law  to  assume  as  against  the  bank  that 
the  officer  is  invested  with  this  customary  authority. 

Neither  does  it  make  any  difference  in  this  respect  that 
the  charter,  or  the  statute  under  which  the  corporation  exists, 
gives  to  the  board  of  directors  power  to  settle  the  respective 
functions  of  the  subordinate  officers.  Our  National  Bankina: 
Act  *  empowers  the  directors  to  "  appoint  a  president,  vice- 
president,  cashier,  and  other  officers,  define  their  duties,^'  &g.  ; 
also  "  to  define  and  regulate  by  by-laws  .  .  .  the  manner  in 
which  ...  its  officers  [shall  be]  appointed,  its  property  trans- 
ferred, its  general  business  conducted,  and  all  the  privileges 
granted  by  this  act  to  associations  organized  under  it  shall  be 
exercised  and  enjoyed."  Occasionally,  in  other  enactments, 
the  expression  "  to  define  and  limit"  duties  has  been  used. 
But,  after  all,  these  phrases  probably  give  to  the  directors  no 
power  over  their  officers  which  they  would  not  be  allowed  to 
exercise  by  virtue  of  their  common  law  authority.^  The  di- 
rectors are  the  government  of  the  bank,  and  must  have  power 
to  direct  and  control  the  acts  and  doings  of  the  other  and 
subordinate  agents.  But  whether  at  common  law  or  under 
such  statutory  enactments  they  seek  to  curtail  the  ordinary 
powers  of  any  of  their  officers,  their  action  in  so  doing  can 
only  be  valid  as  between  the  officer  and  the  bank.  If  the 
officer  does  what  they  have  expressly  forbidden  him  to  do, 
though  it  be  an  act  ordinarily  within  the  range  of  his  func- 
tions, he  will  be  liable  only  to  the  corporation  for  the  results 
of  his  disobedience.  The  directors  unquestionably  have  the 
power,  as  against  him,  to  "  define  "  his  duties  generally,  or  to 
"regulate"  or  "limit"  them  upon  any  particular  occasion, 
and  in  any  particular  matter.  They  may  also  have  the  same 
power  as  towards  any  individuals  among  the  public,  or  even  as 
towards  the  entire  public.  But  it  is  an  absolutely  indispensa- 
ble preliminary  to  the  exercise  of  the  power  in  this  direction 

*  Stat.  1863-64,  chap.  106,  §  8. 

6  Merchants'  Bank  v.  State  Bank,  10  Wall.  604. 

205 


§  98         OFFICERS   AND   AGENTS.  —  GENERAL   PRINCIPLES. 

that  the  individuals  or  the  public  should  receive  actual  notice 
of  the  fact. 

The  judicial  authorities  seem  fully  to  sustain  the  pro- 
pounded doctrine.  The  matter  is  one  of  sufficient  importance 
to  justify  the  quotation  of  the  more  conclusive  passages.  The 
New  York  Court  of  Appeals  says :  "  The  whole  tenor  of  au- 
thority is  in  favor  of  holding  corporations  for  the  acts  of  their 
officers,  especially  executive  officers  and  general  agents,  within 
the  general  scope  and  apparent  sphere  of  their  duties,  and  not 
holding  them  for  acts  done  without  special  authority  in  cases 
without  such  scope  and  general  sphere  of  duty.  The  cases 
are  all  reconcilable  and  sustainable  on  this  principle,  and  no 
other.  Courts  and  judges  have  spoken  cautiously  on  the  sub- 
ject, but  the  language  has  been  uniform,  limiting  the  responsi- 
bility of  corporations  for  the  acts  of  their  officers  and  agents, 
in  the  absence  of  an  express  authority  to  do  the  particular  act, 
to  those  performed  in  the  discharge  of  their  ordinary  duties  in. 
the  usual  course  of  business,  and  within  the  sphere  and  scope 
of  such  duties.  Such  are  presumed  to  be  by  authority  of,  and 
within  the  knowledge  of,  the  directors  ;  and  within  the  rule 
are  included  such  acts  as  are  shown  to  have  been  performed 
with  the  knowledge  and  implied  consent  of  the  directors, 
although  out  of  the  line  of  ordinary  duty  and  usual  course  of 
business.  ...  It  must  be  assumed,  therefore,  and  the  public 
and  those  dealing  or  having  business  transactions  with  the 
bank  had  the  right  to  assume,  that  they  [the  officers  of  the 
bank]  had  and  exercised  the  powers  and  performed  the  duties 
usually  devolved  upon  and  performed  by  persons  occupying 
the  same  positions  in  other  banks,  and  such  as  they  were  in 
the  habit  of  performing  m  the  transaction  of  the  current 
and  ordinary  business  of  the  bank  ;  and  within  tliis  limit  the 
corporation  would  be  bound  by  their  acts,  in  the  absence  of 
proof  that  their  powers  were  limited  or  restricted,  and  that 
such  restriction  or  limitation  was  known  to  the  persons  deal- 
ing with  tliem.  Whatever  may  be  the  extraordinary  or  inci- 
dental powers  of  the  corporation  under  its  charter,  power  to 
bind  the  corporation  can  only  be  presumed  to  exist  in  its 
executive  agents  and  officers  within  the  scope  of  its  ordinary 
206 


INHERENT   AUTHORITY.  §  98 

business  and  their  ordinary  duties."  ^  In  Minor  v.  Mechanics' 
Bank  of  Alexandria,^  the  court  say :  "  Officers  of  a  bank,  as 
of  any  other  corporation,  are  hekl  out  to  the  public  as  having 
authority  to  act  according  to  the  general  usage,  practice,  and 
course  of  their  business.  Their  acts  within  the  scope  of  such 
authority  will  generally  bind  the  bank  in  favor  of  third  per- 
sons possessing  no  other  knowledge."  In  The  Bank  of  Ver- 
gennes  v.  Warren,^  discussing  the  legality  of  an  act,  which  the 
court  held  to  fall  within  the  scope  of  the  cashier's  power, 
qua  "  cashier,"  the  judge  said,  "  Indeed  I  think  it  would  not 
defeat  the  purchase  if  it  could  be  shown  that  the  cashier  had 
been  forbidden  by  the  principals  to  transact  such  business." 
In  Commercial  Bank  of  Buffalo  v.  Kortright,^  the  court  ap- 
plies to  banks  and  their  officers  the  general  rule  of  agency,  as 
laid  down  in  Story  on  Agency,  §§  127,  133,  that  the  principal 
is  bound  by  acts  wliich  he  holds  out  his  agent  as  competent 
to  perform,  despite  that  they  may  contravene  secret  instruc- 
tions or  orders.  Unquestionably  any  person  invested  with  the 
familiar  title  of  an  official  position  in  a  bank  is  held  out  to 
the  public  as  competent  to  perform  all  the  usual  and  inherent 
or  essential  functions  of  the  office.  In  Wild  v.  Bank  of  Passa- 
maquoddy,!*^  it  was  said,  that  any  bank  choosing  to  restrict  the 
ordinary  scope  of  its  cashier's  authority  is  at  perfect  liberty  to 
do  so  ;  but  that,  in  such  case,  it  is  incumbent  on  the  bank  to 
show,  not  only  the  fact  that  it  has  imposed  a  certain  restric- 
tion, but,  further,  that  the  imposition  of  this  restriction,  being 
of  a  peculiar  and  unwonted  kind,  is  known  to  those  with  whom 
it  is  in  the  habit  of  doing  business.  In  Franklin  Bank  v. 
Steward,!!  it  was  said  that  the  cashier's  "  true  position  appears 
to  be  that  of  a  general  agent  for  the  performance  of  his  offi- 
cial and  accustomed  duties.  While  acting  within  the  scope 
of  this  authority,  he  would  bind  the  bank,  although  he  might 
violate  his  private  instructions." 

(/)  The  case  of  Lloyd  v.  West  Branch  Bank  ^^  is  perhaps 

•  First  National  Bank  v.  Ocean  National  Bank,  60  N.  Y.  278. 
7  1  Pet.  46.  8  7  HiU  (N.  Y.),  91. 

9  22  Wend.  (N.  Y.)  3i8.  lo  3  Mason,  505. 

"  37  Me.  519.  ^^  15  pgnn.  St.  172. 

207 


§  98  OFFICERS    AND    AGENTS.  —  GENERAL    PRINCIPLES. 

even  stronger  than  any  of  the  others.  For  though  the  judge 
in  that  cause  is  considering,  not  the  case  of  a  cir- 
tioii  of  char-  cumscribiug  vote  of  a  directorial  board,  but  the 
the  bank."  actual  charter  of  the  bank  itself,  he  does  not  hesi- 
rires^'l'{8d  a,  tatc  to  apply  the  same  principle.  The  decision  is 
'^^^'  rather  striking  by  reason  of  the  vigor  and  oddity  of 

its  expression,  but  it  is  certainly  sound.  It  is,  briefly,  to  the 
effect  that  recognized  and  known  functionaries,  especially  the 
officers  of  a  hank,  are  held  out  to  the  world  as  having  authority 
to  act  according  to  the  geyieral  usage,  practice,  and  custom  of 
the  business  in  such  institutvms.  Otherwise  there  could  be 
no  safety  for  the  public  in  doing  business  with  them.  Their 
charters  differ  in  some  respects,  and  individuals  cannot  be 
presumed  to  "  carry  these  documents  in  their  pockets  as  a  vade 
mecumT  The  acts  of  officers,  therefore,  in  the  scope  of  such 
general  usage,  practice,  and  course  of  business,  bind  the  cor- 
poration in  favor  of  third  persons  who  did  not  know  at  the 
time  that  the  officer  was  exceeding  the  course  of  his  authority. 
In  the  Commercial  Mutual  Marine  Ins.  Co.  v.  Union  Mutual 
Ins.  Co. ,^3  —  which,  though  not  a  bank  case,  yet  covers  the 
point  now  in  discussion  with  great  thoroughness  and  accu- 
racy, —  a  contract  made  by  the  president  in  contravention  of 
secret  limitations  w^as  upheld.  The  court  declared  that,  in 
order  to  show  that  the  corporation  held  out  their  officer  as 
competent  to  make  such  a  contract,  it  was  sufficient  evidence 
to  show  a  usage  among  such  companies  to  make  such  contracts 
through  such  officer.  In  Neiffer  v.  Bank  of  Knoxvillc,i*  a  con- 
tract, made  not  in  accordance  with  the  provisions  of  the  char- 
ter, was  nevertheless  upheld  on  the  ground  that  customarily 
such  a  contract  could  have  been  made  by  the  officer  who  had 
in  this  case  irregularly  undertaken  to  make  it ;  and  that  there- 
fore it  should  be  enforced  in  favor  of  the  third  party  who  had 
entered  into  it  in  good  faith  and  in  ignorance  of  the  charter 
restriction.     But  see  pp.  202,  208,  and  §  722. 

The  cases,  it  will  be  observed,  relate  especially  to  the  acts 
of  cashiers,  —  a  circumstance  fully  explained  by  the  fact  that 

"  19  How.  318.  ■**  1  Head  (Teun.),  162. 

208 


INHERENT    AUTHORITY.  §  98 

the  cashier  is  the  chief  executive  officer,  and  that  naturally  his 
acts  are  more  often  the  subject  of  controversy  than  those  of 
other  officials.  But  the  general  principle  which  runs  through 
the  decisions  is  equally  applicable  to  a  president,  teller,  or 
other  agent  whomsoever. 

(cf)   None  of  the  above  cases  deny  or  infringe   the  statu- 
tory right  of  defining,  restricting,  or  limiting  official   ^^^  ^^^^^ 
powers.     On  the  contrary,  nearly  all  of   them  in   may  restrict 

,..,  •,!  f.iT.  or  enlarge 

terms  distnictly  recognize  the  power  oi  tfie  directo-  officer's 
rial  board,  or  the  government  of  the  corporation,  P"^^®""^* 
to  prescribe,  either  with  the  effect  of  enlargement  or  circum- 
scription, the  functions  of  any  officer.  They  only  superadd  to 
this  right  (making  no  distinction,  as  we  have  above  pointed 
out,  whether  it  owes  its  existence  to  common  law,  charter,  or 
general  statute)  the  duty  of  bringing  home  knowledge  of  their 
action  to  the  individual  dealing  with  the  officer,  whenever, 
in  the  absence  of  such  knowledge,  he  would  naturally  be  de- 
ceived and  injured  by  relying  simply  upon  the  usual  course 
and  usage  of  banking  business.  Since  the  power  to  define  and 
limit  does  exist,  it  must  be  supposed  to  have  some  value,  and 
the  language  of  the  statute  must  be  allowed  to  describe  some 
substantial  privilege.  The  power  is  indeed  valuable,  and  the 
privilege  substantial,  and  no  definite  limit  can  be  set  to  either, 
provided  only  that  the  one  requisition  is  complied  with  of  giv- 
ing due  and  sufficient  notice  of  its  exercise  in  any  instance. 
It  must  then  necessarily  affect  and  bind  the  party  notified. 

(A)  Two  English  cases  well  illustrate  this  rule.  A  cashier 
indorsed  negotiable  paper,  which  ordinarily  he  would  have 
been  empowered  to  do  by  the  inherent  authority  of  jj  ^  ^^^  ^^_ 
his  office.     But  he  preceded  this  indorsement  by  the  tice  the  agent 

■■■  _  "^  IS  not  actnig 

words  "«er  proc^     He  was  in  fact  acting  under  a  within  iiis  in- 

,      ,  hcrcnt  power, 

peculiar  and  special  authority,  distinct  from  that  ic  he  is  put  to 
ordinarily  vested  in  him  by  his  office ;  and  these  ^'^  "iqu'ry. 
words  were  intended  to  notify  the  dealer  of  this  circumstance, 
and  were  words  customarily  having  this  warning  or  admoni- 
tory significance.  The  court  held  that  the  notice  that  the 
authority  was  special  and  peculiar,  and  therefore  wholly  dis- 
tinct from  that  appurtenant  to  the  cashier  as  such,  was  suffi- 
voL.  I.  — U  209 


§  08  OFFICERS    AND    AGENTS.  —  GENERAL    PRINCIPLES. 

cient.^^  In  fact,  the  cashier,  though  doing  an  ordinary  act,  was 
not  doing  it  under  his  general  official  authority,  but  under  an 
independent  and  unwonted  delegation  of  power.  The  words 
prefixed  were,  by  their  well-known  meaning,  equivalent  to  a 
direct  statement  to  this  effect  to  the  dealer,  who  was  then  and 
thereby  put  upon  his  inquiry  if  he  wished  to  ascertain  pre- 
cisely the  nature  and  extent  of  the  special  authority.  If  he 
did  not  care  to  be  at  the  pains  of  satisfying  himself  on  this 
point,  but  relied  on  his  opinion  of  the  cashier's  character,  or 
simply  yielded  to  indolence  or  carelessness,  any  resulting  loss 
must  properly  fall  wholly  on  him.  He  had  received  a  full 
and  sufficient  warning  that  the  cashier  was  not  in  this  matter 
authorized  to  deal  with  him  by  virtue  and  in  the  exercise  of 
his  customary  official  authority,  and  he  could  not  afterward 
be  allowed  to  appeal  to  that  customary  official  authority  to 
support  the  regularity  and  validity  of  an  act  which  he  was 
distinctly  notified  at  the  time  was  not  done  under  it. 

(i)  The  authority  implied  from  a  public  holding  out,  tacit 
acquiescence,  or  usage  and  ordinary  course  of  dealing,  can 
never  go  beyond  the  power  which  the  bank  could  legally  confer 
on  the  officer  w??fZer  the  circumstances  of  vjhich  C.has  notice; 
i.  e.  if,  as  a  matter  of  law  on  the  facts  within  C.'s  reasonable 
reach,  the  act  is  one  for  which  previous  authority  could  not 
have  been  given  by  that  power  whose  conduct  is  the  basis  of 
inference  in  the  matter,  then  C.  has  no  right  to  infer  authority 
from  the  facts  named.  They  only  suffice  to  confer  upon  the 
officer  yws^  as  much  authority  in  the  premises  as  he  could  have 
derived  from  an  empowering  resolution  of  the  board  of  direct- 
ors, or  of  the  corporate  body.  Whatever  limitation  there  is, 
if  any,  upon  the  functions  which  the  government  of  the  corpo- 
ration can  by  their  direct  vote  enable  him  to  assume,  that  same 
limitation  equally  curtails  the  functions  which  usage,  acquies- 
cence, or  public  holding  out  will  enable  him  legally  to  exercise 
on  behalf  of  the  bank.  If  any  official  undertakes  to  exercise 
any  authority  with  which  the  corporate  government  have  no 
legal  right  to  invest  him,  he  does  not  in  its  exercise  bind  or 

15  Alexander  v.  MacKenzie,  6  C.  B.  766  ;  Stagg  v.  Elliott,  12  C.  B.  n.  s. 
373;  8.  c.  31  L.J.  C.  P.  260. 
210 


INHERENT   AUTHORITY.  §  98 

affect  the  bank,  no  matter  how  old,  how  well  known,  or  how 
frequent  has  been  the  previous  practice. 

Yet  it  must  be  kept  in  mind  that  though  executory  contracts 
heyond  authority  will  not  be  enforced,  yet,  if  partly  executed, 
they  may  be.     (See  Firsts  above.) 

In  Minor  v.  Mechanics'  Bank  of  Alcxandria,^^  it  was  said 
that  the  power  by  implication  would  be  held  good,  provided  it 
were  one  which  could  be  conferred  by  a  written  vote  of  the 
board  of  directors.  Circumstances  may  be  shown,  among 
which  are  especially  usage  and  holding  out,  which  dispense 
with  proof  of  the  vote,  and  either  estop  the  corporation  to 
deny  it  or  make  its  supposed  existence  a  conclusive  presump- 
tion of  law.  But  this  does  not  affect  the  imperative  requisition 
that  such  a  vote,  if  it  ever  had  been  passed,  should  have  been 
legal  and  valid,  and  within  the  powers  of  the  board.  Since 
no  one  can  allege  ignorance  of  the  law,  persons  dealing  with 
the  bank  are  held  to  know  those  limits  which  surround  the 
possible  powers  of  each  particular  officer,  and  which  can  be 
extended  by  no  process  whatsoever,  be  it  by  the  most  perfect 
of  usages  or  by  the  most  formal  of  votes.  If  one  deals  with 
an  officer  beyond  these  described  limits,  there  is  nothing 
which  he  can  prove  which  will  protect  him.  If  it  is  matter 
of  law  that  a  certain  function  or  act  falls  exclusively  or  inalien- 
ably within  the  range  of  the  powers  and  duties  of  one  officer, 
no  state  of  affairs  can  cause  the  performance  of  that  function 
or  act  by  another  officer  to  affect  or  bind  the  bank.  There 
are  such  exclusive  and  inalienable  functions  in  the  various 
officers,  as  will  be  seen  hereafter  ;  and  it  behooves  the  public 
to  become  acquainted  with  them,  since  usurpation  by  bank 
officers  of  each  other's  functions,  though  often  innocently 
done  through  ignorance  and  mistake,  is  not  uncommon,  and 
frequently,  by  force  of  the  above  doctrine,  works  a  mischief 
to  the  customer  which  the  law  is  impotent  to  cure.  The  case 
of  the  Farmers  and  Mechanics'  Bank  v.  Butchers  and  Drovers' 
Bank  ^^  furnishes  a  good  example  in  this  matter.     Selden,  J., 

16  1  Pet.  46. 

"  16  N.  Y.  125.  To  the  same  effect  is  ^Mussey  v.  Eagle  Bank,  9  Met. 
(Mass.)  306.     See  also  Salem  Bank  v.  Gloucester  Bank,  17  Mass.  1. 

211 


§  98  OFFICERS    AND    AGENTS.  —  GENERAL   PRINCIPLES. 

delivering  the  opinion,  said  that,  though  a  custom  for  a  cashier 
or  a  teller  to  certify  a  check  might  be  perfectly  good,  yet  it 
was  subject  to  the  limitation  that  it  could  only  be  good  where 
the  drawer  had  funds  in  the  bank.  In  the  case  under  con- 
sideration the  drawer  had  not  funds,  and  the  holder  was  aware 
that  he  had  not.  The  legal  limitation  of  the  power  of  certi- 
fying, which  rendered  certification  under  these  circumstances 
invalid,  was  a  rule  of  law  of  which  the  holder  of  the  check 
could  not  be  heard  to  declare  himself  ignorant.  It  was  an 
absolute  rule  of  law,  and  the  holder  must  be  held  to  know  that 
it  was  such,  and  that  nothing  could  dispense  with  its  operation. 
Knowing  the  fact  of  the  deficiency  of  the  drawer's  assets,  which 
brought  that  principle  of  law  into  operation,  he  ought  also  to 
have  known  that  as  an  unavoidable  consequence  the  certifying 
officer  was  exceeding  the  possible  limits  of  his  authority.  The 
loss,  therefore,  must  rest  upon  him  for  having  accepted  a  cer- 
tification which  the  law  would  conclusively  presume  that  he 
knew  to  be  invalid. 

(y)  An  interesting  case  on  the  subject  of  authority  has 
been  decided  in  the  Court  of  Appeals  of  New  York.  It  has 
been  laid  down  that  an  officer  may  conclude  the  bank  by  an 
act  obviously  pertaining,  by  strict  right,  to  quite  a  different 
functionary.  A  customer  of  the  bank,  having  overdrawn  his 
bank  account,  went  to  the  bank  and  paid  in  somewhat  more 
than  enough  to  cover  the  deficiency,  handing  the  money  over 
the  counter  to  the  paying  teller.  Tlie  court  held  that  this 
constituted  a  sufficient  payment  to  the  bank.  It  did  not  ap- 
pear whether  or  not  the  receiving  teller  was  in  the  bank  at 
the  time,  and  it  did  appear  that  an  entry  to  the  credit  of  the 
customer  was  made  on  the  books  of  the  bank  for  the  amount 
paid  in  to  the  paying  teller.  But  these  facts  do  not  seem  to 
have  been  regarded  as  indispensable  for  furnishing  a  founda- 
tion for  the  decision  of  the  court.  The  breadth  of  the  ruling 
will  appear  from  this  quotation :  "  When  one  goes  into  a  bank 
and  finds  behind  the  counter  one  of  its  officers  employed  in  its 
business,  and  upon  his  demand  pays  a  debt  due  tlie  bank  in 
good  faith,  without  any  knowledge  that  the  officer's  authority 
is  so  limited  that  he  has  no  right  to  receive  it,  he  must  be 
212 


AUTHORITY   OF   OFFICER.  §  98 

protected,  and  the  bank  must  be  bound  by  the  payment."  If 
one  were  inclined  to  question  or  criticise  this  dictum,  it  might 
be  fair  to  say  that  a  person  who  undertakes  to  pay  his  debt  to 
the  bank  to  a  person  whom  he  knows  to  be  the  "  paying  "  teller 
cannot  be  said  to  make  his  payment  "  without  any  knowl- 
edge that  the  officer's  authority  is  so  limited  that  he  has  no 
right  to  receive  it "  ;  —  more  especially  since  in  this  case  the 
customer  knew  not  only  that  there  was  a  cashier,  but  also  that 
there  was  a  receiving  teller.  The  paying  teller  had  written 
to  the  customer  on  the  matter  of  the  overdraft,  asking  him  to 
adjust  the  overpayment,  and  as  there  was  no  evidence  that 
the  receiving  teller  was  present,  but  it  was  shown  that  in  his 
absence  the  other  officers  acted  in  his  place,  it  may  be  pre- 
sumed that  together  with  the  presumption  of  regularity  these 
facts  made  out  a  case  of  substitution  in  the  mind  of  the  court, 
and  at  any  rate  the  ruling  must  be  confined  to  the  facts. 

It  is  in  general  held  that,  when  C.  pays  money  to  an  officer 
to  whom  its  reception  does  not  belong,  such  officer  is  the 
agent  of  C.  to  bring  the  money  to  the  possession  of  the  bank 
by  delivery  to  the  proper  officer.^^  But  a  misstatement  by  an 
officer  as  to  the  proper  designation  of  his  office  cannot  pre- 
judice the  rights  of  third  parties,  dealing  with  the  bank.^^" 

Upon  the  same  principle,  it  has  also  been  held  that  to  make 
a  subscriber's  payment  of  his  subscription  money  for  capital 
stock  a  sufficient  payment  and  binding  upon  the  bank,  it  must 
have  been  made  to  an  officer  authorized  to  receive  it.^'^  So 
where  the  bank  has  a  receiving  teller,  whose  proper  province 
it  is  to  receive  deposits,  the  bank  is  not  liable  to  reimburse  a 
depositor  who  has  handed  in  his  funds  to  the  bookkeeper,  if 
it  happens,  that,  after  their  receipt  by  that  improper  and  unau- 
thorized officer,  they  are  lost  or  embezzled  before  they  come  to 
the  hands  and  possession  of  some  one  whose  special  function 
it  is  to  receive  or  to  keep  them.^^     On  the  other  hand,  the  bank 

18  East  River  National  Bank  v.  Gove,  57  N.  Y.  597  ;  Manhattan  Co.  v. 
Lydig,  4  Johns.  (N.  Y.)  377. 

"«  Bickley  v.  Bank,  43  S.  C.  528  (21  S.  E.  886),  (1894). 
"  State  V.  Commercial  Bank,  6  Sm.  &  M.  (Miss.)  218. 
2«  Manhattan  Co.  v.  Lydig,  4  Johns.  (N.  Y.)  377  ;  Thatcher  v.  Bank  of 

213 


§  98  OFFICERS   AND    AGENTS. —  GENERAL   PRINCIPLES. 

has  been  held  liable  to  reimburse  in  a  case  where  its  manager 
had  succeeded  in  obtaining  and  misappropriating  the  money 
of  a  customer,  inasmuch  as  in  the  conduct  of  the  transaction 
the  officer  had  done  no  act  which  was  not  strictly  within  the 
scope  of  his  legal  functions,  and  had  induced  the  customer  to 
believe  that  he  was  acting  simply  in  the  regular  and  ordinary 
course  of  the  business  of  the  banking-house.^^  We  see,  there- 
fore, that,  in  general,  no  act  binds  the  bank  unless  done  by 
the  officer  actually  empowered, ^^^  or  whom  the  customer  has  a 
right  to  believe  empowered,  to  do  it ;  and  that  every  act  done 
by  an  officer  within  this  scope  will  bind  the  bank.  The  rule 
will  hold  good  even  though  the  act  is  in  fact  fraudulent, 
provided  the  customer  has  no  knowledge  of  the  fraud,  but  is 
himself  dealing  bona  fide,  and  believes  the  official  to  be  deal- 
ing in  the  like  good  faith  in  the  business  of  his  principals. 

(/;)  If  an  officer  is  acting,  speaking,  or  receiving  infor- 
mation in  matters  which  the  ordinary  usage  of  the  banking 
Eepresenta-  busiucss  casts  withiu  the  range  of  his  functions,  the 
Notice.  bank  is  bound  and  affected  thereby,  as  any  other 

principal,  by  the  act,  declaration,  or  knowledge  of  the  agent.^^ 
No  corporate  vote  is  necessary  to  give  validity  to  a  contract 
made  by  an  agent  in  a  matter  concerning  which  he  has,  from 
any  source,  the  power  to  contract.^^  But  no  officer  can  bind 
or  affect  the  bank  by  any  dealing  in  the  department  allotted 
to  another  officer.     The  bank,  in  appointing  various  officers, 

State  of  Xew  York,  5  Sandf.  (N.  Y.)  121.  Though  a  Later  case  seems, 
in  spite  of  the  effort  of  the  court  to  draw  a  distinction,  to  establish  a  con- 
trary rule  :  East  River  National  Bank  ?».  Gove,  57  N.  Y.  597. 

21  Thompson  v.  Bell,  26  Eng.  L.  &  Eq.  5?.6. 

21"  A  national  bank  examiner  is  not  an  officer  or  agent  of  the  bank  and 
has  no  authority,  as  such,  to  act  for  a  bank,  and  cannot  bind  it  by  any 
act  done  in  its  behalf.     Witters  v.  Sowles,  32  Fed.  762. 

2'^  Wyman  v.  Hallowell  &  Augusta  Bank,  14  Mass.  58  ;  Salem  Bank  v. 
Gloucester  Bank,  17  id.  1;  Hooker?;.  Eagle  Bank,  30  N.  Y.  83;  New 
Hampshire  Savings  Bank  v.  Downing,  16  N.  H.  187.  Second  National 
Bank  r.  Howe  40  Minn.  390  (42  N.  W.  200). 

2^  Eastman  v.  Coos.  Bank,  N.  H.  123  ;  Lime  Rock  Bank  v.  Macomber, 
29  Me.  564.     North  Brookfield  Savings  Bank  v,  Flanders,  161  Mass. 
335  (37  N.  E.  307)  1894. 
214 


AUTHORITY   INFERRED    FROM    APPARENT    ACQUIESCENCE.       §  98 

is  simply  creating  various  perfectly  distinct  and  independent 
agencies.  Each  agent  can  act  only  in  his  own  agency .^^  In 
like  manner,  demand  or  notice  can  affect  the  bank  only  if  it 
be  made  upon  or  given  to  the  officer  having  charge  of  the 
subject  matter  which  the  notice  concerns.  If  it  be  given  to 
one  within  whose  sphere  the  business  in  question  does  not 
fall,  the  bank  is  not  chargeable  with  it ;  neither  is  it  answer- 
able for  negligence  if  it  fails  to  act  upon  it.^*  For  example,  the 
bookkeeper  of  a  bank  has  nothing  to  do  with  its  litigation, 
and  notices  in  a  lawsuit  served  upon  him  would  not  ordinarily 
be  valid  as  notices  served  upon  the  corporation.  So  it  has 
been  held,  that  knowledge  on  the  part  of  a  clerk  in  a  bank  of 
the  residence  of  an  indorser  on  a  note  would  not  prevent  the 
holder  of  the  note  from  asserting  and  availing  himself  of  the 
ignorance  of  this  fact  on  the  part  of  those  officers  of  the  bank 
having  charge  of  this  department.  Their  ignorance  was  the 
ignorance  of  the  corporation  ;  but  the  knowledge  of  the  clerk 
"was  not  the  knowledge  of  the  corporation.^^ 

(Z)    A  very  simple   and  unquestionable  method   of   hold- 
ing out  is  by  allowing  an  officer  repeatedly  to  perform  any 
specific  act,  and  recognizing  his  performance  as    Hoidino'out 
proper  and  valid.      Long  usage  implies  authority    i^rysase 

^      I  o  o  X  J      without  ob- 

equally  with  an  express  resolution.^^     It  has  been    jection. 
said  that  a  corporation   is  not  bound  by  any  act  of  its  agent 
simply  because  it  has  been  his  previous  practice  to  do  similar 
acts,  unless  knowledge  of  this  previous  practice  is  brought 

23a  Where  an  attorney,  acting  for  a  bank  which  has  received  from  a 
dehtor  conveyances  of  cattle  encumbered  by  other  debts,  is  sent  to  the 
cattle  range  to  collect  and  receive  the  cattle,  he  is  not  authorized  to 
promise  to  pay  certain  liens  on  the  cattle.  Panhandle  l^ational  Bank  v. 
Emery,  78  Tex.  498  (15  S.  W.  23)  1890. 

2^  Goodloe  V.  Godley,  13  S.  &  M.  (Miss.)  233;  Commercial  Bank  of 
Manchester  v.  Bonner,  id.  649. 

25  Goodloe  V.  Godley,  13  S.  &  M.  (Miss.)  233. 

2«  Hoyt  V.  Thompson,  1  Selden  (N.  Y,),  320;  Elwell  v.  Dodge,  33  Barb. 
(N.  Y.)  336;  Lloyd  v.  West  Branch  Bank,  15  Penn.  St.  172;  Lohman  v. 
N.  Y.  &  Erie  R.  R.  Co.,  2  Sandf.  Super  (N.  Y.)  30;  Northern  Central 
Railway  Co.  v.  Bastian,  15  Md.  494;  Dougherty  v.  Hunter,  54  Pena, 
St.  380. 

215 


§  98  OFFICERS   AND    AGENTS.  —  GENERAL   PRINCIPLES. 

home  to  the  corporate  government.^'^  As  a  broad  statement 
in  technical  terms  of  a  legal  doctrine,  this  is  unobjectionable 
enough.  But  it  should  be  understood  that  the  knowledge  may 
be  such  as  arises  or  is  implied  by  imperative  implication  of 
law,  as  well  as  knowledge  which  exists  in  fact.  The  directo- 
rial board  of  a  bank,  which  is  its  corporate  government,  and 
which  for  most  legal  considerations  is  in  fact  the  corporation 
itself,  is  obliged  to  meet  frequently,  and  to  keep  a  close  and 
constant  supervision  over  the  daily  course  and  conduct  of  its 
business.  In  many  species  of  corporations  the  position  of 
dii'ector  is  almost  a  sinecure ;  the  board  constitutes  only  a 
sort  of  advisory  body,  which  may  meet  only  on  comparatively 
infrequent  occasions,  to  discuss  large  and  important  ques- 
tions concerning  the  general  business  policy  of  the  corporation. 
But  it  is  not  thus  with  banks.  Their  directors  are  bound  to 
constant  activity  and  thorough  acquaintance  with  the  daily 
course  of  the  affairs  and  dealings  of  the  institution.  It  is  their 
duty  to  make  this  acquaintance  so  thorough  that  no  officer 
can  continue  long  and  consistently  to  usurp  a  function  of  any 
degree  of  importance  whatsoever  without  their  knowledge. 
Unquestionably  the  public  has  a  right  to  suppose  that  this 
board,  which  probably  meets  once  or  oftener  in  a  week  with 
the  express  duty  of  inquiring  into  the  proceedings  of  the  very 
few  days  which  have  intervened  since  the  last  convention,  has 
an  ordinarily  accurate  knowledge  of  how  those  proceedings 
are  usually  and  uniformly  conducted.  This  is  an  obvious  duty 
of  the  board,  and  therefore  strictly  of  the  corporation  ;  for  the 
board  is,  in  the  eye  of  the  law,  the  corporation.  The  commu- 
nity are  entitled  to  assume  that  the  board  or  corporation  do 
their  duty,  and  can  hold  the  corporation  liable  for  the  results 
of  their  neglecting  it.  So  if  a  board  of  bank  directors  suffer 
the  assumption  of  a  certain  function  by  their  cashier  or  teller 
to  grow  into  a  usage,  it  is  not  to  be  conceived  that  they  could 
be  heard  to  say  that  they  had  never  had  any  knowledge  of  his 
conduct,  and  so  shift  the  mischief  of  their  own  default  upon 
the  shoulders  of  an  innocent  third  person.  In  other  words, 
instead  of  its  being  necessary  that  the  practice  of  the  officer 

^  Lawrence  v.  Gebhard  41  Barb.  575. 
216 


AUTHORITY   INFERRED    FROM    APPARENT    ACQUIESCENCE.       §  98 

should  have  been  brought  to  the  actual  knowlcd.i^o  of  the  gov- 
ernment, it  must  suffice  to  show  that  such  practice  has  con- 
tinued so  long  and  has  been  so  public  that  it  must  have  been 
brought  to  the  knowledge  of  the  government  had  not  that 
body  been  unduly  lax  and  careless  in  the  performance  of  its 
duties.-^  A  board  of  bank  directors,  with  responsibilities  so 
much  greater  and  duties  so  much  more  exacting  than  fall  to 
the  lot  of  directors  in  the  majority  of  other  species  of  corpo- 
rations, must  be  very  quickly  estopped  to  deny  their  knowledge 
of  any  practice  which  grows  up  among  their  subordinates.  In 
Minor  v.  Mechanics'  Bank  of  Alexandria,^^  it  was  said  that  it 
is  a  presumption  of  law  that  the  ordinary  usage  and  practice 
of  a  bank,  "in  the  absence  of  counter  proof"  results  from 
regulations  of  the  directors.  What  "  counter  proof  "  would 
be  regarded  as  sufficient,  or  what  species  of  evidence  would  be 
admissible  as  going  to  constitute  "  counter  proof,"  is  not  inti- 
mated. But  it  would  seem  that  law  and  justice  would  equally 
require  that  only  evidence  going  to  show  that  such  was  not  in 
fact  the  ordinary  usage  and  practice  of  the  bank,  or  that  the 
circumstances  attendant  upon  it  were  not  such  as  to  give  the 
public  or  the  individual  a  conclusive  right  to  regard  such 
usage  and  practice  as  being  established  and  binding,  should 
be  allowed.  To  allow  the  bank  to  show  more  than  this,  by 
way  of  "  counter  proof,"  would  in  effect  be  to  enable  them  to 
make  others  suffer  for  their  fault.  The  "interests  of  the 
mercantile  world  "  should  be  imperative  in  this  matter.^o 

Where  one  deals  with  a  corporation  in  good  faith,  and  the 
transaction  is  not  ultra  vires,  and  he  is  unaware  of  any  defect 
or  irregularity  on  the  part  of  those  acting  for  the  corporation, 
and  there  is  nothing  to  excite  suspicion  of  such,  the  corpora- 
tion is  bound,  although  such  defect  or  irregularity  really  exists. 
Habitual  exercise  of  powers  by  an  officer  with  the  knowl- 
edge and  acquiescence  of  the  bank  defines  as  to  the  public  his 
authority,  if  it  is  such  as  the  directors  could  confer  without 

28  Beers  v.  Phcenix  Glass  Co.,  14  Barb.  (N.  Y.)  358  ;  Smith  v.  Hull 
Glass  Co.,  11  C.  B.  897;  9  Eng.  L.  &  Eq.  442. 
a-'  1  Pet.  46. 
80  Andrews  v.  Kueeland,  6  Cowen  (N.  Y.),  354. 

217 


§  98  OFFICERS   AND   AGENTS.  —  GENERAL   PRINCIPLES. 

violating  the  cliarter.^^     So  far  as  the  public  are  concerned,  it 
is  immaterial  that  such  powers  are  contrary  to  a  by-law.^- 

Where  a  bank  president,  by  fraud  and  collusion  between 
himself  and  the  payee  of  a  draft  drawn  on  the  bank,  raised 
money  dishonestly  upon  the  draft  by  the  wrongful  use  .of  his 
offiqial  powers,  it  was  held  that  a  bona  fide  indorsee  for  value 
of  the  paper  might  recover  thereon  from  the  bank.^-^     So  if 
negotiable  paper  be  indorsed  for  accommodation  solely,  it  is 
irregular,  and  even  illegal ;  and  is  of  course  an  unauthorized 
and  wrongful  act  on  the  part  of  the  officer  doing  it.     Yet  if 
the  indorsement  of  the  negotiable  paper  of  the  bank  is  the 
proper  function  of  this  officer,  the  bank  will  be  bound  to  the 
holder  of  this  wrongfully  indorsed  paper,  provided  he  came 
by  it  in  due  course  of  business,  and  without  notice  of  the  fact 
that  the  indorsement  was  for  accoraraodation.^*     Though,  by 
the  principle  already  laid  down,  holding  the  taker  to  knowl- 
edge of  the  law  provided  he  has  knowledge  of  the  facts,  if  he 
had  been  aware  that  it  was  solely  an  accommodation  indorse- 
ment he  could  not  have  recovered  on  the  ground  that  he  did 
not  know  but  that  the  officer  might  be  authorized  to  make 
such.     The  absolute  and  necessary  illegality,  the  impossibility 
of  its  being  legal,  except  perhaps  by  virtue  of  special  legisla- 
tion, which  no  one  can  assume,  is  a  principle  of  law  which 
everybody  is  imperatively  presumed  to  know.     In  this  case 
none  of  the  reasons  given  sometimes  for  holding  parties  to 
ultra  vires  acts  exist. 

(m)  So  with  the  ordinary  statutory  requisition  that  all  for- 
mal contracts  of  the  bank  shall  be  signed  by  the  president  and 
Signing  con-  cashicr.  The  contracts  must  be  first  made  by  the 
tracts.  directors,  for  power  to  sign  is  not  power  to  make, 

and  then  only  does  the  function  of  the  president  and  cashier 

31  Merchants'  Bank  v.  State  Bank,  10  Wall.  604. 

32  Royal  Bank  v.  Turquand,  6  Ellis  &  Black.  327  ;  Agar  v.  Athenseum 
Ins.  Co..  3  C.  B.  N.  s.  725. 

83  Ridgway  v.  Farmers'  Bank,  12  Serg.  &  R.  (Pa.)  2.56. 

34  Mechanics'  Banking  Association  v.  N.  Y.  Saugerties  Lead  Co.,  23 
How.  Pr.  (K  Y.)  74;  Bank  of  Genesee  v.  Patchin  Bank,  3  Kern.  (N.  Y.) 
309;  Kaiser  v.  U.  S.  National  Bank,  99  Ga.  258  (2.3  S.  E.  620)  (1898). 
218 


ADVERSE  INTEREST.  §  99 

come  in.  They  are  authorized  to  sign  contracts  which  have 
been  thus  previously  entered  into,  but  they  are  authorized  to 
sign  none  others;  for  none  others  are  in  fact  contracts  of  the 
bank.  So,  if  they  do  sign  others,  it  is  an  unauthorized  exer- 
cise of  a  power  or  duty,  which  yet  properly  inheres  in  them. 
But  it  has  been  strongly  intimated  that  their  signatures 
should  be  regarded  as  conclusive  of  the  validity  of  a  contract, 
in  favor  of  third  parties  affected  thereby  and  ignorant  of  the 
irregularity  lying  behind  this  procedure,  which,  though  irreg- 
ular, has  yet  been  diOWQ  prima  facie  in  strict  pursuance  of  an 
existent  function.^^ 

(n)  If  the  officer  or  agent  of  a  corporation  is  clothed  with 
a  certain  power,  either  by  charter,  statute,  or  by  the  lawful 
act  of  the  corporation,  and  if  he  uses  that  power  for  an  un- 
authorized or  even  prohibited  purpose,  or  fraudulently,  yet  the 
corporation  will  be  answerable  for  his  action  to  any  innocent 
third  person  affected  thereby.^  Ordinarily,  whenever  the  act 
is  one  not  upon  its  face  illegal,  or  in  excess  either  of  the 
general  corporate  powers,  or  of  the  powers  which  the  officer 
undertaking  it  may  legally  exercise,  and  is  held  out  as 
authorized  to  exercise,  regularity  is  always  presumed  in  favor 
of  any  person  who  had  no  notice  contravening  the  correctness 
of  these  appearances. 

§  99.  Tenth.  Adverse  Interest.  —  As  between  an  agent  and 
the  bank  an  act  will  be  without  authority  in  any  transaction 
in  which  A.  has  an  interest  adverse  to  that  of  B.,  unless  B., 
with  full  knowledge  of  all  the  facts,  authorizes  or  ratifies  the 
act ;  for  B.  contracts  for  the  disinterested  skill  and  industry  of 
A.  for  his  own  (B.'s)  benefit,  and  the  law,  to  protect  him  from 

85  Gillett  V.  Campbell,  1  Den.  (X.  Y.)  520. 

86  Sheeban  v.  Davis,  17  Ohio  St.  571  ;  Madison  &  Indianapolis  R.  R. 
Co.  I'.  Norwich  Saving  Soc,  21Ind.  457;  Barnes  v.  Ontario  Bank,  19  N.  Y. 
152;  Curtis  v.  Leavitt,  15  id.  9;  Leavitt  v.  Yates,  4  Edvv.  Ch.  (N.  Y.) 
134;  Stoney  v.  Araer.  Life  Ins.  Co.,  11  Paige  (N.  Y.),  635  ;  Gillett  v. 
Campbell,  1  Den.  (N.  Y.)  520;  Kaiser  v.  U.  S.  National  Bank,  99  Ga.  258 
(25  S.  E.  620)  (1898);  Chemical  National  Bank  w.  Armstrong,  59  Fed. 
372  ;  Wiggins  v.  Stevens,  33  App.  Div.  (Hun,  N.  Y.)  S3  (1898)  ;  Murray 
V.  Pauly,  5G  Fed.  962. 

219 


^  :::!iyl' 

§  100       OFFICERS   AND    AGENTS.  —  GENERAL   PRINCIPLES. 

all  possibility  of  fraud,  declares  that  no  such  transaction  shall 
bind  him  as  to  A.,  whether  A.  has  really  gained  by  it  or  not. 
Thus  all  profits  resulting  from  the  agency  belong  to  B.,  and 
an  agent  to  sell  cannot  himself  buy,  nor  if  it  is  his  duty  to 
buy  can  he  buy  of  himself. 

But  as  to  a  third  person  C,  B.  may  be  held  by  a  transac- 
tion in  which  A.  is  adversely  interested,  if  C.  was  not  aware 
of  such  defect,  on  the  principle  of  inferred  authority.  (For 
illustration  see  chapter  on  Directors,  §  114.) 

The  president  and  cashier  of  a  national  bank  controlling 
its  finances  cannot  use  the  bank's  property  in  their  private 
business,  nor  in  general  bind  the  bank  by  any  contract  to 
which  either  of  them  is  a  party.^ 

In  Bank  v.  Bradshaw  it  was  held  that  a  bank  manager 
cannot  lawfully  loan  the  bank's  money  to  a  company  in 
which  as  a  stockholder  he  is  largely  interested,  but,  if  he 
holds  only  a  small  amount  of  stock  he  is  not  liable  for 
money  so  loaned  if  it  may  reasonably  be  presumed  from  the 
circumstances  that  his  intent  was  solely  to  promote  the 
interests  of  the  bank.^  And  in  North  Carolina  it  has  been 
held  that  where  the  president  of  a  bank  together  with  the 
cashier  constitutes  the  discount  committee,  and  the  president 
indorses  a  note  for  value,  before  maturity,  for  his  own  bene- 
fit, the  bank  takes  the  note  subject  to  all  the  equities  by 
which  the  president  was  bound,  the  presumption  being  that 
his  knowledge  was  that  of  the  bank.^ 

§  100.  Eleventh.  Revocation. — The  clear  principle  of  jus- 
tice approved  by  the  Roman  law,  and  the  jurisprudence  of 
modern  commercial  nations,  is  that  the  bank,  or  the  power 
appointing  the  agent,  may  revoke  his  authority  at  pleasure, 
but  not  to  the  injury  of  A.  or  any  person,  C,  with  whom 
A.  has  dealt  as  agent.     Upon  any  contract  not  yet  legally 

1  §  09.  Rhodes  v.  Webb,  24  INIinn.  292.  Richards  v.  Bank,  26  Can. 
S.  C.  Rep.  381;  Ruohs  v.  Bank,  94  Tenn.  71  (28  S.  W.  303)  (1894); 
Dowd  V.  Stephenson,  105  N.  C.  467  (10  S.  E.  1101)  (1890);  Merchants' 
Bank  V.  Denmere,  92  Ga.  735  (19  S.  E.  38)  (1893). 

2  16  Lower  Can.  Rep.  3. 

3  Le  Due  V.  Moore,  111  N.  C.  516  (15  S.  E.  888)  (1892). 

220 


-jiiJcX)jV, 


'■"«^^W£fi  rf  cfiossy 


REVOCATION.  §  101 

consummated,  so  as  to  be  binding  in  law,  the  revocation 
operates  fully ;  as  to  A.  from  the  time  he  knows  of  it,  as  to 
C.  from  the  time  he  knows  of  it,i  or  ought  to  know  of  it.^ 

If  a  transaction  is  partly  executed,  and  is  severable,  the 
unexecuted  part  may  be  revoked.  But  if  A.  would  be  dam- 
aged by  a  revocation,  it  cannot  be  made  without  full  indem- 
nity to  him,  and  C.'s  acquired  legal  rights  can  never  be 
aifected  by  revocation. 

An  authority  coupled  with  an  interest,  or  given  for  a  valu- 
able consideration,  cannot  be  revoked  ;  but  just  what  consti- 
tutes such  interest  is  not  perfectly  clear  on  the  authorities. 
Wilde,^  C.  J.,  says,  "  An  authority  given  on  sufficient  consid- 
eration for  the  purpose  of  securing  some  benefit  to  the  donee 
of  the  authority  is  irrevocable  "  (except  it  may  be  by  death, 
as  the  case  shows  was  understood).  Marshall,*  C.  J.,  says, 
"  The  interest  that  can  protect  a  power  fully  during  life  (or 
after  death  of  the  one  who  creates  it)  must  be  an  interest  in 
the  thing  itself  which  is  the  subject  of  the  agency,  or  power, 
and  not  merely  in  that  which  is  produced  by  the  exercise  of 
the  power. 

§  101.  Twelfth.  Ratification.  —  A  bank  may,  in  the  same 
way  as  any  other  principal,  ratify  after  performance  unauthor- 
ized acts  of  its  agents.  Such  ratification  may  be  direct,  or 
it  may  be  presumed  from  the  ordinary  circumstances  which 
constitute  practical  ratification  in  the  eye  of  the  law ;  as,  for 
example,  from  its  receiving  the  benefit  of  the  acts.^     But, 

1  §  100.  An  agency  by  writing  revoked,  but  left  in  A.'s  hands,  and  C. 
deals  with  him  on  faith  of  it,  B.  held.     Beard  v.  Kirk,  11  N.  H.  397. 

2  Salte  V.  Field,  5  Durn.  &  E.  211;  Spencer  v.  Wilson,  4  Munf.  (Va.) 
130.  A  general  notoriety  is  equal  to  notice  ;  if  the  principal  does  what 
he  can  to  prevent  third  parties  from  being  misled,  and  to  give  notice 
of  revocation  as  general  as  that  of  the  agency  was,  it  is  sufficient. 

3  Smart  v.  Sandars,  5  C.  B.  (Eng.)  895,  917. 

4  Hunt  V.  Rousmanier,  8  Wheat.  (U.  S.)  204. 

1  §  101.  Lime  Rock  Bank  v.  Macomber,  29  Me.  564 ;  Hooker  v.  Eagle 
Bank,  30  N.  Y.  83.  A  bank  cannot  repudiate  a  contract  so  that  it  con- 
tinues to  enjoy  the  benefits  and  escape  the  liabilities  of  the  transaction. 
Owens  V.  Stopp,  32  111.  App.  653,  Wayne  Title  and  Trust  Co.  v.  Schuyl- 
kill Electric  Ry.  Co.  191  Pa.  St.  90  (43  Atl.  135)  (1899). 

221 


§  101       OFFICERS   AND    AGENTS,  —  GENERAL   PRINCIPLES. 

where  benefits  are  received  without  full  knowledge  by  the 
bank  it  does  not  constitute  a  ratification.^" 

Any  act  done  avowedly  for  the  bank  may  be  adopted  with 
full  actual  knowledge  of  the  facts,  so  as  to  have  the  same 
effect  as  if  previously  authorized  by  the  same  power  which  rati- 
fies, except  that  such  subsequent  action  can  have  no  retro- 
active effect  to  establish  duties,  a  compliance  with  which  was 
not  obligatory  on  C.  at  the  time  of  the  act,  perhaps  would 
have  been  unjustifiable  on  his  part.  (See  §  90,  above.)  If 
the  directors,  or  a  majority  of  them,  know  actually,  not 
merely  constructively,  of  the  contract,  and  acquiesce,  it  is  a 
ratification  without  any  vote. 

If  the  act  is  ratified  by  a  power  which  could  legally  have 
authorized  it,  all  parties  may  of  course  be  held  upon  it  as  a 
valid  act.  If  the  ratifier  could  not  have  given  legal  authority 
for  the  act,  the  adoption  of  course  cannot  render  it  any  more 
valid  than  previous  command  could  have  done.  The  best  law 
is,  that  no  act  of  an  agent  beyond  the  authority  his  principal 
could  rightfully  give  him  shall  be  recognized  as  binding, 
although  benefit  received  must  be  accounted  for ;  but,  as  we 
have  seen  (§  90),  the  cases  are  not  agreed  upon  this. 

One  thing  is  clear,  however,  ratification  by  the  board  of 
directors  makes  the  act  their  own,  and  that  of  the  bank  if  pre- 
vious authority  from  the  directors  would  have  made  it  so,  and 
ratification  by  the  bank  makes  the  act  theirs ;  whether  it  will 
bind  them  fully  depends  on  other  considerations  than  those 
with  which  this  division  is  chiefly  concerned.  (See  Ultra 
vires.')  Some  of  the  cases  upon  these  points  will  now  be 
more  particularly  noticed. 

(a)  It  is  a  well  settled  rule,  that  a  ratification  by  a  principal 
of  the  unauthorized  acts  of  an  agent,  in  order  to  be  effectual, 
must  be  made  with  a  knowledge  on  the  part  of  the  principal 
of  all  the  material  facts.  And  the  burden  is  upon  the  party 
who  relies  upon  a  ratification  to  prove  that  the  principal,  hav- 
ing such  knowledge,  acquiesced  in  and  adopted  the  acts  of  the 

i»  Fort  Dearborn  National  Bank  v.  Seymour,  71  Minn.  81  (73  N.  "W. 
724)  (1898). 

222 


RATIFICATION.  §  101 

agent.  It  is  not  enough  for  him  to  show  that  the  principal 
might  have  known  the  facts  by  the  use  of  diligence.^ 

When  the  alleged  principal  is  a  corporation,  a  ratification 
may  be  shown  by  proving  that  the  officers  who  had  the  power 
to  authorize  the  act  knew  of  it,  and  adopted  it  as  a  valid  act 
of  the  corporation,  although  no  formal  vote  was  passed  by 
them.^ 

It  is  incumbent  upon  the  plaintiff  to  show  that  the  direc- 
tors, or  at  least  a  majority  of  them,  knew  of  the  contract,  and 
its  terms,  and  that  with  such  knowledge  they  acquiesced  in 
and  adopted  it.* 

So  where  the  cashier  of  a  bank  had  been  carrying  on 
transactions  with  the  bank  contrary  to  its  rules,  for  his  own 
benefit,  it  was  held  that  the  fact  of  such  transac-    ^ 

Constructive 

tions   having   been   entered  on   the   books    of   the   knowledge 
bank  did  not  import  knowledge  on  tlie  part  of  the   °ot  enough, 
directors,  and  consequent  ratification.^ 

(b)  A  contract  may  be  ratified  by  the  stockholders  of  a 
corporation  if  it  is  made  with  full  knowledge  of  all  the 
material  facts,  although  in  ignorance  of  the  legal  effect  of 
such  facts.^ 

(c)  Retention  of  the  proceeds  of  the  transaction  renders 
the  officer's  act  as  binding  as  if  expressly  authorized^  The 
president  of  a  bank  in  Nebraska  which  was  about  to  be  reor- 
ganized, professing  to  act  on  behalf  of  the  bank,  promised  D. 
to  give  him  ten  shares  of  the  stock  if  he  would  act  as  a  di- 
rector and  would  continue  the  dealings  of  his  (D.'s)  firm  with 
the  bank.  D.  was  elected  director  by  the  bank,  which  thus 
held  him  out  as  owning  ten  shares  at  least,  for  that  is  re- 

2  Combs  V.  Scott.  12  Allen  (Mass.),  493. 

3  Sherman  v.  Fitch,  98  Mass.  59 ;  Lyndeborough  Glass  Co.  v.  Massa- 
chusetts Glass  Co.,  Ill  Mass.  315;  Kelley  i;.  Newburyport  Horse  Rail- 
road, 141  Mass.  496. 

*  Murray  r.  Nelson  Lumber  Co.,  143  Mass.  251. 

5  First  National  Bank  of  Fort  Scott  v.  Drake,  29  Kan.  311  ;  citing 
Citizens'  National  Bank  v.  Elliott,  55  Iowa,  104. 

^  Kelley  v.  Newburyport  Horse  Railroad,  141  Mass.  496. 

'  People's  Bank  of  Belleville  v.  Manufacturers'  National  Bank,  101 
U.  S.  181  (1879). 

223 


§  102       OFFICERS   AND    AGENTS,  —  GENERAL   PRINCIPLES. 

quired  by  R.  S.  5146  as  a  qualification,  and  on  the  bank  list 
of  shareholders  D.  was  down  as  owner  of  ten  shares.  The 
court  held  that  there  was  sufficient  consideration  for  the  con- 
tract to  give  D.  the  shares,  (it  appeared  that  D.'s  firm  was 
about  to  withdraw  its  business  from  the  bank,)  and  that, 
as  the  president  avowedly  acted  for  the  bank,  and  the  latter 
had  received  the  benefit  of  the  transaction,  it  had  ratified  his 
action.^ 

Where  a  majority  of  the  directors  of  a  bank  make  an  infor- 
mal agreement  to  take  the  assets  and  assume  the  liabilities 
of  a  private  banking  business,  and  the  corporation  thereupon 
takes  and  retains  such  assets  under  tlie  agreement,  it  will  be 
held  to  have  ratified  the  action  of  the  directors,  and  to  be 
bound  by  all  the  terms  of  the  agreement.^ 

{d)  A  cashier  accepted  a  note  in  payment.  He  had  no 
authority  to  do  so,  but  a  ratification  was  inferred  from  the 
directors'  approval  of  it  in  connection  with  an  entry  of  "  paid  " 
in  a  certain  book  showing  the  transaction,  which  was  sub- 
mitted to  them.^*' 

The  president  of  bank  A.  instructed  its  correspondent  bank, 
B.,  to  charge  against  A.  the  amount  of  a  private  note  of  his 
held  by  B.  An  account  was  rendered  showing  the  trans- 
action, which  was  accepted  by  A.  Held,  that  A.  was  es- 
topped to  deny  the  correctness  of  the  charge,  as  was  also  its 
receiver.  ^^ 

§  102.  Tort.  —  An  agent,  A.,  is  responsible  to  the  bank  for 
"  Agent  re-     all  damage  ^  occasioned  to  the  bank  by  tortious  con- 

sponsibie  to  j^^^  ^^^  commanded  or  ratified  by  the  bank  ;  and 
the  order  of  a  superior  officer  is  no  excuse,  if  A. 
has  notice  of  the  wrongful  character  of  the  act.^ 

8  Rich  V.  State  National  Bank  of  Lincoln.  7  Xeb.  201. 

9  Bank  of  New  London  v.  Ketchum,  64  Wis.  7  (1885). 

1"  Ecker  v.  First  National  Bank  of  New  Windsor,  59  Md.  291 
(1882). 

11  Burton  v.  Burley,  9  Bissell,  253  (U.  S.  C.  C.  111.,  1880). 

0  §  102.     Jones  v.  Johnson,  86  Ky.  543  (1888). 

1  Minor  v.  Mechanics'  Bank,  1  Pet.  46  ;  Pendleton  v.  Bank  of  Ken- 
tucky, 1  T.  B.  Mon.  (Ky.)  177. 

224 


TORT.  §  102 

(a)  An  agent  is  responsible  to  a  third  person,  C,  for  mis- 
feasance   or  positive  wrong,  always,  whether   the   ^^gg^t  re- 
bank  is  also  responsible  or  not  ^^  ;  but  for  A.'s  negli-   sponsible  to 

^  _  third  person. 

gence  or  omission  in  the  course  of  his  agency,  C. 
must  look  to  the  principal. 

(5)  The  bank  is  responsible  to  its  agent  for  injury  resulting 
from  its  own  negligence  or  wrongful  conduct,  but  not  for  that 
resulting  from  the  negligence  or  fault  of  properly  g^^^respon- 
selected  fellow  servants ;  for  this  danger  is  within    sibie  to 

.  agent. 

the  contemplation  of  the  parties  at  the  time  of  the 
contract  for  service,  and  may  be  supposed  to  be  allowed  for 
in  the  compensation,  and  is  as  likely  to  be  known  to  and  is 
as  easily  guarded  against  by  A.  as  by  B.,  or  perhaps  more 
easily .2  But  if  A.  is  injured  by  the  tort,  not  of  a  fellow 
servant,  but  of  one  in  command  over  him,  the  best  opinion 
is  that  the  corporation  is  liable  to  A.  as  it  would  be  to  a  third 
party.3 

(c)  The  bank  is  not  responsible  to  a  third  party  for  loss 
remotely  caused  by  its  negligence,  as  where  felony  intervenes, 
nor  if  such  party  has  deprived  himself  of  the  right 

,j  J.       ^  ,  Bank  re- 

to  redress  by  his  own  contributory  fault,  nor  when   sponsible  to 
the  loss  is  occasioned  by  an  act  of  A.  entirely  out-      "^  person, 
side  the  business  of  his  agency. 

The  grounds  of  liability  for  tort  are,  1st,  causation,  2d,  adop- 
tion, and,  3d,  such  position  of  control  as  gives  the  best  oppor- 
tunity of  guarding  against  the  injury.*     Every  one   must  so 

i»  State  V.  Commercial  Bank,  37  Neb.  174  (55  N.  W.  640)  (1893); 
Porter  v.  Sherman  Bank,  36  Neb.  271  (54  N.  W.  424)  (1893);  Williams 
V.  McKay,  46  N.  J.  Eq.  25  (18  Atl.  824)  ;  Minton  v.  Stahlman,  96  Tenn. 
98  (34  S.  W.  222)  (1895)  ;  Cooper  v.  Hill,  94  Fed.  582  (1899)  ;  Dodd  v. 
Wilkinson,  42  N.  J.  Eq.  647  (9  Atl.  685)  (1887)  ;  Barth  v.  Graf,  101  Wis. 
27  (76  N.  AV.  1100)  (1898)  ;  Cockrill  v.  Abeles,  86  Fed.  505  (1898). 

2  As  this  is  a  point  on  which  the  cases  are  not  uniform,  I  quote  au- 
thorities :  Harrison  v.  Central  R.  R.  Co.,  2  Vroom,  N.  J.  296;  Snow  v. 
Housatonic  R.  R.  Co.,  8  Allen,  Mass.  441;  Farwell  v.  Boston  &  Wor- 
cester R.  R.  Co  ,  4  Met.  Mass.  49. 

8  Cleveland,  &c.  R.  R.  Co.  v.  Keary,  3  Ohio  St.  201  ;  citing  Dixon  v. 
Ranken,  1  Am.  R.  R.  Cas.  569  (Scotch  case)  ;  Hayes  v.  Western  R.  R. 
Co.,  3  Cush.  (Mass.)  270. 

*  For  example,  a  railroad  company  is  held  as  an  insurer  because  it  can 
VOL.  I. —  15  225 


§  102       OFFICERS    AND    AGENTS.  —  GENERAL   PRINCIPLES. 

conduct  his  affairs  as  not  to  damage  another  by  any  action 
or  omission,  whether  he  does  the  business  himself 

Grounds  of  ,  <  i  i.i  i       i.  •  i  • 

liability  in  or  by  an  agent,  unless  the  conduct  causmg  loss  is 
^*"^*'  clearly  recognized  as  so  necessary  for  the  good  of 

society  that  it  must  be  sustained,  even  though  producing  dam- 
age to  some  individual,  in  which  case  it  is  set  down  as  dam- 
num  absque  injuria. 

Upon  these  grounds  a  bank  is  liable  for  damage  directly 
and  naturally  resulting  (1)  from  the  nature^  of  an  act  ordered 
General  by  Itsclf  or  its  general  directions,  or  (2)  from  the 

'■"'«•  act  of  an  agent  which  involves  a  breach  of  the  duty 

of  the  bank,^  or  (3)  from  the  manner  in  which  any  agent 
performs  the  functions  of  his  office,  or  any  business  that  he 
may  expressly  or  impliedly  be  authorized  to  do,  whether  it  be 
malfeasance,^"  nonfeasance,  or  negligence  that  causes  the 
damage.  (4)  And  a  tort,  like  a  contract,  can  be  adopted. 
If  the  bank  or  the  board  of  directors  expressly  adopt  and 
ratify  the  act,  or  knowinuly  retain  the  benefit  of  it. 

Ultra  vires.  .  •'  '"  . 

or  m  some  cases  the  services  oi  the  wrongdoer,  it 
will  make  the  tortious  conduct  that  of  the  bank,  and  it  makes 
no  difference  how  clearly  ulti-a  vires  the  act  may  be,  except 
as  bearing  upon  (3)  or  (4)  by  showing  the  original  act  or  the 

best  guard  against  danger  and  loss,  and  because  it  would  be  extremely 
difficult  for  the  owner  of  goods  to  prove  embezzlement  or  other  actual 
fault  or  negligence  ;  and  holding  the  company  to  such  liability  saves  much 
litigation  and  intricate  and  costly  inquiry,  and  works  no  injustice  for  the 
extra  risk  to  company,  and  security  to  the  customer  is  allowed  for  in  the 
compensation  for  the  company's  service.  See  C.  J.  Shaw's  opinion,  in 
Farwell  v.  Boston  &  Worcester  R.  R.  Co.,  4  Met.  (Mass.)  49.  In  the  case 
of  a  bank  it  is  not  generally  deemed  necessary  to  cari-y  responsibility  be- 
yond the  consequences  of  its  own  conduct,  and  that  of  its  agents  acting  in 
its  business  and  under  its  control.  There  is  a  possible  exception  in  the 
case  of  collections  by  a  correspondent  bank.  See  §  26i.  Generally  the 
question  is,  who  has  the  efficient  control,  on  whose  account,  for  whose 
benefit,  and  under  whose  orders  is  the  business  done,  the  conduct  of  which 
occasions  the  loss. 

6  Peachey  i'.  Rowland,  16  E.  L.  &  E.  442;  Rex  v.  Nutt,  Fitzg.  47. 

«  Weed  r.  Panama  R.  R.  Co.,  17  X.  Y.  362 ;  Philadelphia  R.  R.  Co. 
V.  Derby,  14  How.  468;   Sinclairr.  Pearson,  7  N.  H.  227. 
6«  Second  National  Bank  v.  Howe,  40  Minn.  390(42  N.  "W.  200). 
226 


TORT.  §  102 

adoption  not  to  be  within  the  course  of  the  agency  of  the 
officer  or  board. 

If  the  board  of  directors  order  or  ratify  an  act  which  is 
entirely  outside  the  business  of  the  bank,  or  the  handHng  of 
its  interests  and  property,  it  is  not  the  bank's  tort;  but  if 
they  publish  a  libel  or  fraudulent  statements  ^  in  the  corporate 
reports,  the  bank  is  liable,  as  it  would  probably  be  for  assault 
and  battery  if  the  paying  teller  should  attempt  forcibly  to 
recover  an  overpayment,^  or  the  cashier  should  break  the 
peace  in  attempting  to  seize  the  property  of  C.  in  payment  of 
his  debt  to  the  bank. 

In  some  cases  it  has  been  said,  that,  although  the  princi- 
pal is  liable  for  the  agent's  tort  in  the  bona  fide  prosecution 
of  his  master's  business,  yet  he  is  not  responsible  wilfulness 
for  the  agent's  wilful  ^  act,  —  that  the  wilfulness  of  °°t  ^he  test, 
the  act  is  the  determining  fact.  But  it  is  perfectly  clear  that 
in  many  cases,  if  not  all,  the  line  is  not  drawn  in  that  way, 
and  that  wilfulness  is  of  import  only  as  expressing  the  fact 
that  the  agent  stepped  aside  ^^  deliberately  from  the  conduct 
called  for  by  his  agency.  If  the  damage  really  results  from 
the  doing  of  any  act  which  is  really,  or  upon  the  facts  as 
known  to  A."  is  properly  inferred  to  be,  within  the  scope  of 
A.'s  duties  as  agent,  the  bank  is  liable.  And  even  where  the 
principal  has  given  instructions  to  A.  not  to  do  the  act,  yet,  if 
it  is  done  by  him  in  the  course  of  the  regular  business  of  his 
office,  B.  is  liable.i2     xiiis  of  course  is  not  consistent  with  the 

'  Cullen  V.  Thomson,  4  Macq.  H.  L.  Cas.  (Sc.)  431 ;  9  Jur.  n.  s.  85. 

8  Ramsden  v.  Boston  &  Albany  R.  R.  Co.,  104  Mass.  117. 

«  INI'Manus  v.  Crickett,  1  East,  106  ;  Thayer  v.  Boston,  19  Pick.  (Mass.) 
516;  Davis  v.  Bangor,  4'2  Me.  522;  Watson  v.  Bennet,  12  Barb.  (N.  Y.) 
196 ;  Wright  v.  Wilcox,  19  Wend.  (N.  Y.)  343 ;  Fox  v.  Northern  Liber- 
ties, 3  Watts  &  S.  (Pa.)  103. 

10  Weed  v.  Panama  R.  R.  Co.,  17  IST.  Y.  362 ;  Ranger  v.  Great  West- 
ern R.  R.  Co.,  5  H.  L.  Cas.  72  ;  Bloodgood  v.  Mohawk,  R.  R. 
Co.,  14  Wend.    (N.  Y.)    51;    Edwards  r.  Union   Bank   of 
Florida,  1  Fla.  136.     See  case  of  the  Druid,  1  Wm.  Rob.  405;    Trespass  vi 
and  Reeves's  Domest.  Rel.  357.  «<  «''""*- 

"  Goff  V.  Great  Northern  Railway,  30  L.  J.  Q.  B.  148. 

12  Philadelphia  &  Reading  R.  R.  v.  Derby,   14  How.  468;  Southwick 

V.  Estes,  7  Cash.  (Mass.)  385. 

227 


§  102       OFFICERS   AND    AGENTS.  —  GENERAL   PRINCIPLES. 

idea  that  wilfulness  excuses  the  principal.  It  is  impossible 
to  reduce  the  cases  to  anything  like  harmony,  except  upon  the 
theory  that  B.  is  responsible  for  all  torts,  whether  wilful  or 
not,  which  involve  a  breach  of  B.'s  duty,  or  result  naturally 
from  B.'s  orders,  or  arise  from  the  manner  in  which  A.  per- 
forms the  duties  which  he  has  actual  or  implied  authority  to 
do.  Except  as  regards  a  notary  or  correspondent  bank,  the 
whole  matter  of  a  bank's  responsibility  for  tort  reduces  itself 
to  express  authorization,  ratification,  and  control.  The  re- 
sponsibility of  B.  for  A.  for  tort  in  the  course  of  business 
grows  out  of  and  is  measured  by,  begins  and  ends  with,  his 
control  of  A.,^^  and  therefore  does  not  cover  the  act  of  one 
exercising  an  independent  calling  who  has  contracted  to  do 
the  work,^"^  unless  the  injury  results  from  the  vert/  nature  of 
the  thing  contracted  for.  In  that  case,  the  bank  is  respon- 
sible as  the  cause  of  loss. 

The  following  decision  of  the  United  States  Supreme  Court, 
in  a  suit  against  a  corporation  for  libel,  presents  the  law 
clearly. 

"  A  railroad  corporation  was  held  responsible  for  the  pub- 
lication by  them  of  a  libel,  in  which  the  capacity  and  skill  of 
a  mechanic  and  builder  of  depots,  bridges,  station-houses,  and 
other  structures  for  railroad  companies,  were  falsely  and 
maliciously  disparaged  and  undervalued.  The  publication  in 
that  case  consisted  in  the  preservation,  in  the  permanent 
form  of  a  book  for  distribution  among  the  persons  belonging 
to  the  corporation,  of  a  report  made  by  a  committee  of  the 
company's  board  of  directors,  in  relation  to  the  administration 
and  dealings  of  the  plaintiff  as  a  superintendent  of  the  road. 

"  For  acts  done  by  the  agents  of  a  corporation,  either  in 
contractu  or  in  delicto^  in  the  course  of  its  business,  and  of 
their  employment,  the  corporation  is  responsible,  as  an  indi- 
vidual is  responsible  under  similar  circumstances. 

"  The  result  of  the  modern  cases  is,  that  a  corporation  is 
liable  civiliter  for  torts  committed  by  its  servants  or  agents, 
precisely  as  a  natural  person  ;  and  that  it  is  liable  as  a  nat- 

18  McGuire  v.  Grant,  1  Dutch.  (N.  J.)  356. 
1*  9  M.  &  W.  710;  5  Exch.  721. 
228 


TORT.  §  102 

ural  person  for  the  acts  of  its  agents  done  by  its  authority, 
express  or  implied,  though  there  be  neither  a  written  appoint- 
ment under  seal,  nor  a  vote  of  the  corporation  constituting 
the  agency  or  authorizing  the  act."  ^^ 

(d)  A  bank  is  not  generally  held  responsible  for  the  neg- 
ligence of  a  notary  public  in  the  performance  of  his  duties,^® 
unless  it  makes  the  notary  peculiarly  its  agents  by      ggg  Title, 
appointing  him  to  act  for  it  for  a  definite  time,  and      p^nc^^ 
taking  bond  for  his  faithful  performance  of  duty,i^      §  26i. 
and  even  then  opinion  is  not  uniform  that  the  bank  is  liable.^^ 

The  ground  of  this  rule  is  that  the  notary  is  an  officer 
whose  duties  are  prescribed  by  law  (and  in  most  States  an 
official  bond  is  required  to  secure  the  public  against  his  neg- 
ligence, and  this  should  be  the  case  in  all  States),  and  as 
this  ground  does  not  apply  to  giving  notice  of  dishonor,  that 
not  being  a  duty  peculiarly  belonging  to  a  notary,  but  capable 
of  being  done  by  any  agent  of  the  bill  holder,  the  bank  is  not 
relieved  of  responsibility  for  its  proper  performance  by 
employing  a  notary  to  do  it.^^ 

As  we  shall  see  hereafter,  there  is  much  conflict  on  the 
point  whether  a  bank  is  to  be  held  responsible  for   Correspond- 
the  negligence  of  a  correspondent  bank  to  which   collection."* 
paper  is  sent  for  coUectiou.     (§  264.) 

(e)  "We   may  here  notice  a  few    cases   upon  the   liability 
of  a  bank   for  negligence.      The   elaborate,   thorough,   and 
luminous    opinion   delivered  by  Parker,  C.  J.,  in   Cases  ou 
the  case  of  Foster  v.  The  Essex    Bank,  20   stands   '^^giis^"^^- 

15  Philadelphia,  Wilmington,  &  Baltimore  R.  R.  v.  Quigley,  122  U.  S. 
607,  608.  See  also  Salt  Lake  City  v.  HoUister,  118  U.  S.  256,  280 ;  New 
Jersey  Steamboat  Co.  v.  Brockett,  121  U.  S.  637  ;  National  Bank  v.  Gra- 
ham, 100  U.  S.  699,  702  ;  Hyre  v.  Central  Bank,  48  Mo.  App.  434. 

1^  Britton  v.  Niccolls,  104  U.  S.  757  ;  First  National  Bank  of  Galveston 
V.  Butler,  41  Oh.  St.  519  ;  Baldwin  v.  Bank  of  Louisiana,  1  La.  Ann.  13. 

"  Warren  v.  Suffolk  Bank,  10  Cush.  Mass.  582 ;  Gerhardt  v.  Boat- 
man's Savings  List.,  38  Mo.  60. 

1**  Baldwin  v.  Bank  of  Louisiana,  1  La.  Ann.  13. 

"  Allen  V.  Merchants'  Bank,  22  Wend.  (N.  Y.)  215. 

20  17  Mass.  479,  followed  in  Giblin  v.  McMullen,  2  L.  R.  P.  C.  317, 
and  in  Scott  v.  National  Bank  of  Chester  Yalley,  72  Penn.  St.  471. 

229 


§  102       OFFICERS   AND    AGENTS.  —  GENERAL   PRINCIPLES. 

forth  as  the  leading  authority.     The  facts  in  this  well  known 
case  were  as  follows.     A  cask  of  gold  doubloons  was  left  with 
the  bank  for  safe  keeping,  the  circumstances  of  its  reception 
constituting,  in  the  opinion  of  the  court,  a  purely  gratuitous 
bailment.     It  was  kept  in  the  bank  vaults  with  precisely  the 
same  care  with  which  the  funds  and  property  of  the  bank 
were  kept.     But  the  cashier  of  the  bank,  with  the  connivance 
of  a  subordinate  clerk,  stole  from  the  vaults  a  quantity  of 
bank  property,  and  also  a  considerable  amount  of  this  gold. 
It  was  no  part  of  the  duty  of  either  the  cashier  or  clerk  to 
open  or  meddle  with  the  keg  in  which  the  doubloons  had  been 
secured  by  their  depositor  ;  and  no  officer  of  the  bank  had,  from 
the  nature  of  the  mandate,  any  right  to  examine  or  so  much 
as  touch  the  contents  of  the  keg.     The  counsel  for  the  plain- 
tiff urged  that  the  principal   was  liable   for  the  tortious  act 
of  its  agent,  the  cashier.     But  the  court  said,  upon  the  au- 
Tort  be-       '  thority  of  Meclianics'  Bank  v.  Bank  of  Columbia,^! 
onfficmr      t^^^*  *^^®  liability  of  the  principal  depends  upon  the 
business.        facts,  (1)  that  the  act  was  done  in  the  exercise, 
and  (2)    within    the    limits,  of   the   power   delegated.      For 
example,  for  money  credited  in  the  books  of  the  teller,  or 
proved  to  have  been  deposited  with  him,  though  not  credited, 
the  bank  is  answerable.     The  inquiry  then,  in  this  case,  must 
simply  be,  whether,  when  the  gold  was  taken  from  the  cask 
by  the  cashier  and  clerk,  they  were  in  the  course  of  their 
official  employment.     Their  master,  the  bank,  had  no  right 
to  meddle  with  or  to  open  the  cask  ;  it  neither  could  delegate, 
nor  did  it  attempt  to  delegate,  any  authority  to  any  of  its 
officers  so  to  do.     It  was  not  within  the  duty  of  the  cashier 
to  know,  or  to  take  any  account  of,  the  contents.     He  was  not 
therefore  acting  within  the  scope  of  his  authority  when  he 
committed  the  villainy  ;  and  the  bank  is  no  more  answerable 
than  if  he  had  stolen   the  pocket-book  of  an  individual  from 
the  bank  counter.     '•  If,  then,"  the  learned  judge  proceeds, 
"  it  be  asked,  for  what  acts  of  a  cashier  or  clerk  the  bank 
would  be  answerable,  I  should  answer :  for  any  which  pertain 
to  their  official  duty  ;  for  correct  entries  in  their  books,  and 

SI  5  AVheat.  326. 
230 


TORT   BEYOND   OFFICER'S   SPHERE.  §  102 

for  a  proper  account  of  general  deposits  ;  so  that,  if  by  any 
mistake,  or  by  fraud,  in  these  particulars,  any  person  be  in- 
jured, he  would  have  a  remedy.  ^2  .  ,  .  For  the  correct  conduct 
of  all  their  servants,  in  their  proper  sphere  of  duty,  they  are 
answerable."  In  this  especial  case,  "  if  the  cashier  had  any 
official  duty  to  perform  relating  to  the  subject,  it  was  merely 
to  close  the  doors  of  the  vault  when  banking  hours  were 
over,"  but  neither  to  open  the  keg,  nor  to  touch  its  contents. 
The  bank  is  "  not  answerable  for  special  deposits,  stolen  by 
one  of  their  officers,  any  more  than  if  stolen  by  a  stranger ; 
or  any  more  than  the  owner  of  a  warehouse  would  be,  who 
permitted  his  friend  to  deposit  a  bale  of  goods  there  for  safe 
keeping,  and  the  goods  should  be  stolen  by  one  of  his  clerks 
or  servants." 

(/)  "  The  undertaking  of  banking  corporations  with  re- 
spect to  their  officers  is,  that  they  shall  be  skilful  Banks  do  not 
and  faithful  in  their  employments  :  they  do  not  war-  ho^,[est"y  of^ 
rant  their  general  honesty  and  uprightness.  And  b^*^on(ft*hefi. 
it  is  the  same  with  individuals."  ^^  The  cited  dudes. 
case  of  Finucane  v.  Small  "  is  in  all  respects  like  the  one 
before  us,  except  that  the  goods  were  to  be  kept  for  hire," 
a  difference  altogether  in  favor  of  the  present  defendants. 
In  answer  to  this  case,  it  was  observed  in  argument  that 
"  the  cashier  of  the  bank  was  trusted,  and  therefore  the 
doctrine  of  Lord  Kenyon  did  not  apply.  But,  if  we  are 
right  in  the  principles  before  stated,  he  was  not  trusted 
in  this  business;  neither  he  nor  his  principal,  the  bank, 
having  anything  to  do  with  the  chest  or  cask  but  to  give 
it  a  place  in  the  vault,  and  to  lock  it  up  when  the  hours  of 
business  were  over;  and  so  the  cashier  must  be  considered 
like  the  servant  in  the  case  cited." 

(^)    It  was  acknowledged  by  the  counsel  for  the  bank,  in  this 

"^^  To  the  point  that  the  bank  is  liable  for  frauds  or  mistakes  of  the 
cashier  or  clerk  in  their  entries  in  the  books  of  the  bank,  and  in  false  ac- 
counts of  deposits,  may  be  cited  also  Salem  Bank  v.  Gloucester  Bank,  17 
Mass.  1 ;  Gloucester  Bank  v.  Salem  Bank,  id.  33 ;  Andrews  v.  President, 
&c.  of  Suffolk  Bank,  12  Gray  (Mass.),  461. 

28  Citing  Finucane  v.  Small,  1  Esp.  315. 

231 


§  102       OFFICERS    AND    AGENTS.  —  GENERAL   PRINCIPLES. 

case,  that  a  more  difficult  question  would  have  been  presented 
Negligence  ^^^  the  board  of  directors,  or  their  predecessors, 
of  directors,  g^own  any  negligence  in  the  original  appointment 
or  the  subsequent  retention  of  the  defaulting  officials.  Had 
these  persons  borne  bad  cliaracters,  or  had  circumstances  of 
suspicion  demanding  inquiry  come  to  the  knowledge  of  the 
board,  or  had  the  board  for  any  reason  been  unwilling  to  trust 
their  own  property  with  them  in  the  same  manner  in  which 
they  trusted  the  property  of  the  bank,  then  tlie  plaintiff  might 
have  had  a  better  case.  No  adjudicated  cause  aids  us  in 
determining  what  redress,  if  any,  the  law  would  allow  to  the 
sufferer  who  had  lost  a  special  deposit  under  such  circum- 
stances of  additional  aggravation.  An  opinion  must  be 
matter  of  speculation.  Very  probably  he  might  be  allowed 
to  recover.  But  if  he  were,  it  is  obvious  that  his  action 
could  not,  as  in  this  case,  be  assumpsit.  It  should  be  an 
ordinary  action  on  the  case  for  damages,  laying  an  injury 
or  loss  directly  resulting  from  the  wrongful  default  of  the 
corporation.  The  chief  difficulty  in  the  way  of  the  plaintiff's 
success  in  such  a  suit  would  probably  be  in  showing  that  the 
default  of  the  directors  was  in  fact  the  causa  proxima,  of  his 
mishap.  It  would  of  course  be  easy  to  show  that  it  facilitated 
tlie  occurrence  of  the  mishap,  but  the  only  immediate  cause 
in  the  eye  of  the  law  might  perhaps  be  regarded  as  the  felony 
of  the  officials. 

Qi)  There  is  an  English  case  of  very  similar  facts  and  law,^* 
and  also  another  English  case  is  to  the  same  effect,  going,  how- 
ever, even  further.    The  customer  kept  his  trunk  of 

Trunk  case.  ..  .ii-ii 

securities  with  his  bankers,  and  one  or  the  bankers 
himself  obtained  access  to  the  trunk,  and  abstracted  securities 
therefrom.  It  was  held  that  the  customer  could  have  recourse 
for  reimbursement  only  against  tlie  estate  of  the  guilty  part- 
ner, not  against  the  property  of  the  firm ;  inasmuch  as  it 
did  not  appear  that  the  firm  had  any  authority  to  open  the 
trunk  or  examine  its  contents.^^  Apparently,  if  the  firm 
had  had  such  authority,  the  act  of  the  individual  partner  in 

21  Giblin  v.  McMullen,  2  L.  R.  P.  C  317. 
26  Ex  parte  Eyre,  1  Phil.  Ca.  227. 

232 


REMOTE   CONSEQUENCES   OP   NEGLIGENCE.  §  102 

reaching  the  securities,  being  thus  within  the  scope  of  this 
authority  as  a  partner,  would  liave  subjected  the  firm  to 
responsibility  for  his  wrongful  act,  done  within  the  scope  of 
this  autliority. 

But  where  the  customer  deposited  with  his  bankers  certain 
certificates  of  stock  for  the  purpose  of  having  the  dividends 
collected  by  the  bankers  for  his  account,  paying  them  a  small 
commission  for  their  trouble,  and  the  manager  fraudulently 
abstracted  the  certificates  and  by  forged  transfers  got  pos- 
session of  the  stock,  the  customer  was  allowed  to  recover  the 
value  of  the  stock  from  the  company,  but  without  costs.  He 
then  sought  to  collect  the  costs  from  the  bankers.  The  court 
held  that  the  bankers  were  bailees  for  reward,  and  had  been 
guilty  of  culpable  negligence  in  keeping  the  certificates  in  a 
safe  to  which  the  manager  had  such  uncontrolled  access ;  but 
nevertheless  that  the  plaintiff  could  not  prevail  in  this  suit, 
since  the  loss  of  his  costs  was  too  remote  a  consequence  of 
the  negligence  of  the  bankers  to  permit  of  their  being  held 
liable.26 

If  the  bankers  themselves  are  guilty  of  a  misappropriation 
of  property  deposited  with  them  for  a  special  purpose,  it 
seems  hardly  necessary  to  say  that  they  will  be  liable.^'' 

(^)  Upon  this  point  the  same  seventeenth  volume  of  the 
Massachusetts  Reports,  which  is  peculiarly  rich  in  interesting 
and  ably  argued  bank  cases,  contains  a  valuable  decision. 
The  facts  of  the  case  of  The  Salem  Bank  v.  The  Gloucester 
Bank  ^s  were  as  follows.  A  large  number  of  the  Bank  not  re- 
bills  or  notes  of  the  bank  were  prepared  for  cir-  remo\'e  result 
culation,  and  were  signed  by  the  cashier.  They  of'tsnegh- 
only  needed  for  their  perfection  the  signature  stolen  bills. 
of  the  president.  This,  however,  they  did  not  receive,  and 
they  were  kept  in  this  condition  for  several  years,  lying 
in  the  cashier's  desk  in  the  open  room  of  the  bank.  Thieves 
broke  into  the  bank,  and  attempted  to  break  its  vault  with- 
out success.     But  they  broke  open  the  desk  and  stole  the 

26  In  re  United  Service  Company,  Ex  parte  Johnston,  6  L.  R.  Ch.  212. 

27  Ex  parte  Bond,  1  M.  D.  &  De  G.  10. 

28  17  Mass.  1. 

233 


§  102       OFFICERS   AND    AGENTS.  —  GENERAL   PRINCIPLES. 

incomplete  bills,  forged  the  president's  signature  upon  them, 
and  put  them  in  circulation.  The  holders  sought  to  recover, 
among  other  pleas,  under  a  declaration  for  damages,  alleg- 
ing that  their  loss  was  the  result  of  the  excessive  and  wrong- 
ful negligence  of  the  bank  in  allowing  notes  so  nearly 
perfect  to  lie  in  so  exposed  a  place.  Of  course  no  business 
man  could  deny  that,  practically,  the  manner  in  which  these 
notes  were  kept  was  unpardonably  careless.  Had  they  been 
in  the  vault,  it  was  practically  proved  that  they  would  have 
remained  intact,  since  the  vaults  were  not  opened.  But 
the  plaintiffs  were  not  allowed  to  recover.  The  court  said 
that  for  the  "  indirect  and  remote  consequences  of  the  negli- 
gence "  the  corporation  was  not  answerable.  They  did  not 
leave  finished  notes  in  this  exposed  condition,  but  only  paper 
which  required  the  further  and  independent  act  of  forgery, 
an  act  which  is  a  felony,  to  make  them  capable  of  working  a 
deception.  The  neglect  was  only  causa  remota,  and  the  bank 
could  not  be  held.  The  decision  is  clearly  reasoned  and  per- 
fectly satisfactory  in  law.  Unfortunately,  its  value  is  rather 
negative  than  positive,  for  it  furnishes  very  little  aid  towards 
the  determination  of  what  species  of  directorial  negligence 
the  results  would  be  regarded  as  sufficiently  immediate  to  be 
answered  for  by  the  bank.  It  should  perhaps  be  remarked 
that  it  was  not  intimated  in  this  case  that  the  directors  had 
been  in  any  default  in  choosing  or  keeping  a  cashier  whose 
character  they  ought  to  have  known  to  be  such  as  to  render 
him  unfit  for  the  responsibility  imposed  upon  him. 

(j)  It  is  a  general  rule,  that,  except  under  very  peculiar 
circumstances,  a  bank  will  not  be  held  liable  to  make  good 
such  acts  or  undertakings  of  their  officers  as  are  unwarrant- 
able, unusual,  or  indirectly  in  contravention  of  any  law.^^ 

29  Wyman  v.  Hallowell  &  Augusta  Bank,  14  Mass.  58;  where  the  ques- 
tion was  whether  a  bank  could  be  bound  to  pay  the  bank  notes  and  bills 
of  its  predecessor,  of  the  same  name,  by  reason  of  promises  to  that  effect 
made  by  its  president  and  cashier.  Lloyd  v.  West  Branch  Bank,  15  Penn. 
St.  172  ;  where  the  cashier  had  received,  without  consideration,  a  bundle 
of  notes  "  the  issuing  of  which  had  been  interdicted  "  by  a  statute.  Fos- 
ter *;.  Essex  Bank,  17  Mass.  479. 
234 


REPRESENTATIONS   AND  WARRANTY.  §  1^3 

(Jc)  A  bank  is  liable,  if  negligent  in  failing  to  examine 
bonds  received  by  it  for  a  correspondent,  as  collateral  for  a 
loan,  although  the  bank  acts  gratuitously .^° 

§103.  Representations.  —  An  agent.  A.,  Cannot  indirectly 
by  declarations  make  a  contract  for  the  bank  (B.),  which  he 
could  not  make  directly,  nor  ever  affect  B.  by  his  representa- 
tions or  admissions  beyond  the  scope  of  the  business  for 
which  he  has  actual  or  inferred  authority .^^ 

But  if  A.  has  authority  to  make  a  declaration,  expressly  or 
by  usage,  or  by  implication,  as  from  his  acting  in  an  office  in 
which  such  authority  inheres,  or  if  in  the  course  of  transact- 
ing business  for  the  bank  with  C,  for  which  he  has  actual  or 
inferred  authority,  he  makes  declarations  pertinent  to  that 
business,  such  statements  are  as  to  C.  the  statements  of  the 
bank,  and  affect  it  just  as  they  would  if  made  by  a  principal 
transacting  the  business  for  himself,  viz. :  1st,  if  material 
(i.  e.  (a)  enter  substantially  into  the  inducement  to  C.'s  con- 
duct in  the  matter),  and  are  such  as  he  has  a  right  to  rely 
upon  (i.  e.  (b),  not  mere  expressions  of  opinion,  or  recommen- 
dation, or  (6')  statements  regarding  matters  equally  within 
the  knowledge  of  C,  or  (d)  of  the  falsity  of  which  C.  has 
notice),  (e)  and  made  not  in  jest,  but  in  such  manner  as 
naturally  to  influence  C,  and  therefore  presumably  made  with 
that  intent,  (/)  and  C.  does  actually  rely  upon  them,  and  sus- 
tains damage  thereby,  the  bank  is  liable  for  deceit  if  the  state- 
ments were  false  to  the  (</)  knowledge  of  the  officer,  or  made 
without  such  reason  for  belief  as  a  man  of  ordinary  prudence 
would  require  for  his  own  guidance,  or  C.  may  upon  such 
cause  rescind  his  contract.^  2d,  if  made  during  (not  after) 
the  negotiation  for  sale  of  goods  with  the  qualities  (a),  (5), 

80  Clinton  National  Bank  v.  Park  National  Bank,  37  App.  Div.  (Hun, 
N.  y.)  601  (1899). 

0  §  103.  Franklin  Bank  v.  Stewart,  37  Me.  519;  Kennedy  v.  Otoe  Co. 
Bank,  7  Neb.  65.  See  Washington  Bank  v.  Lewis,  22  Pick.  (Mass.)  24; 
Lloyd  V.  West  Branch  Bank,  15  Penu.  St.  172;  Merchants'  Bank  v.  State 
Bank,  10  Wall.  675 ;  Thomas  v.  City  National  Bank,  40  Neb.  501  (58  N. 
W.  943)  (1897)  ;  Rich  v.  State  National  Bank,  7  Neb.  201. 

^  See  Kerr  on  Fraud  and  Mistake  j  Prewitt  v.  Trimble,  92  Ky.  176 
(17  S.  W.  356)  (1891). 

235 


§  103       OFFICERS    AND    AGENTS.  —  GENERAL   PRINCIPLES. 

(e),  and  (/),  it  is  a  warranty  if  so  intended  and  understood 
by  the  parties.^  If  (g)  is  present,  it  is  a  warranty  and  also  a 
fraud.  If  made  in  good  faith,  it  is  still  a  warranty.  If,  how- 
ever, it  was  intended  only  as  a  bare  affirmation,  it  is  a  repre- 
sentation, not  a  warranty.^  Any  affirmation  of  the  quality 
or  co7idition  of  the  goods  with  the  above  limitations  (a),  (Z>), 
{e),  and  (/),  is  a  warranty.*  3d,  the  declaration  or  admis- 
sion may  amount  to  a  contract  or  the  renewal  of  one,  as 
when  a  cashier  declares  a  check  drawn  on  his  bank  to  be 
'"•  good,"  ^  or  when  the  president,  having  power  by  usage, 
takes  a  debt  out  of  the  Statute  of  Limitations  by  his  acknowl- 
edgment.® 

C.  must  be  careful  not  to  rely  upon  A.'s  representations  un- 
til assured  that  he  has  either  authority  for  the  very  purpose 
of  making  them,  or  authority  to  do  the  business  to  which  they 
are  pertinent,  and  in  the  course  of  which  they  are  made ;  he 
must  never  take  an  agent's  own  representations  as  to  the 
extent  of  his  authority." 

As  a  general  rule,  information  as  to  a  past  and  completed 
transaction  is  courtesy,  and  no  more ;  but  if  the  knowledge  has 
Past  trans-  a  bearing  on  a  present  or  future  dealing  with  the 
actions.  bank,  it  will  come  within  the  sphere  of  liability  as 

above,  at  least  if  matter  to  which  it  is  material,  or  the  effect 
of  the  statement  upon  such  dealings  may  be  supposed  fairly 
within  the  contemplation  of  the  parties. 

(rt)  Some  cases  in  illustration  will  be  noticed.  In  the 
Farmers  and  Mechanics'  Bank  of  Kent  County  v.  Butchers  and 
Drovers'  Bank,^  the  teller,  duly  authorized  to  certify  a  check 

2  Bacon  v.  Brown,  3  Bibb  (Ky.),  35;  Davis  v.  Meeker,  5  Johns.  (N.  J.) 
354  ;  Roscorla  v.  Thomas,  3  Q.  B.  234. 

8  Swett  V.  Colgate,  20  Johns.  (N.  J.)  196  ;  Conner  v.  Henderson,  15 
Mass.  320. 

*  Hillman  v.  Wilcox,  30  Me.  170  ;  Beals  v.  Olmstead,  24  Vt.  115  ;  Os- 
good V.  Lewis,  2  Har.  &  G.  (Md.)  495. 

6  Espy  V.  Bank  of  Cincinnati,  18  Wall.  604. 

«  Morgan  v.  Merchants'  National  Bank  of  Memphis,  13  Lea  (Tenn.), 
234. 

'  Farmers  &  Mechanics'  Bank  v.  Butchers  &  Drovers'  Bank,  16  N.  Y. 
125.  «  16  N.  Y.  125. 

236 


REPRESENTATIONS.  §  103 

if  the  drawer  had  funds  in  the  bank,  certified  the  check  of  a 
drawer  who  had  no  funds.  The  certification  under  the  cir- 
cumstances was  clearly  unauthorized ;  but  the  holder  had  no 
notice  of  the  facts  which  rendered  it  so.  Mr.  Justice  Selden, 
delivering  the  opinion  in  the  New  York  Court  of  Appeals, 
said  in  substance :  The  bank  leads  persons  to  put  confidence 
in  its  teller,  through  whom  they  are  obliged  to  deal  with  the 
bank.  For  his  acts,  therefore,  within  the  scope  of  his  employ- 
ment and  authority,  so  far  as  can  be  known,  the  bank  must 
be  responsible.  Here  the  fact  of  whether  or  not  there  were 
funds  was  one  which  could  only  be  learned  by  asking  the 
teller  himself.  Knowledge  that  he  could  not  certify  without 
funds  is  not  knowledge  of  the  extrinsic  fact  that  there  are  no 
funds.  A  check,  taken  on  the  faith  of  the  officer's  represen- 
tation that  he  has  authority  to  certify,  does  not  bind  the  bank, 
if  he  had  i-eally  no  such  authority.  But,  provided  he  has  the 
authority,  then  a  check  taken  on  the  strength  of  his  represen- 
tation that  there  are  funds  binds  the  bank,  unless  the  holder 
knows  as  a  fact  that  the  representation  is  false.  The  sound 
rule  seems  to  be,  that,  where  a  party  dealing  with  an  agent 
ascertains  that  the  agent's  act  corresponds  exactly  with  the 
terms  of  the  power,  he  may  take  the  agent's  representation  as 
to  any  extrinsic  fact.,  peculiarly  within  the  agent's  knowledge, 
and  not  ascertainable  by  a  comparison  of  the  power  with  the 
act  done  under  it.  The  distinction  is  clear,  and  is  well  put  by 
the  learned  judge.  The  bank  doos  not  hold  out  the  officer  as 
authorized,  and  he  is  not  authorized,  to  state  what  are  or  are 
not  his  proper  functions.  But  all  his  acts,  however  irregular 
or  fraudulent,  done  in  pursuance  of  a  function  which,  as  a 
matter  of  fact,  the  bank  has  in  any  manner  made  properly  his, 
must  affect  the  bank,  if  the  party  dealing  with  him  acted  in 
good  faith.  To  the  like  effect  was  the  holding  in  Ex  parte 
Overend,  Gurney,  &  Co.^  Acceptances  made  by  an  officer 
duly  authorized  to  accept  upon  the  receipt  of  collateral  secu- 
rity, but  who  in  this  instance  had  accepted  without  such  re- 
ceipt, were  holden  good  as  against  the  bankers  in  the  hands 
of  a  third  party,  holding  for  value  and  ignorant  of  the  facts 

9  L.  R.  4  Ch.  460. 

237 


§  103       OFFICERS   AND    AGENTS.  —  GENERAL   PRINCIPLES. 

which  had  rendered  the  acceptance  really  irregular  and  un- 
authorized. 

Since  the  power  of  selling  railroad  bonds  does  not  pertain 
to  a  bank  organized  under  the  act  of  Congress  of  1864,  if  a 
bank  undertakes  so  to  sell,  and  the  teller  makes  false  repre- 
sentations to  a  purchaser,  no  action  will  lie  for  the  purchaser 
against  the  bank  to  recover  damages  for  the  deceit.^'' 

Declarations  and  admissions  of  the  officer  or  agent  of  a 
bank  bind  the  bank  only  when  they  are  made  by  him  officially, 
with  the  intent  of  binding  the  bank,  and  either  within  the 
scope  of  his  general  official  employment,  or  by  virtue  of  a  spe- 
cial authority  lodged  in  him  by  the  directors.  Otherwise,  like 
the  remarks  of  any  third  person,  they  are  utterly  incompe- 
tent.ii  The  declarations  of  directors,  even  more  than  those  of 
other  officers,  are  impotent  to  bind  the  bank;  for  the  reason 
that  no  individual  director,  as  sucli,  has  any  power  whatsoever 
in  reference  to  the  affairs  of  the  bank.  Only  when  and  as 
he  is  acting  in  conjunction  with  his  co-directors  is  he  intrusted 
with  what  may  be  described  as  an  undivided  share  in  the 
general  administration  of  its  affairs.  But  to  him  individually, 
at  least  strictly  in  his  capacity  as  director,  no  department  of 
those  affairs  is  allotted,  and  his  sole  admission  or  declaration 
in  any  department  is  therefore  in  excess  of  both  his  duty  and 
his  authority,  and  is  null  and  meaningless  in  law.^^ 

(5)  As  a  general  rule  statements  made  by  a  bank  officer 
concerning  any  past  transaction,  though  the  matter  to  which 
Past  trans-  ^^^J  refer  is  one  which  falls  within  the  scope  of  his 
actions.  employment,  will  not  be  regarded  as  binding  upon 

the  bank.  They  are  considered  to  be  given  simply  as  a  mat- 
ter of  favor  to  the  inquirer.  The  officer  owes  no  duty  to  the 
bank  to  answer  interrogatories  which  relate  only  to  a  com- 

^°  See  also  the  cases  of  Atlantic  Bank  v.  ^Merchants'  Bank,  10  Gray 
(Mass.),  532;  Skinner  v.  Merchants'  Bank,  4  Allen  (Mass.),  290;  Weckler 
V.  First  National  Bank,  42  Md.  581. 

11  Stewart  v.  Huntingdon  Bank,  11  Serg.  &  R.  (Pa.)  267. 

12  Pemigewassett  Bank  v.  Rogers,  18  N.  H.  255  ;  Loorais  v.  Eagle 
Bank  Disney  (Ohio),  285.  See  also  Soper  v.  Buffalo  &  Rochester  R.  R. 
Co.,  19  Barb.  (N.  Y.)  310. 

238 


REPRESENTATIONS.  §  103 

pleted  transaction.  He  is  not  employed  for  that  purpose,  or 
held  out  by  the  bank  as  intrusted  to  fulfil  such  a  function. 
The  interrogator  simply  requests  a  favor  from  the  officer  per- 
sonally, which,  if  granted,  can  create  no  liability  as  against 
the  bank.i3  g^t  an  exception  will  arise  to  this  rule  where 
the  officer  of  the  bank  knows  that  his  answer  to  the  inquiry  \a 
to  form  the  ground  of  future  action  on  the  part  of  the  in- 
quirer, so  that  accurate  information  is  not  merely  desired  to 
satisfy  a  curiosity  as  to  an  occurrence  wholly  in  the  past,  but 
is  sought  and  needed  for  governing  important  dealings  in  the 
present  and  future.  So,  too,  if  the  declarations  or  admis- 
sions, though  relating  to  something  that  is  in  mere  point  of 
time  past,  yet  have  for  any  reason  a  present  interest  and 
weight,  or  from  any  combination  of  circumstances  assume  a 
still  subsisting  importance,  they  will  then  be  admissible  as 
constituting  a  part  of  the  res  gestce,  without  regard  to  the  fact 
that  the  precise  act  itself  to  which  they  relate  was,  strictly 
speaking,  concluded  some  time  before.  Thus  where  a  person 
who  had  been  called  upon  to  pay  a  note,  insisted  that  it  had 
been  paid  ;  and  in  the  discussion  the  president  examined  the 
books  of  the  bank,  became  satisfied  of  the  payment,  and  admit- 
ted it  to  have  been  made  ;  it  was  afterward  held  that  evidence 
of  his  admission  was  competent  to  bind  the  bank,  because  in 
fact  it  constituted  a  part  of  the  res  gestce,  and  was  made  by 
him  in  the  execution  of  his  ordinary  official  duties.^* 

The  cashier  and  a  director  falsely  told  C.  that  they  consid- 
ered G.,  the  maker  of  a  note,  perfectly  good.  C.  indorsed  the 
note,  and  G.  thereupon  obtained  its  discount  by  the  bank. 
The  representations  not  being  in  the  course  of  the  agency  of 
the  officers,  the  bank  could  not  be  held,  though  they  were 
wilfully  false. ^^ 

13  Pemigewassett  Bank  v.  Rogers,  18  N.  H.  255;  Franklin  Bank  r. 
Steward,  37  Me.  519 ;  Lime  Rock  Bank  v.  Hewett,  52  id.  531 ;  Franklin 
Bank  v.  Cooper,  39  id.  542;  Sterling  v.  Marietta  &  Susquehanna  Trading 
Co.,  11  Serg.  &  R.  (Pa.)  179. 

"  Franklin  Bank  v.  Steward,  37  Me.  519;  Bank  of  Monroe  v.  Field,  2 
Hill  (N.  Y.),  445. 

"  Mapes  V.  Second  National  Bank  of  Titusville,  80  Pa.  St.  163. 

239 


§  103       OFFICERS    AND    AGENTS.  —  GENERAL   PRINCIPLES. 

L.,  who  owned  six  shares  of  bank  stock,  asked  C.  for  a  loan 
on  pledge  of  them.  C,  calling  at  the  bank  to  ask  if  the  stock 
was  unencumbered,  was  told  by  the  officer  in  charge  of  the 
bank's  business  that  the  stock  was  free,  and  he  might  safely 
take  it;  and  it  was  held  that  the  bank  was  estopped  from 
declaring  the  stock  forfeit  for  dues  to  it  from  L.  before  the 
shares  were  pledged  to  C.^^  And,  where  one  is  induced  to 
sign  a  note  as  surety  upon  the  assurance  of  an  officer  of  the 
bank  that  certain  stock  of  the  maker  is  retained  as  security, 
the  surety  is  only  liable  for  the  difference  between  the  value 
of  the  stock  and  the  amount  of  the  note.^^" 

(c)  A  bank  cannot  escape  the  consequences  of  misrepre- 
sentation made  by  its  officer  by  showing  that  the  falsehood 
was  told  such  officer  by  another,  also  an  officer  of  the  bank.^^ 

(<i)  A  bank  is  not  bound  by  its  tellers  statement  that  the 
indorsement  on  a  check  is  genuine.^^ 

(e)  If  C.  lends  money  to  the  cashier  (A.)  for  his  pri- 
vate use,  and  receives  from  him  a  certificate  in  the  lender's 
name  and  signed  by  the  president,  but  stating  that  shares  are 
transferable  only  on  the  bank-books  and  on  surrender  of 
former  certificate,  and  no  certificate  has  been  surrendered, 
and  the  bank  has  neitlier  ratified  the  transaction  nor  re- 
ceived benefit  therefrom,  C,  though  defrauded  by  the  cashier, 
has  no  remedy  against  the  bank.  The  bargain  was  with  A. 
personally.  C.  lent  him  money  for  his  own  use,  not  for  the 
bank;  and,  his  representations  being  in  his  own  business, 
could  not  affect  the  bank.  Moreover,  the  certificate  on  its 
face  gave  C.  notice  .^^ 

If  A  bank  receives  a  general  inquiry  from  B  bank  as  to  the 
financial  standing  of  a  customer,  and,  in  answering,  fails  to 
disclose  the  fact  that  the  customer  was  indebted  to  A  bank, 
and  that  it  held  liens  on  certain  of  his  property,  it  will  not  be 

18  Moore  v.  Bank  of  Commerce,  52  Mo.  377  (1873). 

"«  Packard  v.  Harrington,  41  Kan.  469  (21  Pac.  621)  (1889). 

17  Gould  V.  Cayuga  National  Bank,  56  How.  Pr.  (N.  Y.)  505  (1877). 

18  Walker  v.  St.  Louis  National  Bank  5  Mo.  App.  214  (1878). 

19  Moores  v.  Citizens'  National  Bank  of  Piqua,  111  U.  S.  156  (1884). 
See  People's  Bank  i-.  Kurtz,  99  Pa.  St.  344 ;  Merchants'  Bank  v.  Living- 
ston, 74  N.  Y.  223  ;  Western,  &c.  R.  R.  v.  Franklin  Bank,  60  Md.  36. 

240 


WHEN   THE    BANK    HAS   NOTICE.  §  105 

estopped  in  the  absence  of  fraud  to  assert  such  liens  as  against 
a  mortgage  subsequently  taken  by  B  bank.^o 

§  104.     When  the  bank  has  notice. — The  grounds  of  de- 
cision in  this  matter  are  :  — 

(a)  First.  Presumed  communication.  —  It  is  the  duty  of 
an  agent  to  give  the  bank  the  benefit  of  his  knowledge  con- 
cerning the  business  in  which  he  is  engaged  by  B.,  Grounds  of 
and  in  the  absence  of  adverse  interest  rebutting  the  <^'^c'*'<''i- 
inference,  he  is  presumed  to  do  his  duty.  And  the  principal 
is  chargeable  with  the  information  acquired  by  his  agent, 
whether  he  obtained  it  in  the  course  of  the  transaction  of  his 
principal's  business  or  otherwise,  provided  the  knowledge  is 
so  acquired  by  him  as  to  be  presumptively  within  his  recollec- 
tion when  he  is  acting  on  behalf  of  his  principal.^ 

(h)  Second.  Identity.  —  B.  cannot  take  any  advantage  of 
a  third  person,  C. ,  by  employing  A.  to  negotiate  the  business 
instead  of  doing  it  himself.  Unless  C.  has  notice  to  the  con- 
trary, he  has  a  right  to  regard  -A.  and  B.  as  identical  in  re- 
spect to  all  notice  that  is  received  in  the  very  transaction ; 
for  that  B.  would  have  received  if  he  had  conducted  the  busi- 
ness himself,  and  also  in  respect  to  information  concerning 
the  matter  which  C.  knows  A.  to  possess  by  previous  or  out- 
side acquirement,  and  perhaps  for  that  very  reason  does  not 
further  enforce  the  subject  upon  A.'s  attention  during  the 
transaction.  In  such  cases  the  notice  enters  into  the  dealing, 
is  within  the  contemplation  of  both  parties.  And  Knowledge 
farther,  B.  cannot  escape  from  the  effect  of  knowl-  o^bank. 
edge  he  himself  possesses  by  employing  A.,  and  if  there  is 
reasonable  time  for  B.  to  communicate  his  knowledge  to  A. 
before  the  event  which  raises  the  question,  the  transaction  is 
affected  by  B.'s  information.^ 

§    105.     (1)    The  notice  must  be  credible.     It  must  be  of  a 
trustworthy   and   authentic   nature.      Rumor,   or   gossip,  or 

20  First  National  Bank  v.  Marshall  Bank,  83  Fed.  725. 

1  §  104.    Bank  v.  Shook,  100  Tenn.  436  (45  S.  W.  338)  (1897);  Le 
Due  V.  Moore,  111  N.  C.  516  (15  S.  E.  888)  (1892). 

2  Hummel  v.  First   National  Bank,  2  Col.  App.  571    (32  Pac.  72); 
Mayhew  v.  Eames,  3  B.  &  Cress.  601. 

VOL.  I. —16  241 


§  108       OFFICERS    AND    AGENTS.  — GENERAL   PRINCIPLES. 

statements  proceeding  from  sources  which  might  naturally  be 
supposed  inaccurate,  are  neither  knowledge  nor  no- 
^*  tice.  Hearsay  tales  and  idle  talk  can  be  properly 
disregarded,  but  information  of  so  credible  a  nature  that  no 
reasonable  man  would  dare  to  neglect  it  in  his  own  private 
affairs  cannot  be  neglected  by  a  bank  officer  in  the  affairs  of 
the  bank. 

§  106.  (2)  If  the  third  party,  C,  knows  that  A.  has  an 
adverse  interest  tending  to  cause  him  to  withhold  his  knowl- 
Adversein-  ^^o®  from  the  bank,  C.  has  no  right  to  regard  A. 
terest.  ^^^  g_  ^s  identical  in  the  transaction,  and  cannot 

hold  B.  So  one  who  persuades  a  cashier  not  to  impart  his 
knowledge  to  the  bank  cannot  hold  the  bank  affected  by  such 
notice.^  The  knowledge  of  an  officer  in  dealing  adversely  to 
the  interests  of  the  bank  does  not  bind  the  bank.^ 

§  107.  (3)  Subject  to  (1)  and  (2)  we  have  the  following 
rules. 

(x)  Notice  to  one  whose  business  it  is  to  receive  such  no- 
tice binds  the  bank,  whether  such  agent  has  any  other  duty  to 
Special  ap-  perform  in  regard  to  the  matter  to  which  the  notice 
Mdu^^.*^  relates  or  not.  Any  one  the  bank,  or  directors,  or 
custom,  may  appoint  for  the  very  purpose  of  receiving  notices 
of  course  has  power  in  the  matter,  resting  on  the  same  princi- 
ples as  the  authority  to  do  any  other  act.  For  example,  it  is 
part  of  the  president's  inherent  power  to  receive  notice  of 
suits  against  the  bank. 

§  108.  (3/)  If  (x)  does  not  apply,  the  next  question  is.  Bid 
^.,   ,  A.  act  for  the  bank  in  the  business  to  which  the  notice 

Did  the  *' 

agent  act  ?      relates  ?  ^ 

1  §  106.    First  National  Bank  of  Sturgis  v.  Reed,  36  Mich.  263. 

2  Bank  v.  Lovitt,  114  Mo.  .519;  1  Morawetz  on  Corp.,  §  540  c. ;  Gra- 
ham V.  Orange  Co.  National  Bank,  35  Atl.  1053  (1896);  Brandon  Bank  v. 
Briggs'  Assignees,  70  Vt.  594  (41  Atl.  580)  (1898);  Holm  v.  Atlas  Na- 
tional Bank,  84  Fed.  119  (1898);  Findley  v.  Cowles,  93  la.  389  (61  N.  W. 
998)  (1895);  Fort  Dearborn  National  Bank  v.  Seymour,  71  Minn.  81  (73 
N.  W.  724)  (1898) ;  Benton  v.  German-American  National  Bank,  122  Mo. 
332;  (26  S.  W.  975). 

1  §  108.     See  Hoover  v.  ^^\se,  91  U.  S.  308  ;  Commercial  Bank  i;.  Cun- 
ningham, 24  Pick.  (Mass.)  270. 
242 


WHEN  THE  BANK  HAS  NOTICE.  §  109 

If  not,  the  bank  is  not  affected  by  his  knowledge. 

If  he  did  so  act,  then  the  question  is,  TVTien  did  he  receive 
the  information,  and  in  what  capacity  ? 

If  it  came  to  him  officially,  while  acting  in  the  very  business 
which  it  concerns,  it  binds  the  bank,  if  it  came  in  sufficient 
season  to  be  acted  upon.^ 

§  109.  If  notice  comes  to  A.,  as  it  might  to  any  other  in- 
dividual, not  officially  nor  while  acting  for  the  bank  in  the 
business  to  which  it  relates,  as  if  it  is  previous'^  to  his  employ- 
ment as  agent,  then  the  bank  is  bound,  provided, — 

1st.    That  the  information  is  not  privileged  in  law. 

2d.  That  it  is  so  recent,  and  is  so  circumstanced  in  other 
respects,  as  to  render  it  reasonably  probable  that  it  was  still 
present  in  the  mind  of  A.  when  acting  for  B.  in  the  matter  to 
which  it  relates.  It  would  be  hardly  fair  to  hold  the  bank 
responsible  for  A.'s  failure  to  remember  a  remote  piece  of 
information. 

3d.  That  A.  has  no  interest  adverse  to  communication  of 
his  knowledge  to  the  bank  ;  or  if  he  has  such  interest,  that  C.  is 
aware  of  A.'s  possession  of  the  knowledge,  but  not  aware  of  the 
adverse  interest.  If  C.  knows  of  the  adverse  interest,  the  case 
comes  under  §  106.  If  C.  does  not  know  of  the  adverse  inter- 
est, nor  that  A.  has  the  knowledge,  the  knowledge  being  previ- 
ous, the  bank  cannot  be  held  on  the  ground  of  identity  with 
A.  at  the  time  of  receiving  notice,  nor  upon  the  presumption 

2  See  Fairfield  Savings  Bank  v.  Chase,  72  Me.  226 ;  Bank  of  United 
States  V.  Davis,  2  Hill  (N.  Y.),  451. 

1  §  109.  See  the  Distillery  Spirits,  11  Wall.  356;  National  Bank  v. 
Cushman,  121  Mass.  490;  Fairfield  Savings  Bank  v.  Chase,  72  Me.  226; 
Anketel  v.  Converse,  17  Ohio  St.  11;  Hart  v.  F.  &  M.  Bank,  33  Vt.  252; 
Blumenthal  v.  Brainard,  38  Vt.  410;  Hayward  v.  National  Ins.  Co.,  52 
Mo.  181;  Dresser  v.  Norwood,  17  C.  B.  n.  s.  466;  Fuller  v.  Benett, 
2  Hare,  402.  But  Pennsylvania  holds  that  notice  twenty-four  hours  be- 
fore the  agency  is  no  more  notice  to  the  principal  than  if  received  twenty- 
four  hours  after  it  ceased.  81  Pa.  St.  256.  Notice  to  an  agent  of  the 
bank  is  notice  to  the  bank  in  transactions  conducted  by  such  agent  acting 
for  the  bank,  within  the  scope  of  his  authority,  whether  his  knowledge  was 
acquired  in  the  course  of  the  particular  dealing,  or  on  some  prior  occasion. 
Cragie  v,  Hadley,  99  N.  Y.  131. 

243 


8  111        OFFICERS   AND    AGENTS.  —  GENERAL   PRINCIPLES. 

that  A.  communicates  for  the  adverse  interest  rebuts  the 
presumption. 

But  although  this  seems  to  be  the  rule  laid  down  by  the 
cases  cited,  it  seems  questionable  whether  in  any  case  B. 
should  be  allowed  to  take  advantage  of  A.'s  bad  faith.  Of 
course  the  responsibility  should  ultimately  fall  upon  A. ;  but 
as  between  B.  and  C,  C.  is  entirely  innocent,  while  B,  has  at 
least  erred  in  judgment  by  selecting  an  agent  whose  conduct  is 
blameworthy.  If  the  loss  by  reason  of  A.'s  bad  faith  must 
rest  upon  either  B.  or  C,  it  seems  clear  that  the  blot  is  on  B.'s 
side  of  the  line ;  his  conduct  in  selecting  a  defective  instru- 
ment has  caused  loss  to  C.  which  would  not  have  resulted  if 
the  instrument  employed  by  him  had  come  up  to  the  standard 
of  good  faith  which  it  is  one  of  the  great  objects  of  the  law  to 
secure  in  commercial  dealings. 

If  the  third  party,  C,  does  not  know  of  the  adverse  interest 
of  the  agent.  A.,  but  does  know  that  A.  has  the  knowledge, 
(which  perhaps  C.  had  himself  imparted  to  A.  before  he  be- 
came agent,  or  while  not  acting  as  agent),  C.  certainly  has  a 
right  to  consider  that  notice  as  entering  into  the  dealing  be- 
tween them,  just  as  truly  as  if  it  had  come  to  A.  in  the  course 
of  that  very  transaction. 

§  110.  (4)  If  A.  assumes  to  act  as  agent  for  the  bank, 
B.,  and  B.  afterward  adopts  or  takes  the  benefit  of  the  act, 
B.  takes  it  subject  to  notice  of  all  such  matters  as  appear  to 
have  been  at  the  time  within  the  knowledge  and  recollection 
of  A.1 

§  111.  (5)  Notice  to  an  agent  in  regard  to  a  matter  in 
which  he  does  not  act  for  the  lank  is  not  notice  to  the  bank ; 
When  notice  ^or  if  while  acting  for  the  bank  he  has  information 
to  agent  does   ^f  matters  which  do  not  affect  his  own  duties,  nor 

not  aiiect 

bank.  relate  to  the  bank's  business  in  a  way  that  comes 

within  the  scope  of  his  employment. 

For  example,  if  one  is  engaged  in  mere  ministerial  duties, 
as  a  clerk  copying  a  deed,  his  knowledge  of  a  former  deed  or 
incumbrance  on  the  land  is  not  notice  to  the  bank.i     Notice 

1  §  110.     Hovey  v.  Blanchard,  13  N.  H.  145. 

1  §  111.     See  remarks  in  Fairfield  Savings  Bank  v.  Chase,  72  Me.  226. 
244 


WHEN  THE  BANK  HAS  NOTICE.  §  111 

to  a  bank  messenger,  whose  only  duty  is  to  collect  paper  and 
not  to  report  responses  of  persons  who  refuse  to  pay,  is  not 
notice  to  the  bank.^"  But  a  bank  is  charged  with  notice  of  let- 
ters mailed  to  it,  but  wrongfully  suppressed  by  a  bookkeeper 
whose  duty  it  is  to  open  and  distribute  the  mail.^''  If  it  does 
not  concern  a  matter  which  falls  within  the  scope  of  his  real 
or  presumable  agency  and  official  employment,  apparently  he 
is  at  liberty  to  disregard  it,  and  the  bank  cannot  be  injuriously 
affected  by  his  so  doing.  For  the  bank,  having  neither  made 
him  its  agent  nor  held  liim  out  as  such  in  these  premises,  is 
bound  by  nothing  which  he  does,  says,  or  hears  therein.  If 
the  cashier  knows  or  learns  something  concerning  a  matter 
exclusively  within  the  functions  of  the  president,  his  knowl- 
edge is  not  the  knowledge  of  the  bank.  In  the  language  of 
the  court  in  the  case  of  The  Fulton  Bank  v.  New  York  and 
Sharon  Canal  Co.,  "  if  the  notice  be  to  one  who  has  no  duty  to 
perform  relative  to  the  subject  matter  of  the  notice,  it  will  not 
be  enough."  ^  The  words  were  used  in  discussing  notice  to  a 
director,  but  they  state  a  doctrine  of  general  application. 

In  the  case  of  knowledge  acquired  by  or  communicated  to 
any  other  officer  than  a  director,  little  difficulty  can  arise. 
The  president,  it  should  be  remembered,  is  a  director.  But 
his  duty  of  supervision  is  more  extensive  than  that  of  any 
other  member  of  the  board.  Wherefore  notice  to  him  on  any 
subject  would  probably  be  held  to  be  notice  to  the  bank.^ 
Generally  it  may  be  said  that  if  the  notice  relates  to  any 
matter  which  falls  within  the  scope  of  the  agency  and  official 
employment  of  the  officer  to  whom  the  notice  is  given,  then  it 
is  notice  to  the  bank, 

(a)  In  Fairfield  Savings  Bank  v.  Chase,*  Brown,  an  attor- 
ney and  one  of  the  trustees,  was  engaged  to  draw  a  mortgage, 
i.  e.  to  convey  title  to  the  bank,  and  he  knew  there  was  a 
prior  deed  of  the  property  which  failed  to  be  recorded  till 

i«  Camp  V.  Southern  Bank,  97  Ga.  582  (25  S.  E.  362)  (1895). 

i*-  First  Nat.  Bank  v.  Fourth  Nat.  Bank,  56  Fed.  967. 

2  4  Paige  (N.  Y.),  127. 

8  Porter  v.  Bank  of  Rutland,  19  Yt.  410. 

4  72  Me.  226  (1881). 

245 


S  112       OFFICERS   AND   AGENTS.  —  GENERAL  PRINCIPLES. 

after  the  mortgage.  It  was  held,  that,  if  Brown  was  acting 
for  the  hank  in  the  matter  of  drawing  the  mortgage,  his 
knowledge  was  notice  to  the  bank,  but  as  the  evidence  on  this 
point  was  doubtful,  it  should  have  gone  to  the  jury,  and  as 
it  did  not,  the  verdict  was  set  aside. 

§  112.  (6)  Notice  to  a  single  Director.  —  It  has  been  held 
that  each  member  of  the  board  of  directors  is  the  agent  of 
the  bank  to  receive  notice,  and  if  he  acts  in  the  matter, 
although  only  one  of  a  large  majority,  the  others  all  acting 
honestly  and  without  notice,  actual  or  constructive,  yet  the 
knowledge  of  the  one  director  binds  the  bank  as  much  as  if 
he  were  a  sole  agent,  doing  the  business  alone.^ 

It  is  a  question  whether  it  is  just,  in  case  of  a  composite 
agency  like  the  board  of  directors,  to  hold  the  bank  bound  by 
the  knowledge  of  one,  any  more  than  by  the  other  individual 
conduct  of  one.  Since  the  power  and  agency  is  in  the  hoard, 
and  is  not  intrusted  to  individuals,  it  would  seem  proper 
that,  to  affect  the  bank,  the  knowledge  should  be  that  of 
the  hoard,  or  of  so  many  that  its  action  would  not  stand 
after  taking  away  the  votes  of  those  having  notice.  The. 
directorial  act  should  involve  the  notice,  the  knowledge  should 
enter  into  and  taint  the  cause  of  the  bank's  conduct,  in  order 
to  vitiate  it.     See  §  114. 

(a)  In  Louisiana  State  Bank  v.  Senecal,^  the  court  thought 
it  reasonable  that  there  should  be  formal  notice  to  the  board, 
or  at  least  that  the  majority  of  the  directors  should  be 
affected.  This  perhaps  is  going  as  far  the  other  way  iu 
statement,  though  the  thought  of  the  court  was  probably 
really  directed  to  the  point  of  causation  which  we  are 
noticing. 

An  individual  director,  unless  specially  authorized,  is  not 
the  agent  of  the  bank  to  do  any  business ;  he  is  simply  one 
member  of  a  composite  agency,  that  must  act  as  a  unit  to 
bind  the  bank. 

For  this  reason  the  argument  used  above  in  §  108  to  en- 

1  §  112.    North  River  Bank  v.  Aymar,  3  Hill  (N.  Y.),  262;  Bank  of 
'  United  States  v.  Davis,  2  id.  451. 

2  13  La.  527. 

246 


NOTICE   TO    A   SINGLE    DIRECTOR.  §  113 

force  the  liability  of  the  bank  where  A.  is  guilty  of  bad  faith, 
though  in  regard  to  previously  acquired  information,  does  not 
apply  here ;  the  instrument  used  by  the  bank  is  the  board  as 
a  unit,  and  unless  the  board  as  a  unit  is  affected  with  bad 
faith  the  transaction  is  pure.  If  an  officer  acts  with  due  care 
and  in  good  faith,  it  cannot  make  his  conduct  anything  but 
morally  and  legally  good  and  proper  because  some  one  who 
is  acting  dishonestly  may  give  him  advice. 

Suppose  a  director  (D. )  has  knowledge  and  stays  away 
from  the  meeting,  and  the  board  votes  by  five  majority  to 
do  a  certain  thing  to  which  D.'s  notice  relates,  the  cases  are 
clear,  the  bank  is  bound.  Now  suppose  he  takes  his  seat, 
and  there  is  a  majority  of  six,  an  honest  majority  of  five,  how 
is  the  bank's  action  vitiated  ?  Or  suppose  he  goes  further, 
and  argues  for  the  resolution ;  the  others  have  a  right  to  hear 
argument  from  any  source,  and  weigh  it  candidly ;  if  they  are 
really  honest,  the  vote  is  still  untainted.  If  there  is  one 
white  hair  in  a  beard,  it  is  hardly  correct  to  say  the  beard  is 
white,  and  fraud  in  the  vote  of  a  single  town  will  not  vitiate 
the  election  of  a  President  of  the  United  States. 

(J)  Still,  the  law,  in  order  to  avoid  troublesome  inquiry 
and  prevent  the  possibility  of  fraud,  is  in  the  habit  of  drawing 
broad  lines  beyond  all  the  doubtful  territory,  and 

..  ..  .11  .1,1  11  I.         Conclusion. 

SO  it  may  continue  to  be  law  that  knowledge  of  a 
single  director  acting  in  the  business  for  the  bank  while  pos- 
sessing such  notice  is  sufficient  to  bind  the  bank  ;  although 
strict  justice  would  require  no  more  than  that,  when  it  is 
shown  that  one  director  had  notice,  the  burden  of  proof 
should  be  on  the  bank  to  show  that  the  action  of  the  board 
was  not  determined  by  that  director. 


Note  on  the  Competency  of  Bank  Officials  and  Shareholders 
AS  Witnesses  on  Bank's  Behalf. 

§  113.  It  may  now  be  laid  down,  in  general  terms,  that  the  officer  or 
agent  of  the  bank  is  a  competent  witness  in  its  behalf,  even  concerning 
a  transaction  which  he  himself  conducted,  or  in  which  he  was  interested 
or  engaged.  In  such  cases  it  must  frequently  happen  that  the  oflBcer  or 
agent  will  be  personally  and  closely  interested  in  the  determination  of  the 

247 


§  113       OFFICERS   AND    AGENTS,  —  GENERAL   PRINCIPLES. 

litigation.  For  if  the  bank  should  fail  of  success  by  reason  of  any  inac- 
curacy, irregularity,  or  wrongfulness  in  bis  proceedings,  it  must  be  antici- 
pated as  a  natural  result  that  he  will  himself  be  sued  by  the  bank,  either 
upon  his  official  bond  or  his  common  law  liability,  and  held  to  answer  for 
the  consequences  of  his  default,  besides  suffering  all  the  collateral  mis- 
chief of  a  loss  of  his  position  and  reputation.  The  latter  fact,  of  course, 
could  not  operate  to  render  him  incompetent,  but  must  be  confined  to 
affecting  his  credibility.  The  former  fact,  however,  goes  directly  to  the 
question  of  his  competency.  It  is  not  to  be  supposed  that  the  extension 
of  the  exception  to  the  general  rule  to  cover  these  cases  has  been  allowed 
to  take  place  without  opposition.  But  the  several  decisions  have  been 
uniformly  in  favor  of  the  admission  of  the  testimony,  so  that  the  matter 
must  at  last  be  regarded  as  definitively  settled  according  to  the  above 
doctrine. 

(a)  The  simplest  class  of  cases,  those  in  which  the  objectors  to  the 
competency  certainly  had  but  very  little  ground  to  stand  upon,  were  those 
wherein  the  officer  or  agent  had  been  formally  and  sufficiently  released  by 
the  bank  from  all  manner  of  claim  which  it  might  have  against  him,  even 
if  he  should  appear  to  have  been  in  default.  No  difficulty  seems  to  have 
been  experienced  in  disposing  of  these  in  favor  of  the  admissibility. ^ 
The  next  step  in  advance  was  taken  in  the  cases  in  which  some  possible 
question  might  arise  as  to  any  liability  of  the  officer  or  agent  to  the  bank. 
But  admitting  a  possibility  that  he  might  be  held  by  the  bank,  yet  this 
was  by  no  means  equivalent  to  the  established  fact  that  he  certainly 
could  be  so  held.  It  was  an  assumption,  which  might  so  obviously  prove 
erroneous,  that  the  court  could  not  be  expected  to  make  it.  The  contin- 
gent impropriety  of  receiving  the  testimony  could  not  be  allowed  to  have 
equal  effect  with  a  positive  impropriety.  So  again  in  these  cases  the  nar- 
row question  of  intrinsic  competency  was  evaded,  and  the  evidence  was 
admitted  as  it  were  through  a  side  door.^  But  it  was  not  of  course  always 
possible,  however  much  the  courts  might  have  wished  it  to  be  so,  thus 
satisfactorily  to  flank  the  main  position  of  the  objectors.  Sooner  or  later 
the  question  of  the  intrinsic  competency  of  such  persons  as  witnesses  must 
arise,  and  must  be  decided  fairly  upon  its  own  merits ;  and  it  having 
finally  arisen  in  various  States,  the  courts  of  each,  thus  far  without  an  excep- 
tion, have  decided  to  admit  the  testimony  offered.  The  Supreme  Court 
of  the  United  States  and  the  text-books  on  evidence  have  adopted  the 
same   rule.*     The  obvious  necessity  of  the  case  has  conquered  all  less 

1  §  113.  Farmers  &  Mechanics'  Bank  v.  Champlain  Transportation 
Co.,  18  Vt.  131 ;  23  id.  186;  Johnson  v.  Farmers'  Bank,  1  Harr.  (Del.) 
117. 

2  Franklin  Bank  v.  Freeman,  16  Pick.  (Mass.)  535;  Union  Bank  w. 
Knapp,  3  id.  96. 

«  United  States  Bank  v.  Stearns,  15  Wend.  (X.  Y.)  314 ;  Farmers  & 

248 


COMPETENCY   OF   OFFICERS.  §  113 

objections.  It  mnst  be  that  an  ofBcer  should  be  allowed  under  oath  to 
state  what  he  had  done ;  since  otherwise  the  bank  was  so  utterly  tongue- 
tied  that  it  must  fall  an  inevitable  sacrifice  to  the  most  unworthy  plain- 
tiff, and  furnish  an  obvious  temptation  to  dishonest  suits. 

Shareholders  as  Witnesses. 

(b)  A  shareholder  in  the  bank,  by  assigning  away  his  stock,  may  render 
himself  a  competent  witness  in  its  behalf.  Neither  is  it  too  late  for  him 
to  make  the  assignment  after  the  suit  has  been  begun.*  If  a  statute  of  the 
State  in  which  the  bank  is  incorporated  declares  stockholders  to  be  liable 
to  the  holders  of  notes  of  the  bank  in  case  of  the  insolvency  of  the  corpo- 
ration, the  contingent  liability  under  this  law  of  one  who  has  at  any  pre- 
vious time  been  a  stockholder  will  not  impair  his  competency  as  a  witness. 
His  interest  in  the  affairs  and  prosperity  of  the  bank  is  too  remote  to  be 
permitted  to  have  this  effect,  at  least  unless  there  is  some  evidence  of 
inability  on  the  part  of  the  bank  to  meet  its  liabilities.^ 

Declarations  of  Officers. 

(c)  W.  seeks  credit  at  a  bank  and  makes  certain  representations  to  the 
cashier  concerning  his  standing.  If  the  cashier  reports  the  conversation 
to  the  "  discount  committee,"  and  the  bank  subsequently  attempts  to  set 
aside  the  transaction  on  the  ground  of  fraudulent  representations,  the 
members  of  the  committee  may  testify  as  to  what  the  cashier  stated  to 
be  W.'s  conversation.^ 

Declarations  by  the  manager  of  a  bank  after  the  bank's  insolvency  as 
to  the  state  of  old  accounts  are  admissible  to  show  the  true  state  of  the 
accounts,  the  bank-book  having  been  surrendered.'^ 

Mechanics'  Bank  v.  Champlain  Transportation  Co.,  18  Vt.  131;  Huntress 
V.  Patten,  20  Me.  28 ;  Jackson  v.  Bank  of  the  United  States,  10  Pa.  St. 
61 ;  2  Starkie  on  Evidence,  753,  767,  768,  n.  2;  1  Greenleaf  on  Evidence, 
416,  417;  Cookendorfer  v.  Preston,  4  How.  (U.  S.)  317;  Franklin  Bank 
V.  Freeman,  16  Pick.  (Mass.)  535.  See  also  Wiggin  v.  Freewill  Baptist 
Church,  8  Met.  (Mass.)  301. 

*  Meighen  r.  Bank,  25  Pa.  St.  288. 

6  Ibid. ;  citing  also  Willings  j;.  Consequa,  1  Pet.  301 ;  Curcier  v.  Pen- 
nock,  14  Serg.  &  R.  (Pa.)  51 ;  Irvine  r.  Lumbermen's  Bank,  2  Watts  & 
S.  (Pa.)  190. 

^  National  Bank  v.  Illinois  and  Wisconsin  Lumber  Co.,  101  Wis.  247 
(77  N.  W.  185)  (1898). 

'  Dingley  v.  McDonald,  124  Cal.  90  (56  Pac.  790)  (1899). 


249 


CHAPTER  IX. 

DIRECTORS. 

§  114.   Analtsis. 

§  115.  Division  op  Management.    The  bank  may  divide  the  management 
among  several  boards  or  committees. 
Authority. 

§  1J6.  Management  and  superintendence.     They  are  the  brains,  judgment, 

discretion,  of  the  bank  ;  they  can  delegate  the  execution  of  their 
decisions  and  limited  discretion  in  small  matters,  but  not  discre- 
tion in  weighty  matters.     §§  143,  151. 

§  117.  Allowing  discounts  is  an  exclusive  power  of  the  board,  though  the 

execution  may  be  delegated,  as  by  giving  the  cashier  authority 
to  discount  for  a  certain  person  to  a  certain  amount. 
Allowing  overdrafts  is  also  an  exclusive  function.     §§  357,  358. 

§  118.  Execution  of  daily  routine  is  not  a  part  of  the  management. 

§  119.  They  may  release  a  debt  due  the  bank  if  they  think  it  best  for  the 

bank's  interest. 

§  120,  They  may  pledge  or  assign  property  of  the  bank  to  pay  or  secure 

creditors,  just  as  an  individual  may. 

§  121.  Issuing  bank  bills  when  the  bank  has  the  right  is  an  exclusive  func- 

tion of  the  board. 

§  122.  Directors  may  arrange  with  other  banks  for  collection,  redemption 

of  bills,  transfer  of  stock,  &c. 

§  123.  They  may  remove  the  president,  or  any  other  oflScer. 

§  124.  The  power  of  directors  rests  in  them  as  a  board,  not  as  individuals. 

In  the  absence  of  express  provision,  a  majority  is  a  quorum,  and 
a  majority  of  a  quorum  at  a  legal  meeting  is  necessary  to  bind 
the  bank.  No  individual  director  has  authority  to  bind  the  bank 
by  his  representations  or  statements,  but  he  may  make  himself 
liable  for  misrepresentation,  or  slander,  or  libel. 
Duty.    §  163. 

§  125.  Directors  must  show  a  reasonable  capaciti/  for  their  position,  must 

exercise  discretion  and  industry  in  good  faith,  and  must  obey  the 
directions  of  the  charter  and  organic  law.  They  are  trustees, 
owing  their  first  duty  to  the  public,  so  far  as  concerns  the  circu- 
lating notes  of  the  bank  (if  it  has  any),  next  to  the  depositors,  and 
then  to  the  stockholders ;  and,  in  common  with  all  persons  acting 
in  a  fiduciary  capacity,  it  is  their  duty  not  to  acquire  any  interest 
adverse  to  that  of  the  bank,  nor  to  make  any  profit  from  their 
employment. 
§  126.  It  is  their  duty  to  repudiate  the  wrongful  acts  of  subordinate  offi- 
cers, and  to  discharge  a  guilty  one. 

250 


DIRECTORS.  §  114 

§  124.         They  should  see  that  their  fellow  directors  are  properly  notified  of 
meetings. 
No  Power. 
§  127.  They  have   no  power  to  increase  the   capital   or   to   work  any  or- 

ganic change.     §  144. 
They  cannot  release  a  shareholder  from  his  liability.     §  671. 
§  125.  They  cannot  make  a  profit  for  themselves  from  tlieir  trust,  except 

such  as  is  common  to   all  stockliolders,  nor  make  a  contract  in 
which  they  have  an  adverse  interest. 
§  127.  They  cannot  give  away  the  bank's  property.     Their  discretion  ia 

limited  to  conducting  the  affairs  of  the  bank  so  as  to  increase  its 
profits,  and  to  enhance  the  value  of  its  property  intrusted  to  them 
in  the  pursuance  of  legitimate  banking  business.  They  cannot 
make  the  bank  an  accommodation  indorser  nor  a  gratuitous  surety 
in  any  way. 
§  116.  They  cannot  delegate  discretion  in  important  matters. 

Nor  acquire  adverse  interest  to  bank;  but  if  a  director  votes  in  a 
matter  improperly,  the  bank  will  still  be  bound  to  innocent  third 
parties.     §  127  c. 
Liability.     §§  79,  129,  147,  717  c;  II.  §§  53,  153. 
To  the  bank  or  shareholders. 
§  128.  For  any  loss  by  reason  of  their  incompetence,  bad  faith,  or  neg- 

ligence of  duty.  But  an  error  of  judgment,  such  as  any  one 
of  reasonable  capacity  might  make,  or  an  innocent  mistake 
of  fact,  is  an  excuse.  Ignorance,  however,  of  any  fact  which 
reasonable  diligence  in  the  discharge  of  duty  would  have 
brought  to  knowledge  is  not  innocent.  Ill  health  is  held  no 
excuse  for  such  ignorance. 
Only  the  directors  who  cmise  the  damage  are  liable,  though  in 

Georgia  it  is  held  otiierwise.     §  130,  d.  e. 
In  some  States  the  law  provides  how  dissenting  directors  m&y 

avoid  liability. 
For  incurring  debt  beyond  the  legal  limit. 
For  loan  beyond  limit. 
For  wrongful  issue  of  bills. 
§  129.  A  bank's   claim   against  a  director  for  dishonesty,  negligence, 

or  incompetency  is  assets  in  the  hands  of  a  receiver. 
To  third  parties.     II.  §§  5-3,  153. 
§  130.  In  absence  of  statute  provision,  directors  are  not  liable  to  third 

persons  dealing  with  the  bank  for  damage  caused  by  their 
mismanagement,  unless  their  conduct  is  grossly  negligent,  or 
malicious,  or  fraudulent.  Their  contract  is  with  the  bank. 
If  a  director  misrepresents  or  makes  a  contract  binding  on 
himself,  or  is  guilty  of  tort  in  any  way,  he  is  of  course  liable, 
as  is  any  other  individual  or  agent.  Every  one  assisting  in 
a  wrong,  as  in  making  deceiving  statements  in  corporate  re- 
ports, is  personally  liable,  unless  a  mere  instrument. 
One  allowing  himself  to  be  held  out  as  a  Director.  §  148. 
§  131.  Is  liable  to  one  misled  by  his  conduct,  and  perhaps  to  all  who  could 

251 


§  114  DIRECTORS. 

hold  him  if  he  were  a  real  director,  even  though  not  knowing  of 

tlie  holding  out. 
When  a  Bank  is  made  liable  by  the  Conduct  of  Directors.    §  79. 
An  individual  director,  as  such,  has  no  power  to  make   the   bank 

liable  in  any  way. 
Contract. 

(1)  Whenever  the  board  (as  such,  §  124)  undertakes  to  contract  for  the 

bank  in  a  way  that,  so  far  as  may  be  ascertained  by  any  facts 

§  ■'■^'^"  Director  voting  actually  or  Constructively  known  to  C.  (the  party 

in  case  he  is       between  whom  and  the  bank  the  controversy  on  the 

adversely  in-  .,..,.,  r    i     ■ 

terested.  contract  arises),  IS  witliin  the  scope  ot  their  powers 

§§  125(5, 127  c.  jjjjj  j^jy  ^g  ^j,g  managing  body  in  the  bank's  busi- 
ness, it  is  the  contract  of  the  bank  as  to  C.  If  really  intra  vires, 
the  bank  is  of  course  bound ;  if  ultra  vires,  it  may  or  may  not  be 
bound.     See  Ultra  vires. 

(2)  If  the  board  undertakes  to  contract,  and  C,  whose  right  is  in  ques- 

tion, did  know  or  ought  to  have  known,  as  matter  of  law,  upon  the 
facts  of  which  he  had  notice,  that  they  were  going  beyond  the 
scope  of  their  agency,  their  act  is  not  that  of  the  bank  as  to  C. 

(3)  Any  action   of  the   board   autliorizing  or  ratifying  the  contract  of 

any  other  officer  is  governed  by  the  same  consideration.  Their 
action  is  that  of  the  bank  if  really  valid,  or  if  C.  has  a  right  to 
deem  it  so. 

(4)  Declarations  of  directors.     See  §  103  a. 
Tort.    §§  147,  172. 

§  132.  Under  the  principles  of  §  102,  the  bank  is  liable  for  the  tort  of  the 

board,  or  of  a  subordinate  officer  authorized  or   ratified  by   the 
board,  e.  g.  libels  and  false  statements  in  corporate  reports. 
§  126.  If  the   directors  knowingly  allow  the  bank  to  take  the  benefit  of 

the  wrong  of  an  officer,  or  retain  him  in  the  bank's  service,  or 
otherwise  adopt  his  act,  the  bank  will  be  liable. 
Forfeiture.    §  722. 
§  126.  Any  act  of  the  board  which  upon  the  facts  known  to  them,  or  which 

ought  to  be  known  to  them  by  reasonable  diligence,  is  in  viola- 
tion of  the  law  governing  the  bank,  may  cause  forfeiture ;  and  if 
they  authorize  such  breach  of  law  by  a  subordinate  officer,  or 
if  they  knowingly  allow  the  bank  to  get  the  benefit  of  such  an  act, 
or  retain  the  wrongdoer  in  the  bank's  service,  or  otherwise  adopt 
or  ratify  his  conduct,  it  will  make  the  bank  liable  to  forfeit- 
ure. II.  §  35. 
Crime. 

Though  outside  our  subject,  we  may  note  that  the  board  may  make 
the  corporation  liable  to  indictment,  as  by  authorizing  a  public 
nuisance  or  publishing  a  libel. 
Notice.    §  9,  n.  9;  §  166. 

Knowledge  (such  as  a  man  of  ordinary  prudence  would  regard  in 
his  own  affairs). 
§  133.  Of  the  Board,  by  open  mention  or  discussion  at  a  meeting, 

or  what  they  should  know  by  due  diligence  in  discharge 

252 


DIVISION   OP  MANAGEMENT.  §  115 

of  their  trust,  binds  the  bank  as  to  third  parties  (except 
sureties  on  an  officer's  bond,  q.  v.) 
Of  a  single  Director. 

Constructive  knowledge  of  a  single  director  does  not  bind 

the  bank. 
As  to  actual  knowledge,  the  rules  are  as  follows. 
§§  134-136.   The  Bank  is  not  bound  by  notice  to  one  director. 

(a)  (1)   If  the  third  party  (C.)  knows  D.  has  adverse  interests. 

(2)  If  D.  is  not  specially  appointed  to  receive  such  notice,  and  did 
not  act  for  tiie  bank  in  the  matter  to  which  it  relates,  or, 
if  he  did  act,  but  the  knowledge  was  gained  previous  to 
or  outside  of  the  agency,  and  he  has  an  adverse  interest, 
or  the  information  is  not  fairly  to  be  presumed  still  present 
in  his  mind  at  the  time  of  the  agency  in  the  matter  to  which 
it  relates. 
(6)   The  bank  is  bound  when  (a)  (1)  does  not  apply,  in  four  cases. 

(1)  If  D.  is  specially  authorized  to  receive  tlie  notice. 

(2)  If  he  is  acting  for  the  bank  in  the  matter  to  which  the  notice 

relates  at  tlie  time  of  receiving  it. 

(3)  If,  after  receiving  the  notice  in  any  manner,  he  acts  for  the 

bank  in  the  matter  with  the  information  still  presumably  in 
his  mind  and  without  adverse  interest. 

(4)  If  he  acts  with  such  information  presumably   present,  even 

thougli  he  has  an  adverse  interest,  if  this  fact  is  not  known 
to  C.  and  tlie  fact  of  his  having  the  knowledge  is  known 
toC. 
§  137.        (c)   A  director  is  as  an  individual  chargeable  with  his  own  knowl- 
edge, actual  or  constructive,  of  course,  but  it  is  not  a  conclu- 
sive presumption  that  he  knows  all  the  details  of  the  bank 
business. 
Rights, 

Unless  prohibited, 
§  125.  May  take  a  loan  from  the  bank,  but  must  not  act  at  the 

granting  of  it. 
§  124.  Each  has  by  his  oflBce  a  right  to  scrutinize  all  the  affairs 

of  tlie  bank,  to  have  notice  of  meetings,  and  to  have 
access  to  the  bank  books,  &c. 
§  138.  Qualifications.     II.  §§  9,  10. 

Frequently  required  to  own  a  prescribed  number  of  shares  in 
the  bank  to  identify  its  interests  with  their  own. 
Continuance  in  Office. 
§  139.  Bankruptcy  does  not  vacate  the  office,  but  circumstances  may 

show  abandonment. 
§  140.  Pat  of  Directors.      150. 

§  141.  Records. 

De  facto  Directors.'   See  §  98  6. 

§  115.   Division   of  Management.  —  It  has  been  held,  that 
a    banking   corporation   may   divide   the   total   of    its   busi- 

253 


§  116  DIRECTORS. 

ness  into  various  distinct  departments,  choosing  a  separate 
board  of  directors  to  have  control  of  each  respec- 

Mav  divide  i    t    -j 

management  tivcly.  Or  it  may  havc  but  one  board,  and  divide 
erdbf anis or  it  into  Committees,  conferring  upon  each  commit- 
committees.  ^^^  supreme  power  in  its  appropriate  department. 
Then  the  resolutions  of  each  committee  within  the  scope  of 
the  business  allotted  to  it  will  be  equivalent  to  and  of  the 
same  effect  as  similar  resolutions  of  the  entire  board.^  But 
in  the  latter  case  the  powers  intended  to  be  exercised  by  each 
committee  should  be  distinctly  conferred  upon  it,  as  in  any 
other  case  of  delegation  of  authority.  The  mere  nomination 
of  two  or  three  among  the  directors  to  constitute  a  "  finance 
committee,"  may  impose  duties  or  especial  watchfulness  and 
supervision  upon  them,  but  without  some  further  delegation 
of  real  power  to  them  it  does  not  give  them  the  supreme  con- 
trol and  management  of  all  the  financial  transactions  and 
business  of  the  bank.  Their  duties  rather  than  their  powers 
are  enlarged.  The  intent  to  increase  the  authority  which 
they  already  have,  if  individual  directors  can  be  properly  said 
to  have  any  authority  at  all,  must  be  expressed  in  some  more 
clear  and  precise  manner  than  by  the  simple  act  of  giving 
the  name  of  "  finance  committee  "  to  A.  B.  and  C.  D.  out  of 
the  whole  number  of  the  board.  So  it  was  held  in  New 
York  that  the  president,  cashier,  and  •'  finance  committee  " 
of  the  board  could  not  mortgage  corporate  real  estate  without 
the  concurrence  of  the  board  of  directors  ;  although  practi- 
cally the  president  and  cashier  had  been  wont  to  exercise 
very  large  authority  and  discretion  in  the  management  of  the 
bank's  affairs.  The  finance  committee  as  such  enjoyed  no 
extraordinary  power.^ 

§  116.  Board  of  Directors.  — General  Functiona.  —  The  gen- 
General  man-  ^ral  control  and  government  of  all  the  affairs  and 
agementand  transactions  of  the  bank  rest  with  the  board  of  di- 
supermen  ^.^^^.^^.g^  p^j,  ^^^^  purposcs  the  board  constitutes 
the  corporation,  may  act  as  the  corporation,  and  unless  spe- 
cially restricted  may  with  few  exceptions  (see  §  127)  exercise 

1  §  115.     Palmer  v.  Yates,  3  Sandf.  Super.  (N.  Y.)  137. 

2  Leggett  V.  New  Jersey  Banking  Co.,  Saxt.  (N.  J.)  541. 

254 


FUNCTIONS   AND   POWER   OF   DELEGATION.  §  116 

y 
all  tbe  powers  which  the  corporation  is  authorized  at  common 
law,  or  under  the  charter  or  or.f^anic  law,  to  exer-   ^    ,    . 

'  "  Exclusive 

cise.  Organic  banking  laws  and  charters  custom-  functions 
arily  confer  upon  the  board  in  broad  phraseology  the 
general  power  to  conduct  and  manage  the  corporate  business. 
But  this  language  is  practically  only  a  recognition  of  the  func- 
tions which  the  board  would  be  entitled  and  called  upon  to 
exercise  by  the  rules  of  common  law,  and  does  not  oper- 
ate to  enlarge  those  functions,  or  to  designate  them  with 
any  greater  particularity.  Neither  can  the  duty  thus  con- 
ferred be  construed  as  a  requisition  upon  the  directors  to 
undertake  the  performance,  in  person,  of  all  the  acts  called 
for  by  the  daily  routine  of  the  business  of  the  bank.  It 
extends  to  such  matters  only  as  are  usually  and  conveniently 
allotted  to  the  charge  of  directors  in  the  banking  business. 
Some  such  acts  they  must  perform  ;  others  they  may  perform. 
But  the  obligation  is  measured  by  a  uniform  usage  prevail- 
ing among  banks  universally.  Their  personal  execution  may 
be  restricted  to  the  matters  thus  designated,  unless  others  be 
specifically  named  or  added  in  the  law.  Besides  a  variety  of 
specific  acts  which  they  must  initiate  or  wholly  do,  this  uni- 
form usage  imposes  upon  them  the  "  general  superintendence 
and  active  management  "  of  the  corporate  concerns.  They 
are  bound  to  know  all  that  is  done,  beyond  the  merest  matter 
of  daily  routine  ;  and  they  are  bound  to  know  the  system  and 
rules  arranged  for  its  doing.  So,  though  it  has  been  said  that 
powers  of  a  public  character  given  by  the  legislature  to  any 
body  of  individuals  can  never  be  sub-delegated  by  jj^  ^jgig. 
the  recipients,  yet  this    doctrine  has  never  been   gate  matters 

,    .  .       .  not  nivolv- 

allowed  to  prohibit  bank  directors  from  appointmg   ing  weighty 
agents  and  endowing  them  with  sufficient  powers 
for   executing    the    resolutions  •  of    the   board,  and    carrying 
on,  without  specific  authority  in   each   individual  case,  the 
ordinary  transactions  of  daily  business.^ 

1  §  116.  While  the  directors  of  a  national  bank  cannot  divest  themselves 
of  the  duty  of  general  supervision  and  control  by  committing  this  duty  to 
the  cashier,  they  may  properly  intrust  to  him  all  the  discretionary  powers 
•which  usually  appertain  to  the  immediate  management  of  the  bank's  busi- 

255 


§  116  DIRECTORS. 

The  board  may  authorize  the  president  or  cashier,  or  both, 
to  borrow  money,  indorse  the  notes  of  the  bank,  or  obtain  a 
discount  for  the  benefit  of  the  bank.^  Accordingly  they  may 
delegate  to  a  committee  of  their  own  number,  power  to  mort- 
gage real  estate  of  the  corporation,  including  as  a  necessary 
implication  power  to  execute  and  deliver  the  ordinary  and 
proper  instruments.^  Although  dealings  in  real  estate  are 
of  the  most  dignified  and  formal  character  of  any  dealings 
in  the  eye  of  the  law,  yet  general  supervision  even  of  these 
satisfies  the  duty  of  the  board.  All  beyond  this  may  be  dele- 
gated. They  may  empower  the  president  alone,  or  the  presi- 
dent and  cashier  conjointly,  to  borrow  money  on  behalf  of 
the  bank,  to  indorse  its  promissory  notes,  to  obtain  discounts 
for  its  use ;  these  powers  also  including  the  power  to  make 
delivery  of  the  paper  thus  negotiated.  It  seems  also  that 
these  powers  may  be  conferred  not  only  by  a  special  vote 
passed  with  a  view  to  a  single  occasion,  but  also  by  a  general 
resolution  looking  to  their  frequent  exercise  on  various  occa- 
sions.* But  votes  of  this  broad  nature,  unless  very  cautiously 
indulged  in,  are  likely  often  to  be  improper  and  in  some  de- 
gree unsafe.  For  if  they  appear  to  go  too  far  in  throwing 
within  the  discretion  of  others  the  decision  of  weighty  mat- 
ters covering  a  wide  ground  of  responsibility,  they  would 
amount  to  an  effort  in  a  measure  to  delegate  the  "  manage- 
ment "  of  the  business  of  the  bank.  To  this  extent  the  board 
of  directors  cannot  go.  Within  reasonable  and  moderate 
limits,  so  narrow  that  their  general  supervision  must  practi- 
cally cover  all  which  their  delegates  can  do  within  these 
limits,  they  may  confer  powers  by  a  general  resolution,  which 
may  be  valid  for  an  indefinite  period  and  for  any  number  of 
separate  transactions.     But  authority  so  large  as  to  transfer 

ness.  Warner  v.  Penoyer,  91  Fed.  587  (1898);  Burrill  v.  Nahant  Bank, 
2  Met.  (Mass.)  163;  Ridgway  r.  Farmers'  Bank,  12  Serg.  &  R.  (Pa.)  256. 

2  Fleckner  v.  Bank  of  the  United  States,  8  Wheat.  355. 

8  Burrill  v.  Nahant  Bank,  2  Met.  (Mass  )  163. 

*  Ridgway  v.  Farmers'  Bank,  12  Serg.  &  R.  (Pa.)  256 ;  Merrick  v. 
Bank  of  the  Metropolis,  8  Gill  (Md.),  59 ;  Fleckner  v.  Bank  of  the  United 
States,  8  Wheat.  383. 

256 


DISCOUNTS.  §  117 

in  an  important  degree  the  control  of  the  corporate  affairs 
thej  cannot  confer. 

§  117.   Thus   the  making  of   discounts    is   an   inalienable 
function  of  the  directors.     They  cannot  part  with  it,  or  in- 
vest any  officer  or   officers  with   it.     It   rests   in   Allowing 
them   alone    and    exclusively.     It   is    a   power   of   ciusiVe"^^  *^ 
that  degree  of  vital  importance  that  it  cannot  be    Execution 

^  .     '■  may  be  dele 

taken  out  of  the  policy  of  the  general  principle  gated. 
that  powers  of  a  public  nature,  given  by  the  legislature, 
cannot  be  sub-delegated.^  The  legislature  imposes  upon  the 
board  the  duty  of  taking  charge  of  all  those  matters  of  busi- 
ness upon  the  wise  and  skilful  conduct  of  which  the  pros 
perity  of  the  institution  and  the  safety  of  persons  dealino^ 
with  it  depend.  This  duty  they  cannot  shift  in  whole  or  in 
part  upon  others,  and  it  covers  no  department  of  banking 
business  more  unquestionably  than  the  making  of  loans  and 
discounts.  The  case  cited  below.  Bank  Commissioners  v. 
Bank  of  Buffalo,  if  carelessly  read,  might  seem  to  give  the 
directors  power  to  confer  upon  the  financial  officer  of  the 
bank  a  general  authority  to  discount.  But  a  more  careful 
examination  serves  to  show  that  quite  the  contrary  was  in- 
tended, and  that  the  case  really  illustrates  the  doctrine  of  the 
last  preceding  paragraph.  The  board  may  give  the  financial 
officer  by  a  single  resolution  power  to  make  a  considerable 
number  of  discounts  or  loans,  provided  they  be  requested. 
But  this  single  resolution  must  name  the  person  or  persons 
to  whom  the  loans  may  be  made,  the  aggregate  sum  which 
they  must  never  exceed,  the  time,  and  such  other  particu- 
lars as  the  directors  may  deem  of  moment.  Thus  in  fact 
though  many  separate  acts  may  be  authorized  by  this  one 
vote,  yet  nothing  is  really  done  beyond  the  supervision  of  the 
directors,  or  without  the  active  exercise  of  their  discretion. 
They  may  order  the  cashier  to  let  A.  have  such  loans  as  he 
shall  wish,  in  such  sums  and  at  such  times  as  he  shall  ask, 
within  a  certain  period,  up  to  the  amount  of  a  designated 
sum,  to  run  for  specified  times,  at  rates  of  interest  named, 
and  upon  designated  conditions  concerning  indorsers  or  collat- 

1  §  117.  Lyou  V.  Jerome,  26  Wend.  (Mass.)  485. 
VOL.  I. -17  257 


§119 


DIRECTORS. 


eral  security.  This  does  not  leave  each  individual  discount 
made  to  A.  to  be  passed  upon  by  the  directors ;  yet  in  fact 
no  discount  is  made  to  him  by  any  official  authority  other 
than  that  of  the  board,  or  at  the  substantial  discretion  of  any 
person  save  the  directors.  Such  is  unquestionably  the  real 
thread  of  legal  principle  which  runs  through  the  cases  cited 
in  this  and  the  next  preceding  paragraph.  It  alone  can  make 
them  intelligible  and  consistent  with  established  rules.^ 

§  118.  The  ordinary  executory  functions  of  the  various 
officers  of  the  bank  are  not  necessarily  affected  by  the  statu- 
tory delegation  of  the  management  of  all  corporate 
functions  not  affairs  to  the  board.  Management  is  not  identi- 
managemen .  ^^^  y^T[i\i  execution,  and  docs  not  intend  execution. 
Checks  are  drawn,  notes  and  bills  indorsed,  deposits  received, 
drafts  paid,  and  the  like  transactions  conducted,  as  matter  of 
course,  by  the  appropriate  customary  officers  without  any 
authorizing  vote  of  the  directorial  board.  These  matters 
do  not  constitute  the  "  management"  of  the  bank,  nor  inter- 
fere with  the  "  control "  of  its  affairs.  They  are  properly  the 
medium  through  which  that  management  and  control  are 
introduced  into  the  practical  transactions. 

§  119.  As  a  rule,  they  cannot  voluntarily  release  a  debt 
owing  to  the  company ;  ^  but  where  the  emergencies  of 
May  some-  busiucss  require  it,  they  may  make  a  nominal 
d^rormake  ^^  merely  apparent  sacrifice  of  bank  property, 
a  compromise,  jf  [f^  sccms  reasonably  likely  to  redound  to  the 
substantial  benefit  of  the  institution.  In  the  bo7ia  fide  pur- 
suit of  this  end,  their  power  is  not  limited  by  technical 
restrictions  which,  under  other  circumstances,  would  for- 
bid their  cancelling  debts  owing  to  the  bank.  The  case  of 
Baird  v.  Bank  of  Washington  ^  shows  that  they  may  commute 
a  debt  if  it  seems  to  them  practically  more  advantageous  to 
do  so  than  it  would  probably  be  to  push  it  at  law,  or  to 
retain  the   naked  legal  claim  for  the  full  amount.     In  like 

2  Bank  of  the  United  States  v.  Dunn,  6  Pet.  51 ;  Bank  Commissioners 
V.  Bank  of  Buffalo,  6  Paige  (N.  Y.),  497  ;  Percy  v.  Millaudon,  3  La.  56S. 

1  §  119.    Stanhope's  Case,  3  De  G.  &  Sm.  198. 

2  11  Serg.  &R.  (Pa.)  411. 

258 


RELEASING    CLAIMS.  §  119 

manner,  if  any  officer  of  the  bank  is  in  arrear  or  default,  it 
is  perfectly  in  their  power  to  compound  and  settle  with  him 
in  any  manner  and  upon  any  terms  which  seem  to  them 
likely  to  secure  the  most  complete  reimbursement  to  the 
bank.^"  Their  contract  of  this  nature  can  be  subsequently 
avoided  by  the  bank,  solely  on  the  ground  of  further  fraud 
or  dishonesty  of  the  compounding  officer  occurring  in  the 
negotiation  itself.^ 

Again,  it  not  unfrequently  occurs  that  the  wrongful  or 
erroneous  act  of  an  officer  causes  a  loss  to  the  bank  which 
he  can  be  held  liable  to  reimburse,  but  which  there  is  reason 
to  believe  can  only  be  recovered  by  a  suit  against  some  other 
third  party.  But  if  recourse  is  had  to  the  suit  against  the 
third  party,  then  the  testimony  of  the  officer  in  fault  may  be 
absolutely  essential,  or  at  least  very  desirable,  to  secure  the 
success  of  the  bank ;  whereas  on  the  ground  that  he  is  a 
party  immediately  interested  in  the  result  of  the  litigation, 
he  must  in  all  probable  expectation  be  rejected  at  the  trial  as 
an  incompetent  witness,  unless  he  is  first  legally  and  fully 
released  from  his  liability  to  the  corporation.  In  this  di- 
lemma it  is  the  duty  of  the  directors  to  consult  solely  the 
comparative  ultimate  probability  of  securing  reimbursement 
to  the  bank  from  the  defendant  or  from  the  officer.  It  may 
be  that  the  amount  of  the  loss  is  greater  than  can  possibly  be 
recovered  from  the  officer  or  from  his  bondsmen,  while  the 
other  defendant  would  be  amply  able  to  pay  it.  It  may  be 
that  the  result  of  the  suit  is  doubtful ;  or  it  may  be  that  only 
a  successful  result  can  in  reason  be  anticipated.  Upon  the 
consideration  of  such  facts,  the  directors  must  conclude 
whether  or  not  worldly  wisdom  would  lead  them  to  release 
the  claim  of  the  bank  against  the  officer,  or  to  abandon  the 
notion  of  the  other  suit,  or  to  sacrifice  in  its  prosecution  the 
advantage  of  his  evidence.     If  they  choose  the  first  course, 

^"  The  directors  of  a  bank  have  a  right,  in  their  discretion,  to  allow 
an  officer  who  has  been  removed,  compensation  to  which  he  is  not  entitled 
in  order  to  obtain  a  settlement  and  secure  what  he  owes  the  bank  on 
account  of  overdrafts.     Jones  v.  Johnson,  86  Ky.  530  (6  S.  W.  582). 

«  Frankfort  Bank  v.  Johnson,  24  Me.  490. 

259 


§120  DIRECTORS. 

then  it  is  not  only  in  their  power,  but  it  becomes  their  duty, 
to  execute  to  him  a  full,  valid,  and  sufficient  release  from  his 
liability.  We  say  they  must  be  guided  solely  by  their  notion 
of  worldly  wisdom  in  tlie  case ;  unless  by  direct  sanction 
from  the  stockholders,  their  feeling  towards  the  officer,  and 
their  opinion  of  his  conduct  and  character,  cannot  be  allowed 
any  weight  whatsoever  ;  and  this  equally  whether  this  feeling 
and  opinion  would  lead  them  to  punish  him  to  the  utmost 
extent  of  their  power,  or  to  pity  and  relieve  him.  The  ques- 
tion is  purely  of  dollars  and  cents,  not  of  moral  desert,  of 
vindictiveness,  or  of  commiseration.*  Neither  have  they  any 
power  to  release  an  original  subscriber  to  the  capital  stock, 
nor  to  make  any  arrangement  with  him  by  which  the  corpora- 
tion, its  creditors,  or  the  State,  shall  lose  any  of  the  benefits  of 
his  subscription.^ 

§  120.  The  board  of  course  has  power  to  part  with  or 
to  pledge  the  property  of  the  bank  in  tlie  ordinary  and  due 
Piedrre.  course  of  business,  and  for  proper   purposes.     So 

AssisTiiment,    jj.  j^^^  assigu  or  transfer  any  part  or  the   whole 

ice.  of  bulk's  ^  a  J     r 

property.  of  the  Corporate  assets,  of  whatever  description 
of  property  they  may  consist,  in  order  to  pay  corporate 
debts,  or  to  secure  creditors  having  preferred  claims.  Its 
rights  and  powers  in  this  respect  are  co-ordinate  with  the 
rights  and  powers  enjoj^ed  by  individuals  in  the  same  situ- 
ation. Whatever  a  merchant  or  a  mercantile  firm,  owing 
largely  or  more  than  they  can  pay,  could  legally  do  with  their 
property  to  pay  or  secure  their  creditors,  all  or  any  of  them, 
the  board  of  directors  can  legally  do  with  the  funds  of  the 
bank.i  This  is  the  rule  of  common  law.  Of  course  it  may 
be  modified  by  legislative  enactments  imposing  peculiar  duties 
or  restrictions  upon  institutions  seriously  indebted,  in  failing 
circumstances,  or  fully  insolvent. 

*  Lewis  V.  Eastern  Bank,  32  Me.  90. 

6  McNulta  V.  Corn  Belt  Bank,  164  111.  427  (45  N.  E.  954). 

^  §  120.  Stevens  v.  Hill,  29  Me.  183  ;  Dana  v.  Back  of  United  States, 
5  Watts  &  S.  (Pa.)  223  ;  Sargent  v.  Webster,  13  Met.  (Mass.)  497 ;  Mer- 
rick V.  Bank  of  the  Metropolis,  8  Gill  (Md.),  59 ;  Bank  Commissioners  v. 
Bank  of  Brest,  Harring.  Ch.  (Mich  )  106;  Parker  v.  Carolina  Savings 
Bank,  53  S.  C.  583  (31  S.  E.  673)  (1898). 
260 


REMOVAL   OF   EMPLOYEES.  §  123 

The  directors  of  an  insolvent  savings  bank  may  in  good 
faith  assign  the  assets  of  the  bank  for  the  benefit  of  creditors, 
without  first  obtaining  the  consent  of  the  stockholders.^  But 
they  cannot  without  the  consent  of  the  stockholders  pledge 
the  future  dividends  of  the  bank  to  meet  a  deficit  in  capital.^ 

§  121.  Issue  of  Bank  Notes  or  Bills  a  Function  of  the  Direc- 
tors. —  If  the  bank  has  the  legal  authority  to  issue  its  bills  or 
notes  for  circulation  as  a  currency,  the  j)ower  to  make  the  issue 
is  one  of  the  ordinary  and  inherent  functions  of  the  board, 
which  the  public  has  a  right  to  presume  is  vested  in,  and  will 
be  honestly  exercised  by,  the  directors.  The  bank  is  held  to 
warrant  their  fidelity.  If  the  issue  is  attended  with  any 
error,  neglect,  or  fraud,  the  resulting  loss  is  that  of  the  bank. 
For  example,  if  there  be,  from  any  of  these  causes,  an  over- 
issue, the  bank  must  yet  redeem  all  the  notes  in  the  hands  of 
innocent  holders.^  The  transaction,  falling  within  the  ordi- 
nary scope  of  directorial  authority,  is  one  wherein  the  bank 
guarantees  both  the  integrity  and  the  accuracy  of  its  agents. 

§  122.  Tliey  may  make  arrangements  with  other  banks  to 
collect  notes  and  dividends,  to  redeem  their  bills,  transfer 
stocks,  or  for  any  other  business  usual  or  proper  for  one  bank 
to  transact  with  another.^ 

§  123.  Directors  may  for  Cause  discharge  any  Employee  at 
any  Time.^  —  But  the  power  of  the  directors  over  the  president, 
at  least  under  our  present  National  Banking  Act,  is  greater. 
Him,  it  has  been  declared,  they  may  remove  absolutely  and 
at  any  time  by  their  own  sole  action.^  A  clause  in  the  articles 
of  association,  giving  them  this  power,  is  valid,  and  will  suffi- 
ciently authorize  them  to  exercise  it.  But  such  a  clause  is, 
in  fact,  surplusage,  for  the  act  of  Congress,  sect.  11,  itself 
directly  and  fully  bestows   the  power.     The  construction  of 

2  Descorabes  v.  AVood,  91  Mo.  196  (1886). 
8  Brown  v.  Bradford,  103  Iowa,  378  (72  N.  W.  648)  (1898). 
1  §  121.     McDougald  v.  Bellamy,  IS  Ga.  411. 

1  §  122.  Bank  of  Kentucky  v.  Schuylkill  Bank,  1  Pars.  Sel.  Cas.  (Pa.) 
236. 

1  §  123.  Harrington  v.  First  National  Bank,  1  Thomp.  &  C.  (N.  Y.) 
361.  " 

2  Taylor  v.  Hutton,  43  Barb.  (N.  Y.)  195. 

261 


§  124  DIRECTORS. 

this  section,  as  referring  to  directors  and  not  to  stockholders, 
the  court  say,  is  quite  clear.  In  the  case  cited,  it  was  urged 
that  no  by-laws  had  ever  been  adopted  by  the  stockholders  or 
accepted  by  the  comptroller  of  the  currency  ;  and  that,  until 
this  had  been  done,  the  directors  could  not  properly  perform 
the  act  of  removal.  The  objection,  however,  was  overruled. 
It  was  not  considered  at  all  necessary  that  by-laws  should 
have  been  adopted  before  a  president  could  be  chosen,  be 
removed,  and  a  successor  be  appointed.  The  by-laws,  in  fact, 
could  have  nothing  to  say  about  the  matter  at  all ;  save,  per- 
haps, that  they  might  be  permitted  to  prescribe  unessential 
formalities  to  accompany  its  exercise.  What  the  act  of 
Congress  explicitly  gives,  not  even  the  articles  of  association 
could  take  away  ;  much  less  could  the  by-laws  interfere  with 
it.  Their  formal  adoption,  even  their  existence,  are  not 
necessary  preliminaries  to  the  exercise  of  a  power  which 
springs  from  a  source  wholly  independent  of  them,  and 
infinitely  above  them  in  weight  and  authority. 

§  124.  Quorum.  —  A  majority  of  the  directors  make  a  quo- 
rum, and  a  majority  of  a  quorum  may  act.^ 

The  bank  is  bound  by  the  action  of  the  majority  of  the 
board,  taken  in  the  manner  usually  adopted  by  the  board,  no 
Majority  of  a  matter  how  informal  or  peculiar  that  manner  may 
quorum  at       |^g      ^j^  expressiou  of  the  will  of  the  majority  is 

legal  meeting  ^  .  , 

rules.  what  the  law  looks  for  and  recognizes.^     It  seems, 

however,  that  it  is  indispensable  to  the  validity  of  any  action 
that  it  should  be  taken  by  the  board ;  that  is,  that  it  should 
he  the  vote  of  a  majority  of  a  quorum  at  a  regular  and  legal 
m,eeting  of  the  hoard.  Thus,  it  has  been  held  that  the  assent 
of  a  majority  of  the  directors,  expressed  by  them  individ- 
ually, and  not  at  a  regular  stated  meeting  of  the  board,  is 
not  sufficient  to  confer  upon  the  cashier  authority  to  do  any 
act  which  he  would  not  have  authority  to  do  unless  it  were 
conferred  upon  him  by  the  directors.^ 

"The  only  powers  conferred  by  statute  upon  the  direct- 

1  §  124.     Lockwood  v.  American  National  Bank,  9  R.  I.  308. 

2  Bank  of  Middlebury  v.  Rutland  &  Washington  R.  R.  Co.,  30  Vt.  159. 
«  Elliot  V.  Abbot,  12  N.  H.  549. 

262 


RIGHTS    OF    DIRECTORS.  §  125 

ors  of  a  national  bank  are  vested  in  them  as  a  board,  and 
when  acting  as  a  unit,  and  therefore  the  assent  of  a  majority 
of  the  individual  members  of  the  board,  acting  separately 
and  singly,  is  not  the  assent  of  the  banlv,  and  is  not  binding 
upon  it."  * 

It  appears  that,  when  a  quorum  of  the  directors  is  assem- 
bled at  a  legal  meeting,  the    action   of   those    present   will 
bind  the  bank,  even  though  the  remainder  of  the    ^^^^  ^^  ^^ 
directors  have  had  no  notification  of  the  meeting.^    ti/y  members 

of  a  meetmg. 

Though  the  action  of  the  quorum  may  be  valid  as 
the  action  of  the  corporation  under  such  circumstances,  yet  it 
by  no  means  follows  that  the  members  may  not  themselves  be 
in  fault  if  the  failure  to  notify  all  the  members  of  the  board 
was  not  absolutely  unavoidable.  It  is  the  duty  of  every 
director  to  be  present  at  every  meeting  of  the  board.  Clearly 
the  responsibility  which  rests  upon  him  as  a  part  of  the  gov- 
ernment of  the  corporation  gives  him  the  absolute  right 
to  demand  that  due  notice  be  given  him  of  all  meetings  of 
the  government  for  deliberation  or  action.  But  where  it  is  a 
regular  custom  pursued  for  a  number  of  years  for  the  direct- 
ors, whenever  a  sufficient  number  are  present,  to  hold  a 
meeting  and  transact  business  at  the  banking  house  during 
business  hours,  such  custom  carries  with  it  notice  to  all  the 
members  of  the  board,  unless  the  by-law  or  the  law  prescribes 
the  kind  of  notice.^''  The  directors  have  no  power  or  discre- 
tion, directly  or  indirectly,  to  debar  any  one  of  their  number 
from  the  exercise  of  all  his  rights,  a  fortiori  from  the  per- 
formance of  all  his  duties.  Not  even  the  conviction,  honestly 
entertained  by  all  the  rest,  that  one  of  the  members  Rights  of  a 
is  secretly  hostile  to  the  real  interests  of  the  bank,  '^"■e'=^°'"- 
will  authorize  them  to  refuse  him  any  of  those  means  of 
scrutinizing  its  affairs  which  ordinarily  pertain  to  his  incum- 

*  National  Bank  v.  Drake,  35  Kans.  564;  Corbett  v.  Woodward,  5  Saw. 
403. 

6  National  Bank  v.  Shumway,  49   Kans.  224    (30   Pac.    411)  (1892)  ; 
Edgerly  v.  Emerson,  3  Fost.  (N.  H  )  555. 

5"  American  Exchange  National  Bank  v.  First  National  Bank,  82  Fed. 
961  (1897.) 

263 


§125 


DIRECTORS. 


bency  in  office.  Even  the  formality  of  a  by-law  is  impotent 
to  deny  him  access  to  the  books  and  accounts.  A  by-law- 
assuming  to  do  so  is  simply  invalid.  The  effort  to  exclude 
by  such  a  by-law  constitutes,  by  itself,  sufficient  and  proper 
ground  for  the  granting  a  writ  of  mandamus  in  favor  of  the 
excluded  official ;  and  the  writ  may  be  directed  not  alone  to 
the  other  directors,  but  also  to  any  subordinate  officer  who 
has  assisted  in  the  attempt  to  prevent  the  ousted  petitioner 
from  exercising  any  of  his  legal  functions.  The  supposed 
hostility  on  the  part  of  the  petitioner  towards  the  corporation, 
even  if  it  should  be  proved,  would  furnish  no  valid  cause  for 
withholding  the  writ.^ 

§  125.  Duties  of  Directors.  — They  must  carefully  obey  the 
law  under  which  the  bank  is  organized,  must  act  with  entire 
good  faith,  and,  like  all  other  agents,  they  contract  for  reason- 
able capacity,  skill,  and  care  in  the  discharge  of  their  duties. 
See  §  128. 

The  high  degree  of  confidence  and  responsibility  resting 
upon  directors  of  corporations  has  often  led  the  courts  to 
regard  them  as  trustees,  and  to  declare  the  relationship 
existing  between  them  and  the  stockholders  to  be  that  of 
trustees  and  cestuis  que  trustent,  respectively.  If  this  can  be 
asserted  with  regard  to  the  generality  of  corporations,  it  is 
peculiarly  and  exceptionally  true  with  regard  to  banking 
corporations,  in  whose  solvency  the  whole  neighboring  com- 
munity must  be  at  least  indirectly  interested.  A  bank  of 
issue  may  properly  be  regarded  as  a  quasi  public  corpora- 
Trustees  for  tion.  The  directors  of  a  bank  are  not  trustees 
ito?]  an'd''''^"  for  the  stockholders  alone,  but  they  owe  an  even 
stockholders,  earlier  duty  to  the  depositors,  and,  if  the  bank 
exercises  the  privilege  of  circulation,  still  a  prior  duty  to  the 
public  at  large.  The  law  is,  as  it  ought  to  be,  very  jealous 
in  exacting  the  strict  and  thorough  performance  of  these 
duties,  and  it  is  in  the  scrutiny  of  possible  breaches  of  them 
that  the  rigid  rules  which  govern  trustees  have  been  applied. 
It  is  not  enough  to  exculpate  a  director,  that  no  actual  dis- 
honesty can  be  shown,  that  he  cannot  be  positively  proved  to 
«  People  V.  Throop,  12  Wend.  (N.  Y.)  183. 

264 


ADVERSE   INTEREST.  §  125 

have  been  influenced  by  interested  motives.  Like  a  trustee, 
he  is  absolutely  prohibited  from  the  performance  of  those 
questionable  acts  wherein  his  conduct  may  be  wholly  free 
from  blame,  but  where  the  bias  of  self-interest  is  strong,  and 
may  influence  him  even  without  his  own  recognition  of  the 
fact.  A  director,  who  wishes  to  keep  completely  within  the 
protection  of  the  law,  must  look  to  something  more  than 
the  mere  integrity  of  his  own  intentions. 

(a)  The  law  is  obliged  to  forbid  a  certain  general  class  of 
actions  in  which  the  temptation  is  so  great  that  it  is  wisely 
regarded  as  better  wholly  to  remove  human  frailty    pj^g^j^j.^ 
from  the   possibility  of  yielding  than  to  be  con-   must  not  be 

^  ./  ./  o  ^    ^  interested  ad- 

tinually  plunging  into  darkling  inquiries  as  to  the  verseiy  to 
probable  purity  and  uprightness  of  sundry  isolated 
transactions.  It  is  possible  that  any  person,  being  a  director, 
might,  at  a  meeting  of  the  board,  vote  honestly  and  with  a 
single  eye  to  the  bank's  welfare,  upon  a  question  in  which  he 
had  an  individual  interest  opposed  to  that  of  the  corporation. 
It  is  also  possible  that  he  might  intend  so  to  vote,  and  yet  not 
succeed  in  doing  so,  by  reason  of  the  unconscious  obliquity 
of  mental  vision  which  such  circumstances  may  often  produce. 
But  a  sound  precaution  prefers  to  exchange  these  possibili- 
ties for  a  certainty.  The  law  therefore  has,  with  wholesome 
care,  declared  that  it  is  a  duty  of  a  director,  resulting  from 
the  employment  itself,  not  to  acquire  any  interest  in  any 
matter  adverse  to  that  of  the  bank  so  long  as  he  remains 
in  office.     See  §  127  d. 

"  A  trustee  may  not,  as  such,  purchase  property  in  which 
he  has  an  individual  interest.  The  law,  in  such  case,  does 
not  stop  to  inquire  whether  the  transaction  was  fair  or  un- 
fair, but,  when  the  relation  is  disclosed,  sets  aside  the  trans- 
action, or  refuses  to  enforce  it  at  the  instance  of  cestui  que 
trust."  1 

"  A  corporation  in  order  to  defeat  a  contract  entered  into 
by  its  directors  on  its  behalf,  in  which  one  or  iJiore  of  them  had 
a  private  interest^  is  7iot  hound  to  show  that  the  influence  of  the 

1  §  125.  Munson  et  al  v.  Syracuse,  &c.  R.  R.  Co.,  103  N.  Y.  58.  71-74 
(8  N.  E.  355). 

265 


I  125  DIRECTORS. 

director  or  directors  having  the  private  interest  determined  the 
action  of  the  board." 

"  The  plaintiffs,  therefore,  are  compelled  to  meet  the  ques- 
tion, whether,  upon  principles  of  equity,  they  are  entitled  to 
the  aid  of  the  court  to  enforce  an  executory  contract  between 
themselves  on  one  side,  and  the  defendant  corporation  on  the 
other,  for  the  sale  of  the  property  of  the  former,  and  in  a  case 
where  one  of  the  plaintiffs  at  the  time  the  contract  was  made, 
was  a  director  of  the  purchasing  corporation,  and  took  part  in 
making  the  contract  upon  which  the  action  is  brought." 

"  We  are  of  opinion  that  the  contract  of  September  14, 
1875,  is  repugnant  to  the  great  rule  of  law  which  invali- 
dates all  contracts  made  by  a  trustee  or  fiduciary,  in  which 
he  is  personally  interested,  at  the  election  of  the  party  he 
represents." 

"  The  law  stops  the  inquiry  when  the  relation  is  disclosed, 
and  sets  aside  the  transaction,  or  refuses  to  enforce  it  at  the 
instance  of  the  party  whom  the  fiduciary  undertook  to  repre- 
sent, without  undertaking  to  deal  with  the  question  of  abstract 
justice  in  the  particular  case.  It  prevents  frauds  by  making 
them,  as  far  as  may  be,  impossible,  knowing  that  real  motives 
often  elude  the  most  searching  inquiry,  and  it  leaves  neither 
to  judge  nor  jury  the  right  to  determine,  upon  a  consideration 
of  its  advantages  or  disadvantages,  whether  a  contract  made 
under  such  circumstances  shall  stand  or  fall.  It  will  make 
no  difference  in  the  application  of  the  rule  in  this  case,  that 
M.'s  associates  were  not  themselves  disabled  from  contracting 
witli  the  corporation,  or  that  M.  was  only  one  of  ten  directors." 

{h)  It  is  fraud  for  directors  to  secure  by  means  of  their 

trust,  any  advantage  not  common  to  the  other  stockholders. 

,     ,      The  law  will  not  allow  private  profit  from  a  trust, 

Cannot  make  ^  ^ 

a.  profit  from  and  will  not  listen  to  any  proof  of  honest  intent. 
It  is  useless  for  a  trustee  to  exert  his  wits  to 
contrive  evasions  of  this  prohibition.^  Not  only  must  he 
refrain  from  voting  on  questions  in  which  he  is  directly 
interested,  but  he  must  not  use  his  influence,  resulting  from 

2  Farmers  &  Merchants'  Bank  r.  Downey,  53  Cal.  466;  Koehler  v. 
Black  River  Falls  Iron  Co.,  2  Black,  715;  Bain  v.  Brown,  56  N.  Y.  285. 
266 


LOANS   TO    DIRECTORS.  §  125 

his  official  position,  to  secure  his  own  ends  or  his  private 
advantage.  Neither,  of  course,  can  he  directly  or  indirectly 
barter  this  influence  to  any  outside'  person  upon  any  species 
of  consideration  moving  from  that  person  to  himself.  It  is 
not  enough  in  the  eye  of  the  law  to  protect  him,  that  he 
did  not  mean  to  prejudice  the  bank.  If  his  act  is  open  to 
suspicion,  he  will,  like  a  trustee,  be  held  to  have  violated 
his  duty,  which  is,  not  to  strive  to  do  questionable  things 
conscientiously,  but  wholly  to  refrain  from  all  action  or 
intermeddling  in  them  of  what  nature  soever.^ 

Attempts  have  often  been  made  to  prevent,  by  statutory 
enactment,  or  by  provisions  in  charters,  some  of  the  more 
definite  and  openly  dangerous  acts  which  directors  may  some- 
times be  tempted  to  do  for  their  own  use  and  advantage. 
But  this  method  is  necessarily  insufficient.  The  language,  if 
specific,  will  cover  too  httle  ;  if  general,  will  cover  too  much  ; 
and  so  in  either  case  the  phraseology  will  be  easily  perverted, 
and  the  intent  evaded,  on  the  plea  of  reasonable  construction 
or  necessity.  The  National  Banking  Act  wisely  refrains  from 
any  enactment  on  the  subject  of  loans  or  discounts  made  to 
directors.  It  leaves  their  conduct  in  all  particulars  to  the 
supervision  of  the  common  law,  which,  as  it  has  been  above 
laid  down,  must  be  regarded  as  requiring  only  proper  and 
efficient  enforcement  to  render  it  fully  equal  to  the  task  thus 
imposed  upon  it,  of  securing  perfect  purity  in  the  adminis- 
tration of  the  bank's  affairs. 

(<?)  In  the  absence  of  legislative  prohibition,  there  is  no 
rule  of  the  common  law  which  prevents  the  making  a  loan  or 
discount  to  a  director  any  more  than  to  any  other  ^^^^  ^ 

person.     Only,  a  director  applying  for  such  a  loan   loan  from 
must  not  vote  or  officially  aid  in  the  discussion  con- 
cerning its  allowance.     The  same  principles  of  law  will  be 

8  Butts  V.  Wood,  38  Barb.  (N.  Y.)  181;  Ex  parte  Bennett,  18  Beav. 
339;  Benson  v.  Heathorn,  1  You.  &  C.  Ch.  326;  York  Railway  Co.  v. 
Hudson,  19  Eng.  L.  &  Eq.  361;  16  Beav.  485;  Richards  v.  New  Hamp- 
shire  Ins.  Co.,  43  N.  H.  263 ;  Baird  v.  Bank  of  Washington,  11  Serg.  & 
R.  (Pa.)  411;  In  re  Grant,  7  Moore,  P.  C.  141;  Ex  parte  Robinson,  2  De 
G.  M.  &  G.,  517. 

267 


§  125  DIRECTORS. 

applied  to  this  as  to  other  loans ;  but  they  will  be  rigidly  en- 
forced, and  the  proceedings  will  be  severely  scrutinized.*  He 
must  behave  himself  strictly  like  any  other  outside  customer 
of  the  corporation.  He  must  cause  his  request  to  be  acted 
upon  by  the  majority  of  his  co-directors,  strictly  exclusive  of 
himself.  It  is  probable  that  any  circumstance  of  impropriety 
or  suspicion  attendant  upon  the  fact  of  his  making  the  appli- 
cation at  all,  or  upon  the  manner  of  making  it  or  procuring  its 
acceptance,  would  be  construed  with  a  degree  of  stringency, 
as  against  him,  greater  than  would  be  exercised  towards  an 
ordinary  outside  borrower.  Under  any  circumstances,  favorit- 
ism and  fear  of  offending  are  too  likely  to  have  some  influence 
in  such  a  transaction,  and  even  the  suspicion  of  them  cannot 
be  too  carefully  guarded  against.  Prudence  no  less  than  right 
feeling  should  prevent  the  applicant  from  even  being  present 
at  the  discussion  and  vote. 

(d^  If  a  statute  prohibits  loans  to  directors,  a  loan  to  a 
firm  in  which  a  director  is  one  of  the  co-partners  is  illegal.^ 
When  loan  But  the  mcrc  fact  that  the  director  is  to  be  ulti- 
prohibited,  matcly  benefited  by  a  loan  is  not  per  se  enough 
o'the/for'use  ^^  make  the  loan  improper  or  invalid,  even  when 
of  a  director    loans  to  directors  are  prohibited  by  law.     If   the 

IS  not  un-  ^  •' 

lawful.  board  is  satisfied  with  the  credit  or  securities  of- 

fered by  A,,  they  may  discount  his  note,  although  the  amount 
received  by  him  is  to  go  to  the  use  and  into  the  posses- 
sion of  one  of  themselves.  The  question  is,  Who  is  the  real 
debtor  to  the  bank  ?  not.  What  use  will  the  debtor  make  of 
the  borrowed  funds  ?  Accordingly,  where  a  statute  forbade 
any  director  to  "  become  indebted  or  liable  "  to  the  bank  for 
a  sum  exceeding  fifty  per  cent  of  the  amount  of  the  capital 
stock  of  the  bank  owned  by  him,  and  a  note  was  given  to  the 
bank  by  other  parties,  though  in  fact  the  debt  was  for  the 
benefit  of  a  director,  it  was  held  that  this  was  not  an  illegal 
evasion  of  the  statute,  inasmuch  as  the  note  and  the  claim 
thereon  of  the  bank  were  good  against  the  signers.     The  case 


*  See  Conyngham's  Appeal,  57  Penn.  St.  474. 

6  Bank  Commissioners  v.  Bank  of  Buffalo,  6  Paige  (N.  Y.),  497. 

268 


DUTY   IN    CASE   OF   DEFAULTING    OFFICER.  §  126 

is  very  poorly  reported,  Ijut  this  point  seems  to  be  deducible 
from  it.^ 

(e)    A  prohibition  in  a  bank  charter  forbidding  a  loan  to 
be  made  to  an  officer  of  the  bank  does  not  render  the  con- 
tract whereby  such  loan  is  made    null    and  void.  j  ^^ 
The  charter  of  a  bank  in  Maryland  contained  such   not  necessa- 

1 J  r  '"■'y  void. 

a  prohibition,  and  further  provided  a  penalty,  as  tor  See  Ultra 
a  crime,  to  be  inflicted  on  any  officer  who  should  ""^^'^ 
be  convicted  of  breaking  this  law.  A  loan  was  made  to  a 
director,  and  he  sought  to  defend  in  a  suit  brought  to  recover 
the  amount,  on  the  ground  that  the  whole  transaction,  being 
illegal,  was  null  and  void,  and  that  he  could  not  be  holden. 
But  the  court  ruled  this  defence  to  be  absurd  and  inadmis- 
sible.^ Yet  it  seems  that,  if  by  reason  of  this  illegal  act  an 
innocent  third  party  be  prejudiced,  such  third  party  may  be 
recouped  at  the  cost  of  the  bank.^  If  the  amount  of  the  loan, 
or  any  part  of  it,  be  lost  to  the  bank,  it  is  obvious  that  the  loss 
falls  on  the  shareholders,  who  should  be  permitted  to  have 
their  remedy  in  some  practicable  shape. 

§  123.  Duty  of  Directors  concerning  unauthorized  illegal  Acts 
of  Officers.  —  It  will  often  happen  that  a  subordinate  officer 
will  do  an  act  either  illegal  or  fraudulent,  wliich  is  of  such  a 
nature,  or  done  in  such  a  manner,  that  it  does  not  necessarily 
bind  or  affect  the  bank.  Thus  the  conduct  of  a  single  officer 
may  be  such  that,  if  it  could  be  construed  as  the  action  of  the 
corporation,  it  would  cause  a  forfeiture  of  the  charter ;  but  if 
it  be  witliout  the  direction  or  privity,  a  fortiori  if  it  be  con- 
trary to  the  actual  orders,  of  the  board  of  directors,  the  pun- 
ishment will  be  meted  solely  to  the  wrong-doer,  and  it  will  be 
considered  that  the  nature  of  the  case  furnishes  no  ground  for 
a  proceeding  for  forfeiture  or  penalty  against  the  bank  itself. 
But  whenever  knowledge  of  the  commission  of  an  act  of  this 
description,  any  or  all  the  possible  results  of  which  might  be 
averted  from  the  bank,  is  brought  home  to  the  directors,  it  is 

^  Peniigewassett  Bank  v.  Rogers,  18  N.  H.  255. 

7  Lester  v.  Howard  Bank,  33  Md.  558 ;  Brittan  v.  Oakland  Bank  of 
Savings,  124  Cal.  282  (57  Pac.  84)  (1899). 

8  Albert  v.  Savings  Bank,  2  Md.  160. 

269 


§  126  DIRECTORS. 

incumbent  upon  them  at  once  to  disavow  the  doings  of  their 
officer  on  behalf  of  the  body  corporate,  to  decline  to  allow  the 
corporation  to  receive  any  benefit  from  them,  and,  so  far  as 
can  be  done  reasonably  and  without  injury,  to  seek  to  undo 
the  transaction  if  it  be  still  inchoate  or  imperfect. 

(fz)  If  the  whole  affair  is  completed,  and  can  no  longer  be 
repudiated  or  undone,  or  if  no  good  or  just  end  could  be  at- 
tained by  the  repudiating  or  undoing  when  knowledge  of  it  first 
reaches  the  board,  still  it  is  their  duty  promptly  to  remove  the 
official  who  was  guilty  of  the  misdemeanor.  If 
retainlhe  they  neglcct  these  steps,  if  they  knowingly  suffer 
thTwrong-  the  bank  to  reap  advantage  from  the  wrongful  con- 
^°^''*  duct,  or  if  they  continue  to  retain  the  wrong-doer  in 

service  of  the  bank,  they  will  be  regarded  as  sanctioning  and 
adopting  his  acts  on  behalf  of  the  bank,  and  it  will  be  affected 
by  these  precisely  as  if  they  had  been  originally  done  under 
direction,  or  with  the  cognizance,  approval,  or  collusion  of  the 
corporate  government.^ 

(6)  The  cited  cases  also  perhaps  suffice  to  sustain  a  doc- 
trine similar  to  that  which  we  laid  down  in  discussing  the 
possible  allegation  of  directors  that  they  were  ignorant  of  the 
existence  of  a  custom  and  usage  prevalent  in  their  bank. 
Such  an  excuse,  it  is  intimated,  would  be  utterly  insufficient 
to  shield  the  bank  from  the  natural  consequences  of  its  offi- 
cer's wrongful  act.  If  the  ignorance  of  the  directors  that  a 
Constructive  brcach  of  law  or  of  the  charter  has  been  committed 
knowledge,  jg  ^j^jg  Q^jy  to  their  own  neglect  of  their  obvious  duty 
in  the  premises,  they,  i.  e.  the  bank,  will  not  be  permitted  to 
benefit  by  their  own  laches.  If  tliey  ought  to  have  known, 
and  have  no  sufficient  excuse  for  not  knowing,  the  law  will 
deal  with  the  corporation  precisely  as  if  they  had  actually 
known.  Thus  if  it  be  illegal  for  a  loan  or  discount  to  be 
made  to  a  director  beyond  a  certain  amount,  and  such  a  loan 
or  discount  is  actually  made,  the  fact  that  the  board  had 
neglected  to  examine  the  books,  and  so  did  not  know  that  the 
accounts  of  the  bank  with  this  director  showed  so  large  a 

1  §  126.     Bank  Commissioners  v.  Bank  of  Buffalo,  6  Paige  (N.  Y.), 
497 ;  Robinson  t;.  Bealle,  20  Ga.  275. 
270 


WHAT   DIRECTORS   MAY   NOT    DO.  §  127 

loan  already  outstanding  to  him,  is  no  defence  vrhatsoever  in 
a  proceeding  by  the  bank  commissioners  for  the  dissolution  of 
the  corporation.^ 

§  127.   "What  the  Board  cannot  do.  —  The  board  of  directors 
is  limited  in  its  authority  to  the  management  and  transaction 
of  the  ordinary  business  for  which  the  company    f.^^^^^.^^_ 
was  created,  and  which  it  is  wont  to  transact;  in-   crease  capital 

ormakeother 

eluding,  of  course,  such  matters  as  may  be  neces-  radical 
sarily  incidental  thereto."  It  cannot  effect  great  ^  ^°^^' 
or  radical  changes  in  the  organization  of  the  company,  al- 
though such  changes  are  lawful  under  the  charter  or  organic 
law,  unless  the  same  be  consented  to  by  the  shareholders. 
For  example,  where  a  bank  is  chartered  with  a  certain  capital, 
but  with  power  to  increase  this  capital,  and  nothing  is  said 
as  to  the  manner  in  wliich  this  power  may  be  exercised,  the 
directors  have  not  authority  to  determine  upon  and  make 
such  increase  ;  it  must  be  done  by  action  of  the  shareliolders.^ 
And,  an  assessment  on  stockholders,  required  by  a  notice 
from  the  comptroller,  under  Rev.  St.  U.  S.  §  5205,  is  invalid 
if  made  by  the  directors  of  a  bank.  Such  assessment  must 
be  made  by  the  stockholders  themselves.^" 

(a)  Directors  can  use  the  funds  and  property  of  the  bank 
only  for  proper  banking  purposes,  and  for  the  strict  further- 
ance of  tlie  business  objects  and  financial  prosper-  cannot  give 
ity  of  the  corporation.^''  Their  discretion  and  power  brnfe's^prop- 
to  manage  its  affairs  extend  only  to  the  conducting  ^rty. 
those  affairs  in  the  best  manner  that  their  knowledge,  fore- 
sight, and  observation  can  suggest,  to  the  end  of  increasing 
the  profits  and  enhancing  the  value  of  the  investments  which 

2  Ibid. 

0  §  127.  Bank  of  Commerce  v.  Hart,  37  Neb.  197  (55  N.  W.  631)  (1893) ; 
Merchants'  Bank  v.  Rudolf,  5  Neb.  527. 

^  Eidman  v.  Bowman,  58  111.  444;  and  see  Gray  v.  Portland  Bank, 
3  Mass.  364. 

1"  Hulett  V.  Bell,  85  Fed.  98  (1898). 

I''  AVhere  directors  spend  money  of  the  bank  in  prospecting  for  ore  in 
a  mine  owned  by  the  bank,  in  •which  mine  no  ore  of  value  has  ever  been 
found,  they  are  personally  liable  for  the  money  to  the  bank  or  its  receiver. 
Cooper  V.  Hill,  94  Fed.  582  (1899). 

271 


§127 


DIRECTORS. 


have  been  intrusted  to  their  charge  by  others.  They  cannot 
use  any  portion  of  the  money  for  such  objects  of  usefulness  or 
charity,  or  the  like,  as  they  may  consider  worthy  of  encour- 
ao-ement  and  aid.  All  their  transactions  must  be  strict  mat- 
ters of  business.  They  cannot  make  gifts  from  the  corporate 
property.  They  cannot,  without  authority  from  the  stock- 
holders, subscribe  money  to  any  objects,  however  meritorious, 
unless  with  the  immediate  view  and  expectation  of  thereby 
furthering  the  actual  worldly  and  material  well-being  of  the 
bank.  They  are  trustees  of  the  property  of  others  for  this 
sole  and  only  purpose,  and  if  they  appropriate  any  portion  of 
the  property  for  any  other  purpose  whatsoever,  however  in- 
trinsically deserving,  it  is  yet  a  deviation  from  their  obvious 
duty,  both  legal  and  moral,  for  it  is  nothing  else  than  a  clear 
breach  of  a  plain  and  simple  trust.^ 

Also  a  case  of  misappropriation  of  the  funds  of  the  corpo- 
ration has  been  held  to  be  where  the  directors,  apprehensive 
that  a  suit  was  to  be  instituted  against  them  by  the  stock- 
holders, used  corporate  funds  to  retain  counsel  for  their  own 
defence.^  A  clearer  case  of  a  wrongful  misapplication  and 
deflection  of  trust  money  from  the  purposes  of  the  trust  is  not 
likely  to  occur. 

(5)  A  cognate  rule  forbids  the  directors  needlessly  or  gra- 
tuitously to  assume  either  actual  or  contingent  liabilities  on 
Cannot  behalf  of  others.     If  they  could  ever  have  the  right 

make  Bank      ^    ^    g^    j^  could  be  oulv  under  circumstances  of 

a  p^ratuitous  '  •' 

surety.  urgent  necessity,  and  where  interests  of  the  bank 

seemed  to  be  in  some  degree  involved,  so  that  a  jury  would  be 
willing  to  regard  the  exceptional  excuse  as  sufficient.* 

(c)  If  a  director  or  the  board  act  beyond  their  power  or 
contrarv  to  their  duty,  third  parties  may  still  hold 

Effect  of  -  .  . 

■wrongful  act  the  bank  on  the  transaction,  if  on  the  facts  as  actu- 
bank  and  ally  or  coustructivcly  known  to  such  third  parties 
third  parties.   ^^^^,^  ^^^  nothing  to  notify  them  of  the  wrongful- 

2  Frankfort  Bank  v.  Johnson,  2i  Me.  490;  Bedford  R.  R.  Co.  v.  Bow- 
ser,  48  Penn.  St.  29. 

8  Percy  i^.  Millaudon,  3  La.  568. 

*  Stark  Bank  v.  U.  S.  Pottery  Co.,  34  Vt.  144. 

272 


ULTRA    VIRES    ACTS.  §  127 

ness  of  the  transaction.  Where  the  directors  permit  an  officer 
to  hold  himself  out  to  the  public  as  being  invested  with  abso- 
lute power  to  manage  and  control  its  affairs,  in  such  a  manner 
and  for  such  a  length  of  time,  as  to  lead  innocent  persons  to 
make  contracts  with  such  officer,  the  bank  cannot  repudiate 
the  contracts  by  invoking  any  by-law  of  the  corporation  which 
the  directors  themselves  have  negligently  allowed  to  fall  into 
disuse.^" 

(c?)  If  a  director  commits  a  breach  of  duty  in  advocating, 
or  voting  upon,  a  measure  in  which  he  is  so  interested  that  he 
ought  to  have  regarded  himself  as  wholly  excluded  from  the 
deliberation  and  decision  upon  it,  yet  the  action  of  the  board 
thereon  will  be  valid  and  binding  upon  the  corporation  in  favor 
of  any  innocent  third  person,  not  cognizant  of  or  a  party  to  the 
wrongfulness  of  the  proceeding.  Thus,  in  a  case  where  a  di- 
rector was  jointly  responsible  with  a  debtor  upon  a  debt  owing 
to  the  bank,  he  was  present  and  voted  at  the  meeting  when  the 
board  settled  the  debt  by  taking  a  conveyance  of  the  debtor's 
real  estate.  It  was  held  that  the  fact  of  his  voting,  however 
wrongful  in  him,  nevertheless  did  not  avoid  the  contract 
as  towards  the  debtor,  unless  fraudulent  collusion  on  the 
part  of  the  debtor  should  be  shown.  The  debtor  had  noth- 
ing to  do  with  the  correctness  of  the  dealings  taking  place 
between  the  bank  and  its  own  agents  and  officers.  He  had 
only  to  satisfy  himself  that  the  board  was  acting  within  its 
powers.^ 

(e)  If  the  directors  give  away  the  bank's  property,  or  make 
the  bank  an  accommodation  indorser,  or  make  an  illegal  loan 
or  purchase,  or  otherwise  exceed  their  authority  in    ultra  vires 
such  a  way  that  the  transaction  is  on  its  face  regu-   st^ances'un- 
lar,  and  apparently  within  the  scope  of  the  directo-   ^"''^n. 
rial  authority,  and  no  circumstances  affect  third  parties  with 
notice  of  its  wrongfulness,  the  transaction  as  to  such  parties 
would  bind  the  bank.^" 

*"  Cox  V.  Robinson,  82  Fed.  277,  286  (1897). 

6  Baird  v.  Bank  of  Washington,  11  Serg.  &  R.  (Pa.)  411. 

6»  Seeberger  v.  McCormick,  178  111.  404  (53  N.  E.  340)  (1899). 

VOL.  I.  —18  273 


§  128  DIRECTORS, 

(/)  But  if  the  real  nature  of  the  act  were  known  to  the 
outsider,  he  would  be  held  to  a  knowledge  of  its  illegality 
Ultra  vires  arising  from  its  not  being  within  the  ordinary 
by  circum-  ageucy  Conferred  by  the  corporate  principle  upon  its 
known.  official  agcuts.     For  directors,  though  they  are  the 

government  of  the  corporation,  are  yet,  no  less  than  any  subor- 
dinate officers,  its  agents,  with  a  definite  scope  to  their  agency, 
and  can  only  act  legally  within  this  scope.^  If  their  act  is 
such  that  it  is  the  duty  of  the  party  dealing  with  them  to 
know  that  it  falls  without  the  ordinary  limits  of  directorial 
power,  he  will  be  affected  by  its  invalidity.  If  the  facts  are 
known  to  him  which  sliow  that  as  matter  of  law  the  directors 
are  undertaking  an  act  of  this  description,  he  deals  with  them 
at  his  own  peril  if  he  neglects  to  satisfy  himself  that  they 
have  received  a  special  and  extraordinary  authority  in  the 
particular  case.  If  they  have  not,  any  loss  he  may  incur  is 
only  the  natural  result  of  his  own  laches.  Thus  it  is  a  prin- 
ciple of  law  that  the  directors  can  only  use  funds  of  the  bank 
for  legitimate  banking  purposes.  If  they  borrow  money  in- 
tending to  use  it  for  other  purposes,  and  the  lender  is  aware 
of  this  intent,  then  their  use  of  it  accordingly  will  relieve  the 
bank  from  indebtedness  upon  the  loan.'  See  on  this  topic, 
Ultra  vires,  §  722. 

§  128.  Liability  of  Directors.  —  If  bank  directors  do  not 
manage  the  affairs  and  business  of  the  bank  according  to  the 
directions  of  the  charter  and  in  good  faith,  they  will  be  liable 
to  make  good  all  losses  which  their  misconduct  may  inflict 
upon  either  stockholders  or  creditors,  or  both.i  But  they  are 
not  liable  for  frauds  of  an  officer  unless  they  have  been  guilty 

«  Salem  Bank  v.  Gloucester  Bank,  17  Mass.  1 ;  Bank  of  Kentucky  v. 
Schuylkill  Bank,  1  Pars.  Sel.  Cas.  (Pa.)  180;  P.idley  v.  Plymouth  Grind- 
ing &  Baking  Co.,  2  Exch.  711. 

^  Bank  of  Australasia  v.  Breillat,  6  Moore,  P.  C.  197. 

1  §  128.  Hodges  v.  New  England  Screw  Co.,  1  R.  I.  312 ;  3  id.  9 ; 
Bank  of  St.  Mary's  v.  St.  John,  25  Ala.  566  ;  Attorney-General  v.  Wilson, 
1  Craig  &  Ph.  1;  10  L.  J.  n.  s.  53;  4  Jur.  1174;  Solomon  v.  Bates,  118 
N.  C.  311  (24  S.  E.  478)  (1896)  ;  McDonald  v.  Rankin,  7  Montreal  L.  R. 
(S.  C.)  44. 
274 


LIABILITY   OF   DIRECTORS.  —  FOR    CARELESS   SUPERVISION.    §  128 

of  gross  neglect.i"     Neither  are  they  liable  if  no  loss  results  to 
the  bank  from  their  negligence.^'' 

If  the  directors  do  not  use  ordinary  diligence  to  know  the 
conduct  of  officers  and  what  the  bank  books  show,  and  to  con- 
trol their  subordinates,  and  loss  results,  they  are  For  careless 
liable.2  The  degree  of  care  required  of  directors  s^»P«vision. 
depends  upon  the  subject  to  which  it  is  to  be  applied,  and 
eacli  case  is  to  be  determined  in  view  of  all  the  circumstances.^" 

They  may  be  held  to  account  to  an  injured  party  in  a 
court  of  chancery ,3  or  they,  or  any  one  of  their  number  who 
shared  in  the  wrongdoing,  may  be  sued  at  law  for  damages.* 
But  for  excusable  mistakes  concerning  the  law,  and  for  many 
errors  strictly  of  discretion,  they  are  not  liable.*"  Though  in 
cases  in  which  their  action  has  been  so  grossly  ill  advised  as 
to  warrant  the  imputation  of  fraud,  or  to  show  a  want  of  the 
knowledge  absolutely  necessary  for  the  performance  of  their 
duties,  so  great  that  they  were  not  justified  in  assuming  the 
office,  they  may  be  held  responsible.^  They  are  required  sim- 
ply to  show  a  reasonable  capacity  for  the  position  they  accept ; 
to  use  in  it  their  best  discretion  and  industry ;  to  show  the 
scrupulous  hona  fides  and  concientiousness  in  every  matter, 
however  minute,  which  is  exacted  rigorously  from  all  trustees 
of  the  property  of  others ;  and  to  obey  accurately  the  requisi- 

i«  Savings  Bank  v.  Caperton,  87  Ky.  306  (8  S.  W.  885)  (1888);  Robin- 
son V.  Hall,  59  Fed.  648 ;  Swentzel  v.  Penn  Bank,  147  Pa.  140  (23  Atl. 
405,  415). 

1*  Wallace  v.  Lincoln  Savings  Bank,  89  Teun.  630-648  (15  S.  AV.  448) 
(1890). 

2  United  Society  jj.  Underwood,  9  Bush  (Ky.),  609;  Gibbons  v.  Ander- 
son, 80  Fed.  345;  Wheeler  v.  Aiken  Co.  Bank,  75  Fed.  781;  Empire 
State  Savings  Bank  v.  Beard,  81  Hun  (N.  Y.),  184. 

2«  Briggs  V.  Spaulding,  141  U.  S.  132  (1891). 

8  Hodges  I'.  New  England  Screw  Co.,  supra;  Bank  of  St.  Mary's  v. 
St.  John,  supra. 

*  Conant  v.  Seneca  County  Bank,  1  Ohio  St.  298. 

<"  Witters  v.  Sowles,  31  Fed.  1;  Wallace  t-.  Lincoln  Savings  Bank 
89  Tenn.  630  (15  S.  W.  448)  (1890)  ;  Williams  v.  McDonald,  42  N.  J. 
Eq.  392  (7  Atl.  866). 

6  Godbold  V.  Branch  Bank,  11  Ala.  191 ;  Smith  v.  Prattville  Manufac- 
turing Co.,  29  id.  503. 

275 


§  128  DIRECTORS. 

tions  of  the  charter,  or  of  the  general  law  under  which  they 
are  organized. 

(a)    For  example,  if  directors  declare  a  dividend  at  a  time 

hen  the  bank  is  so  far  embarrassed  that  such  a  needless 
Wrongful  disbursement  of  money  must  be  regarded  as  an  act 
dividend.  q{  either  fraud  or  folly,  and  which  could  have  been 
advocated  by  no  man  who  was  not  either  dishonest  or  grossly 
incapable,  they  may  be  held  liable  for  the  consequent  loss  to 
the  corporation.^  The  act  is  not  to  be  excused,  for  it  must 
be  either  fraudulent  or  the  result  of  such  excessive  unfitness 
as  to  become  the  legal  equivalent  of  fraud.  But  where  the 
directors  declare  a  dividend  because  of  bad  judgment,  and  not 
bad  faith,  as  to  the  condition  of  the  assets,  they  are  not 
liable.^" 

(^)  Collateral  to  this  right  of  action  for  the  improper  dec- 
laration of  a  dividend  is  the  right  of  the  shareholder  to  pro- 
tection for  the  future  in  a  court  of  equity.  It  is  one  of  the 
very  few  cases  in  which  he  can  interfere  to  control  the  judg- 
ment of  the  board.  If  he  makes  out  a  proper  case,  he  may 
have  an  injunction  against  the  directors,  proliibiting  the  de- 
claring of  other  dividends  thereafter.  The  proceeding  for 
this  purpose  is  an  independent  one,  and  does  not  operate  as 
a  waiver  of  his  right  of  action  at  law  to  recover  damages  for 
the  injury  sustained  from  the  payment  of  the  dividend  already 
declared.  For  apparently  this  act,  however  wrongful,  cannot 
be  undone  after  the  measure  has  passed  the  corporate  govern- 
ment. The  right  of  each  shareholder  to  receive  his  dividend, 
is  perfect  so  soon  as  there  has  been  a  formal  vote  to  pay  it. 
It  is  rendered  a  debt  owing  from  the  bank  to  him.  After  this 
stage  it  is  too  late  for  a  court  of  equity  to  enjoin  the  disburse- 
ment of  the  dividend,  certainly  where  only  one  shareholder  is 
before  the  court." 

(c)  So  again  if  the  charter  forbids  the  issue  of  bills  for  cir- 
culation before  a  certain  portion  of  the  capital  stock  has  been 

«  Gunkle's  Appeal,  48  Pa.  St.  13 ;  Dykman  v.  Keeney,  10  N.  Y.  App. 
Div.  610. 

««  Witters  v.  Sowles,  31  Fed.  1. 
7  Fawcett  v.  Laurie,  1  Drew.  &  S.  192. 
276 


LIABILITY    OF   DIRECTORS   OVER    ISSUE.  §  128 

subscribed  and  paid  in,  in  specie,  an  issue  before  that  time  will 
make  the  directors  personally  liable  to  redeem  any  wrongful 
of  the  bills  which  the  bank  is  unable  to  pay  in  the  i^^ue  of  bills. 
due  and  ordinary  course  of  its  business.  A  statutory  requisi- 
tion of  a  nature  so  plain  and  simple  as  this  cannot  be  excusa- 
bly broken.  If  broken,  the  breach  cannot  be  regarded  as  a 
mistake  of  law.^ 

It  has  been  declared  in  a  Georgia  case,  that  with  the  expi- 
ration of  the  charter  of  the  bank  the  liability  of  the  directors 
for  over-issues  ceases  also.^  One  judge  dissented  from  this 
opinion,  and  it  must  be  confessed  that  it  is  difficult  to  believe 
that  it  is  sound  law.  An  over-issue  of  circulating  bills  is  a 
very  grave  offence.  It  can  hardly  be  made  honestly,  and  even 
if  it  is,  the  gross  neglect  of  duty,  which  must  open  the  door 
to  it,  deserves  a  scarcely  lighter  responsibility  than  actual 
fraud.  But  if  there  is  to  be  any  limitation  to  a  liability  thus 
created,  surely  it  cannot  accrue  until  such  time  as  no  person 
on  behalf  of  the  institution  has  the  duty  of  redeeming  its 
notes,  so  that  those  still  remaining  out  may  properly  be  sup- 
posed by  the  community  to  be  utterly  worthless.  Statutory 
or  charter  provisions,  or  judicial  decrees,  often  place  this  tijne 
at  a  date  much  later  than  that  of  the  expiration  of  the  charter. 
So  long  as  the  community  have  a  right  to  look  to  any  one  to 
redeem  the  bills  of  the  bank,  surely  they  should  have  the  right 
to  look  to  a  director  who  has  taken  part  in  an  over-issue. 

(d)  Mistakes  as  to  what  is  the  law  serve  to  excuse  in  cases 
where  correct  knowledge  could  be  reasonably  expected  only 
from  a  professional  man,  and  even  in  such  cases,  if  Mistakes 
the  directors  feel  any  doubts,  they  may  be  guilty  of  ^^^^^• 
neglect  if  they  fail  to  seek  and  be  guided  by  competent  legal 
advice.  Thus  the  board  of  a  bank  voted  to  pay  a  director  for 
services  ;  the  court  held  that  he  could  not  be  legally  paid.  But 
the  point  was  purely  legal ;  the  directors  had  acted  honestly 
and  without  negligence  in  the  matter,  and  they  were  accord- 
ingly exculpated  from  blame  or  responsibility.^^^     But  igno- 

«  Schley  v.  Dixon,  24  Ga.  273. 
9  Moultrie  v.  Hoge,  21  Ga.  513. 
"  Godbold  I'.  Branch  Bank,  11  Ala.  191. 

277 


R  128  DIRECTORS. 

ranee  of  any  fact  in  the  bank's  affairs  which  it  is  their  duty  to 
know,  can  never  be  set  up  by  them  in  defence  or  exculpation 
for  any  act  which  the  existence  of  that  fact  should  have  pro- 
hibited.ii  An(i  while  they  are  not  responsible  for  their  fail- 
ure to  collect  a  debt  because  of  usury  included  therein,  they 
are  liable  for  their  own  infringement  of  a  statute  against 
usury.i^" 

(e)  If  the  cashier  is  properly  selected,  there  is  no  negli- 
gence in  letting  him  select,  and  hire,  and  pay  from  his  salary, 
Notnegii-  tlie  clerks  and  servants  of  the  bank.^^  Directors 
gence.  ^j,g  ^ot  iusurcrs  of  the  fidelity  of  the  agents  whom 

they  appoint,  nor  can  they  be  held  responsible  for  losses  re- 
sultino-  from  the  wrongful  acts  and  omissions  of  other  direc- 
tors or  agents,  unless  the  loss  is  a  consequence  of  their  own 
neglect  of  duty.i^" 

(/)  A  director  cannot  escape  liability  for  the  results  of  his 
ignorance  of  the  affairs  of  the  bank,  on  the  ground  that  he 
111  health  of  has  been  in  ill  health.i^  g^t  where  the  other 
a  director.  directors  gavc  him  leave  of  absence  and  frauds 
are  committed  during  his  absence,  and  without  his  knowl- 
edo-e,  he  is  not  responsible  for  them.^'^'' 

(^)  Neither  non-residence  of  directors  making  it  imprac- 
ticable for  them  to  give  proper  attention  to  the  bank's  affairs 
„  nor  private  arrangements  between  them  and  other 

Non-resi-  ^^^     i  o  t         j 

dence.  directors  or  stockholders  whereby  they  are  relieved 

from  such  duties,  excuses  them  from  liability  incurred  by- 
permitting  false  statements  to  be  made  of  the  bank's  con- 
dition.13* 

"  Bank  Commissioners  v.  Bank  of  Buffalo,  6  Paige  (N.  Y.),  497. 
"«  Wallace  v.  Lincoln  Savings  Bank,  89  Tenn.  630,  648  (15  S.  W.  448) 
(1890)  ;  Drake  v.  Bank,  9  Grant,  Ch.  (U.  C.)  116. 

12  Smith  V.  First  National  Bank,  99  Mass.  605;  ^^'allace  v.  Lincoln 
Savings  Bank,  89  Tenn.  630,  652-654  (15  S.  W.  448)  (1890). 

12a  Briggs  V.  Spaulding,  141  U.  S.  133  (1891);  Warner  v.  Penoyer,  82 
Fed.  181  (1897);  Clews  i?.  Bardon,  36  Fed.  617;  McDonald  v.  Rankin, 
7  Montreal  L.  R.  (S.  C.)  44. 

13  German  Savings  Bank  v.  Wulfekubler,  19  Kans.  60. 
13a  Briggs  V.  Spaulding,  141  U.  S.  133  (1891). 

"«>  Houston  V.  Thornton,  122  N.  C.  365  (29  S.  E.  827)  (1898). 
278 


LIABILITY.  —  EXPIRATION   OF   CHARTER.  §  128 

(A)    A  director  of  a  savings  bank,  also  manager  and  mem- 
ber of  the  finance  committee  who  makes  a  loan 

,  ,  J     Solicitation 

prohibited  by  statute,  is  not  excused  on  the  ground   of  president 
that  he  acted  at  the  solicitation  of  the  president 
and  for  the  alleged  benefit  of  the  bank.^^'' 

(z)  A  very  common  provision  in  banking  acts  and  bank 
charters  names  a  certain  sum  or  ratio  vrhich  the  indebtedness 
of  the  bank  shall  never  be  allowed  to  exceed,  and  Goin^  beyond 
for  any  excess  makes  the  directors  under  whose  [,'a"„']5"/i„debt- 
administration  it  was  allowed  liable.  Apparently  edness. 
directors  have  a  salutary  fear  of  exposing  themselves  to  the 
risks  of  this  enactment,  for  few  suits  are  reported  in  the 
books.  Neither  are  those  few  which  are  found  very  valuable 
authorities.  The  chief  lesson  that  they  teach  is  the  necessity 
of  a  minute  accuracy  of  detail  in  any  legislation  which  may 
be  undertaken  for  the  accomplishment  of  an  end,  like  this, 
of  personal  responsibility  in  an  unremunerative  employment. 
They  are  not  very  consistent  inter  se,  nor  do  they  easily 
arrange  themselves  under  any  distinct  principle. 

(y)  In  Neal  v.  Moultrie  ^*  it  was  declared  that  the  liability,^ 
being  statutory,  was  not  barred  for  twenty  years  ;  and  that  the 
limitations  which  might  run  against  a  fine,  a  forfeiture,  or  a 
penalty  had  no  force  in  this  matter.  Hargroves  v.  Chambers  ^^ 
decided  that,  in  a  suit  against  surviving  directors,  on  the 
ground  that  all  the  directors  had  become  individually  liable,  it 
was  not  necessary  to  join  the  representatives  of  deceased  direc- 
tors ;  also  that  certificates  of  deposit  payable  on  order  with  in- 
terest from  date  formed  a  part  of  the  corporate  indebtedness ; 
also  that  neither  waste  of  the  assets  of  the  bank  in  the  hands 
of  the  assignee,  nor  a  judgment  of  forfeiture  of  fran-  Not  relieved 
chise  pronounced  against  the  bank,  nor  the  expira-  tion^orchar- 
tion  of  the  bank  charter,  could  operate  to  relieve  the  [f^g^^^f  ffr. 
directors  from  their  liability.  It  was  added  as  a  leiture. 
semhle,  that  they  would  not  be  relieved  by  these  events,  even  if 
the  dissolution  of  the  corporation  discharged  its  indebtedness. 

(k}   Next  we  have  the  case  of  Banks  v.  Darden,^^  also  de- 

13c  Williams  v.  McDonald,  42  N.  J.  Eq.  392  (7  Atl.  866)  (1886), 
"  12  Ga.  104.  15  30  Ga.  580.  i«  18  Ga.  318. 

279 


§  128  DIRECTORS. 

cided  in  Georgia,  but  hardly  destined  to  add  much  to  the 
reputation  of  the  learned  bench  of  that  State.  The  charter  of 
the  bank  fixed  the  limit  of  indebtedness,  and  provided  that 
Georgia  held  "  i^  casc  of  cxccss  the  directors  .  .  .  shall  be  liable 
director  li-       £qj.  ^}jq  same  in  their  private  and  individual  ca- 

able  though  '■ 

objecting.  pacitj."  The  court  held  that  the  provision  was 
remedial,  and  not  penal ;  tliat  the  liability  of  the  directors  was 
joint,  and  not  several;  and  that  no  single  member  of  the 
board  could  escape  his  responsibility  by  proving  either  his 
absence  from  the  meetings  at  which  the  excess  was  suffered 
to  be  incurred,  or  his  dissent  from  the  action  of  his  co-direc- 
tors. In  discussing  the  last  point,  the  judge  waxes  eloquent 
and  picturesque  in  his  language.  He  imagines  a  director  not 
only  absolutely  innocent  of  collusion  in  the  wrongdoing,  but 
even  laboring  strenuously  though  in  vain  to  obtain  respect 
and  obedience  for  the  law.  But,  he  says,  even  for  this  ill- 
starred  individual  there  is  no  flight  from  the  rigid  vengeance 
of  the  statute.  It  is  indeed  "  a  bloody  legal  picture,"  yet  the 
law  is  inexorable ;  the  "  pound  of  flesh  must  be  had."  In 
Michigan  the  judges  were  less  Draconic  in  their  interpretation 
of  their  similar  legislation,  and  ventured  to  hold  that  a  di- 
rector was  not  liable  for  an  excess  created  by  a  loan,  to  the 
making  of  which  he  had  objected  at  the  time  when  it  was 
agreed  upon  by  the  board. ^" 

(Z)    In  Ohio  the   lawgivers   wisely  took   this   matter  into 

their  own  hands,  and  laid  down  specifically  by  what  means, 

such  as  publication  of  his  dissent  and  the  like,  a  di- 

Ohio.  ^  ... 

rector  might  save  himself  from  liability  for  any  action 
of  the  remainder  of  the  board.  The  opinion  in  the  cited  case 
was  the  result  of  a  very  careful  consideration  of  the  subject, 
and  deserves  to  be  noticed.  The  statute  provided  that  for  any 
excess  the  "  directors  under  whose  administration  it  should 
happen  should  be  liable  for  the  same  in  their  natural  and  in- 
dividual capacity,  in  an  action  of  debt  against  them  or  any  of 
them."  The  court  held  that  the  remedy  of  the  creditors  was  a 
penal  action,  and  not  one  of  contract ;  and  that  the  measure  of 
damages  would  be  the  amount  of  the  excess  of  liability  created 

"  White  1-.  How,  3  McLean,  111. 

280 


LIABILITY   OF    DIRECTORS.  §  128 

by  the  board  of  which  the  defendant  or  defendants  were  mem- 
bers. The  grounds  on  which  this  conclusion  was  based  were  as 
follows :  1.  The  language  of  the  act  does  not  declare  that  the 
directors  shall  be  personally  liable  on  the  contract  of  indebted- 
ness itself  which  was  created  in  excess  of  the  legal  limit,  but 
solely  for  the  excess  itself.  2.  The  liability  does  not  run  to 
the  persons  holding  the  particular  contract  made  in  excess  of 
the  limit,  but  to  the  creditors  generally  ;  wherefore  the  ground 
of  action  is  clearly  not  the  original  contract.  3.  The  amount 
which  any  creditor  can  recover  is  not  the  amount  of  his  own 
debt,  but  the  amount  of  the  excess  of  the  total  liability  beyond 
the  legal  limit ;  and  this  even  though  his  own  debt  forms  no 
part  of  the  excess.  4.  The  liability  is  provided  for  in  the  man- 
ner customary  in  penal  statutes  to  vindicate  a  violation  of  law. 
6.  The  action  provided  is  the  usual  action  prescribed  by  penal 
statutes  to  recover  a  penalty.  6.  The  action  of  the  creditor 
must  be  debt,  whether  his  contract  with  the  bank  be  such  as 
to  authorize  this  form  or  not.  The  court  then  add,  that  they 
consider  that  the  right  to  bring  this  penal  action  is  given  to 
any  one  among  the  creditors  who  may  choose  singly  to  insti- 
tute it,  but  for  the  benefit  of  the  whole  body  of  creditors,  and 
to  create  a  fund  for  the  indemnity  of  all.^^  How  that  fund  is 
to  be  saved  and  applied  for  the  benefit  of  all,  is  a  matter  not 
discussed. 

(m)  In  Massachusetts,  a  dissenting  director  avoids 
liability  by  notice  to  the  bank  commissioners.^^ 

(w)    In  Pennsylvania,  where  a  loan  is  made  in  excess  of 
the  legal  limit,  every  director  who  particijxites  in  or  assents 
to  the  wrong  is  personally  responsible  for  the  dam- 
age directly  consequent  to  the  bank,  the  shareholders, 
or  any  one  else.^" 

(o)  A  recent  Kentucky  case,^!  Louisville  National  Bank  v. 
Brannin,  contains  an  excellent  discussion  of  the  liability  of 
directors. 

18  Sturges  V.  Burton,  8  Ohio  St.  215.  "  R.  L  c  115,  §  36. 

20  Stephens  v.  Monongahela  National  Bank,  88  Pa.  St.  157. 

21  Louisville  National  Bank  v.  Brannin,  Loving,  &  Harvey,  82  Ky. 
370-375  (1884). 

281 


§  128  DIRECTORS. 

The  charter  of  the  "  Exchange  Bank  and  Tobacco  Ware- 
house Co.  of  Louisville  "  provides  that  "  the  indebtedness  of 
the  corporation  over  and  above  that  incurred  for  deposits  of 
money  shall  at  no  time  exceed  their  paid-up  capital  stock." 

During  the  time  that  the  bank  was  indebted  beyond  the 
amount  of  its  paid-up  capital  stock,  the  president,  Harvey,  in- 
dorsed the  name  of  the  bank  upon  three  bills  of  exchange, 
and  they  were  sold  to  appellants,  and  suits  were  instituted 
by  appellants  against  appellees  to  hold  them  personally  bound 
for  the  bills.  Appellees  Loving  and  Bronner,  who  were  direc- 
tors, had  no  knowledge  of  the  making  or  negotiation  of  the  bills. 

"  By  reason  of  the  trustee  character  of  the  bank,  the  great 
facilities  its  officers  have  for  committing  frauds,  the  inability 
of  the  public  to  know  its  condition,  and  the  supreme  control 
the  directors  have  over  its  affairs,  it  becomes  the  duty  of  the 
latter  to  so  conduct  the  business  that  any  misconduct  cannot 
long  continue.  The  banks  conduct  the  business  of  this  coun- 
try so  largely,  and  those  dealing  with  them  are  compelled 
to  rely  on  their  officers  so  implicitly,  that  the  extraordinary 
privileges  accorded  to  them  should  be  properly  exercised. 

"  The  services  of  directors  are,  however,  usually  gratuitous  ; 
they  are  entitled  to  no  compensation  in  the  absence  of  a  con- 
tract for  it,  and  are  only  required  to  exercise  the  same  care 
that  an  ordinarily  prudent  man  would  in  his  own  business  of 
a  like  character. 

"  The  appellees  Loving  and  Bronner  had  no  knowledge 
whatever  of  the  making  or  negotiation  of  the  bills  sold  the 
appellants,  and  never  approved  the  same. 

"  The  transactions  were  isolated,  and  the  exercise  of  ordi- 
nary care  upon  their  part  did  not  afford  them  notice,  or  ena- 
ble them  to  stop  them ;  and,  being  isolated,  it  must  not  be 
presumed  that  they  had  notice  of  them  simply  because  they 
were  directors. 

"  The  appellee  Harvey,  however,  stands  in  a  different 
attitude.  As  to  him  it  is  not  a  question  of  neglect,  but  the 
violation  of  a  known  duty,  and  therefore  a  breach  of  trust 
amounting  to  a  tort. 

"  H  he  did  know  its  condition  and  the  provision  in  its  char- 
282 


LIABILITY    OF   DIRECTORS.  §  128 

ter,  and  created  the  indebtedness,  then  he  is  certainly  liable  ; 
and  if  he  did  not  have  such  knowledge,  then  there  was  such  a 
want  of  information  as  was  absolutely  necessary  to  the  proper 
performance  of  his  duty,  and  he  is  responsible  for  assuming 
to  act  without  it. 

"He  assumed  to  act  under  a  charter  containing  a  provi- 
sion so  plain  that  it  could  not  excusably  be  broken  by  him,  and 
when  it  was  his  duty  to  know  the  condition  of  his  company  ; 
and  under  such  circumstances  he  is  equally  as  responsible  as 
if  he  had  been  guilty  of  fraud.  Although  acting  bona  fide, 
he  had  no  right  to  create  the  debt ;  it  was  not  merely  an 
omission,  but  a  positive  violation  of  his  duty,  by  which  an 
innocent  outside  party  is  made  to  suffer,  and  one  who  had 
placed  confidence  in  the  implied  assertion  of  authority  arising 
from  the  making  of  the  paper." 

(^)    In  Missouri,  the  directors  of  a  savings  bank  who  have 
loaned  to  one  person  a  sum  greater  than  one-fourth  of  the 
bank's    capital    stock,  contrary    to  Revised  Statutes, 
§  916  (1879),  are  liable  to  the  bank  or  its  receiver 
for  any  loss  that  may  accrue  from  such  loan,  although  the 
statute  itself  does  not  provide  any  penalty  for  its  violation.^i" 

(g)  In  South  Carolina  the  loaning  of  over  two-thirds  of 
the  capital  of  a  bank  to  a  single  merchant  is  not  sufficient  to 
render   the    directors   personally  liable  for  resulting 

'  •'  .  .  ^     S.  Car. 

loss,   provided    the   loan   was    made    in   entire    good 
faith  and  honesty  of  purpose.^^* 

(r)    The  directors  of  a  bank  are  not  personally  responsible 
to  one  (H.)  from  whom  they  have  in  good  fait^  made  an  unau- 
thorized purchase  of  stock,  which  the  bank  repudi-   Abeies  v. 
ated.     The  sale  was  illegal  for  lack  of  consent  of   ^°'^^'"^"- 
the  shareholders,  and  the  contract  being  therefore  ultra  vires, 
the  bank,  having  received  no  benefit  from  it,  could  not  be  held. 

H.  sued  the  directors,  claiming  that,  as  they  had  failed  to 
bind  the  bank,  they  were  themselves  bound,  on  the  rule  that 
an  agent  who  goes  beyond  his  authority  binds  himself.  The 
court  said,  that  this  is  by  no  means  a  universal  rule  ;   the 

2i«  Thompson  v.  Greeley,  107  ]\Io.  577  (17  S.  W.  962). 
216  Wheeler  v.  Aiker  Co.  Bank,  75  Fed.  781  (1896). 

283 


§129  DIRECTORS. 

first  question  is  always,  between  what  parties  was  the  con- 
tract, for  the  law  will  not  make  a  new  contract.  In  this  case 
the  agreement  was  clearly  understood  to  be  between  the  bank 
and  H.,  and  therefore  the  directors  could  not  be  held  on  the 
contract;  but  if  any  wrong  could  be  imputed  to  the  agents 
they  would  be  liable.  In  the  case  at  bar,  however,  the  direc- 
tors (D.)  were  not  guilty  of  any  misrepresentation ;  both  H. 
and  D.  thought  the  contract  good,  and  the  sources  of  D.^s  au- 
thority zvere  as  open  to  H.  as  to  D.  If  an  agent  covenants  per- 
sonally, adding  his  representative  character  which  he  fails  to 
sustain,  he  is  bound  on  the  contract ;  but  if  the  language  does 
not  contain  a  personal  undertaking  it  is  not  his  contract." 
If  he  carelessly  or  knoivingly  assumes  authority  he  does  not 
possess,  he  is  liable  in  tort ; "  but  in  no  case  where  the  power 
of  judging*  of  the  agency  was  equal  has  the  agent  been  held 
liable  as  the  principal.22  Directors  are  not  liable  in  any  event 
for  over-checks  permitted  to  customers  without  their  author- 
ity or  knowledge,23  neither  can  they  be  held  to  the  common- 
law  liability  for  hazardous,  imprudent,  and  disastrous  loans  if 
such  loan?  were  made  by  their  associates  without  their  knowl- 
edge, connivance,  or  participation.^* 

§  129.  Claims  against  Directors.  —  If  liability  of  a  director 
once  accrues  for  any  of  the  above  described  species  of  mal- 
feasance in  office,  whether  his  acts  have  been  the  result  of 
dishonesty,  negligence,  or  incompetence,  the  claim  of  the  bank 
against  him  becomes  a  part  of  the  assets  of  the  institution. 
An  assignee,  receiver,  commissioner,  or  other  party  whomso- 
ever, who  may  come  into  possession  of  the  corporate  property 
for  the  purpose  of  collecting  it  and  distributing  it  among  the 

22  Abeles  v.  Cochran,  22  Kans.  405  (1879).  See  (c)  Story  on  Agency, 
§§  264  a,  265  a.  (a)  Ogden  v.  Raymond,  22  Conn.  384.  AVhen  the 
directors  of  an  insolvent  bank  receive  a  deposit,  in  violation  of  statute, 
their  liability  is  in  tort.  Baxter  v.  Nash,  70  Minn.  20  (72  N.  W. 
799)  (1897);  Soloman  v.  Bates,  IIS  N.  C.  311,  316  (24  S.  E.  478) 
(1896).  (6)  Aspinwall  v.  Torrance,  1  Lans.  (N.  Y.)  381;  Sandford  v. 
McAuthur,  18  B.  Mon.  (Ky.)  411. 

23  Wallace  r.  Lincoln  Savings  Bank,  89  Tenn.  630,  655  (15  S.  W.  448) 
(1890). 

2*  Witters  v.  Bowles,  31  Fed.  1. 
284 


CLAIMS   AGAINST   DIRECTORS.  §  129 

creditors  and  shareholders,  is  obliged  to  regard  the  rights  of 
action  against  such  delinquent  directors  as  a  part  of  the  avail- 
able assets.  It  is  his  duty  to  push  the  claims,  to  make  what 
he  can  out  of  them,  and  to  apply  the  proceeds  together  with 
the  other  funds  of  the  corporation  to  the  discharge  of  its  in- 
debtedness and  the  reimbursement  of  its  creditors  and  share- 
holders. The  suit  may  be  instituted  in  the  corporate  name, 
provided  it  is  stated  that  it  is  instituted  by  order  of  the  re- 
ceiver.i  Neither  a  stockholder  nor  a  creditor  can  sue  the 
directors  of  an  insolvent  bank  to  make  them  personally  liable 
for  mismanagement.  The  receiver  alone  can  maintain  the 
action.!"  j^^i  where  a  cause  of  action  exists  and  the  bank  re- 
fuses to  sue,  the  depositors  may  do  so.^*  The  liability  is  at 
common  law,  and  though  a  statute  or  charter  may  declare 
what  acts  of  a  director,  and  under  what  circumstances  com- 
mitted, shall  render  him  liable,  yet  these  enactments  will  not 
operate  to  alter  the  nature  of  the  liability,  once  accrued,  or  to 
render  it  statutory.  They  must  be  construed  as  simply  relat- 
ing to  evidence,  and  as  declaring  that  testimony  establishing 
the  acts  and  circumstances  described,  shall  suffice  to  fix  the 
liability  ;  which,  however,  after  it  has  been  thus  fixed,  will  still 
retain  its  original  and  inherent  common  law  character.  For 
this  same  reason  dexterous  and  subtle  evasions  of  the  language 
of  the  statute  will  not  enable  the  directors  to  frustrate  its  in- 
tent, or  to  shun  a  responsibility  which  is  fastened  upon  them 
by  extrinsic  principles  of  law,  wholly  outside  the  statute  or  the 
charter,  and  existing  quite  independently  of  either.  Thus,  if 
the  statute  declares  that,  in  case  an  insolvent  or  embarrassed 
bank  shall  be  "  compelled "  to  make  an  assignment,  then  the 
assignee  shall  pursue  his  rights  of  action  against  the  directors, 
and  their  liability  shall  be  maintained  upon  proof  of  certain 
facts  in  their  conduct,  the  directors  cannot  escape  either  the 
obvious  purport  of  this  legislation,  or  their  common  law  lia- 
bility, by  making  a  voluntary  assignment  before  they  have 

1  §  129.     Bank  of  Niagara  v.  Johnson,  8  Wend.  (N.  Y.)  645. 
^"  Howe  V.  Barney,  45  Fed.  668 ;  National  Exchange  Bank  v.  Peters, 
44  Fed.  13 ;  Bailey  v.  Mosher,  63  Fed.  488. 

1*  Savings  Bank  v.  Capertou,  87  Ky.  306,  311  (8  S.  W.  885)  (1888). 

285 


§  130  DIRECTORS. 

been  actually  "  compelled  "  to  do  so.^  And  under  Revised 
Statutes  of  U.  S.  the  right  to  recover  from  a  director  the 
damages  sustained  in  consequence  of  excessive  loans  made  by 
him  is  not  affected  by  the  fact  that  the  comptroller  has  or  has 
not  procured  a  forfeiture  of  the  bank's  charter.^®  An  action 
by  the  receiver  of  a  bank  against  a  director  for  losses  caused 
by  negligent  conduct  survives,  and  does  not  abate  by  the 
director's  deatli.^*  But  whatever  liability  may  have  been  in- 
curred by  all  or  any  of  the  members  of  a  board  of  direction, 
it  will  not  descend  to  their  successors  in  office,  who  are  blame- 
less upon  their  own  account.  Neither  will  it  pass  to  any  third 
party  to  whom  they  have  assigned  corporate  property,  if  he 
took  it  in  good  faith,  without  collusion,  and  for  value.^ 

§  130.  Liability  of  Directors  to  Third  Parties.  —  It  has  been 
said,  that  aside  from  statute  no  bank  officer  is  individually 
liable  to  a  creditor  or  depositor  for  mismanagement,  unless 
his  action  is  malicious  or  fraudulent.^  But  in  the  case  of 
savings  banks,  of  course,  the  officers  are  liable  to  the  depos- 
itors for  lack  of  ordinary  care,  and  in  commercial  banks  the 
better  opinion  is,  that,  though  the  officers  are  liable  only  to 
the  bank  for  ordinary  negligence,^"  they  are  liable  to  third 
parties  for  gross  neglect,^*  The  burden  for  exoneration  is 
not  on  the  directors,  and  they  cannot  be  charged  for  losses 
unless  it  is  shown  that  such  losses  resulted  from  their 
negligence.^"^ 

(a)  The  directors  of  a  bank  are  trustees  for  depositors,  and 
can  be  held  for  injuries  resulting  from  gross  negligence  on 

2  Gunkle's  Appeal,  48  Pa.  St.  13 ;  Schley  v.  Dixon,  24  Ga.  273. 

2«  Stephens  v.  Overstolz,  43  Fed.  771 ;  Gerner  v.  Thompson,  74  Fed. 
125;  Cockrill  v.  Cooper,  86  Fed.  7  (1898). 

26  O'Brien  v.  Blaut,  17  App.  Div.  (Hun,  N.  Y.)  288  (1897)  ;  Stephens 
V.  Overstolz,  43  Fed.  465. 

2  Schley  ?'.  Dixon,  supra. 

1  §  130.  Fusz  V.  Spaunhorst,  67  Mo.  257;  Howe  v.  Barney,  45  Fed. 
668. 

i«  Williams r.  McDonald,  42  N.  J.  Eq.  392  (7  Atl.  866)  (1886). 

1*  Union  National  Bank  v.  Hill,  148  Mo.  380  (49  S.  W.  1012)  (1898); 
Deaderick  v.  Bank,  100  Tenn.  457  (45  S.  W.  786)  (1899). 

i<^  Warner  v.  Penoyer,  91  Fed.  587  (1898). 

286 


LIABILITY    TO   THIRD    PARTIES.  §  130 

their  part  in  allowing  the  hank  to  he  held  out  to  the  public 
as  solvent,  when  it  was  in  fact  insolvent.  Slieldon,  C.  J.,  and 
Craig,  J.,  dissenting.^ 

"  Ordinarily  the  character  of  the  directory  for  integrity  and 
business  capacity  increases  the  degree  of  confidence  reposed 
in  the  corporation  by  the  public.     Were  depositors,    jjjrectors 
when  intrusting  to  a  bank  their  entire  fortune,  to   liable  to  de- 

°  .  positors  for 

be  informed  that  the  directors,  upon  whose  honor   gross  negii- 
and  careful  watchfulness  they  were  relying,  owed   For  ordinary 
them  no  duty,  were  under  no  obligations  to  take  at   "nfy  nXie' 
least  reasonable  precautions  to  guard  their  money    *"^^'^'^- 
from  the  itching  fingers  of  dishonorable  officials,  they  would 
certainly   hesitate    long    before    surrendering   it   upon    such 
terms.     There  are  many  risks  and  uncertainties  against  which 
a  prudent  business  man  never  expects  the  directors  or  man- 
agers of  banks  to  insure  him. 

(i)  "  He  knows  that  for  the  usual  hazards  of  business  he 
must  look  to  the  hank  alone,  that  for  the  ordinary  negligence  of 
directors  they  are  responsible  alone  to  their  principal ;  but  for 
such  gross  negligence  or  incompetency  as  shows  a  reckless 
disregard  of  their  duty  to  care  for  and  protect  the  funds  com- 
mitted to  their  charge,  we  think  they  are  directly  responsible 
to  the  depositor." 

The  directors  in  this  case  were  notified  by  the  president, 
ten  months  before  the  failure,  of  his  suspicions  that  Compton 
was  stealing  from  the  bank,  when  the  slightest  examination 
would  have  exposed  the  true  state  of  affairs  and  protected 
subsequent  depositors.  No  examination  whatever  was  made. 
Under  such  circumstances  there  w-as  clearly  another  duty 
which  the  directors  owed  to  the  community.  If  they  knew 
that  the  bank  Avas  insolvent,  or  if  their  suspicions  were 
aroused,  and  they  recklessly  closed  their  eyes  and  made  no 
effort  to  discover  the  truth,  it  was  their  duty  not  to  receive 
the  money  of  depositors  ignorant  of  the  true  state  of  affairs. 
To  do  so  when  they  had  but  a  suspicion  of  the  danger 
would  be  a  great  wrong,  and,  if  with  full  knowledge,  would 

2  Delano  v.  Case,  12  N.  E.  676 ;  17  Brad.  531  (III  ,  Aug.,  1887)  ; 
Foster  v.  Bank  of  Abingdon,  88  Fed.  G04  (1898). 

287 


S  130  DIRECTORS. 

now  be  a  felony.  If  we  are  correct  in  these  views,  it  fol- 
lows that  appellants  owed  a  duty  to  appellee  which  they 
have  not  performed,  in  consequence  of  which  he  has  been 
injured,  and  for  which  he  ought  to  have  a  remedy ;  for  it  is 
a  maxim  of  the  common  law,  that  a  man  specially  injured  by  a 
breach  of  duty  in  another  should  have  his  remedy  by  action.^ 

(c)  So  in  Kentucky,  the  directors  were  held  liable  for 
special  deposits  stolen  and  sold  by  the  officers,  since  ordinary 
diligence  on  the  part  of  the  directors  would  have  disclosed 
the  wrongful  salcs.^ 

(d)  And,  in  JVIassachusetts,  if  the  directors,  through  in- 
attention or  otherwise,  suffer  the  cashier  to  pursue  and 
practise  a  certain  line  of  conduct  for  a  considerable  period  of 
time  without  objection,  the  bank  will  be  bound  by  his  acts 
within  that  line  of  conduct.^" 

(e)  The  directors  of  an  insolvent  national  bank  cannot  be 
held  for  failure  to  discover  and  prevent  a  series  of  discounts 
of  improperly  secured  paper,  indorsed  by  a  wealthy  director 
who  was  the  largest  stockholder  in  the  bank. 

The  president  of  a  bank  wished  to  resign  on  account  of 
health,  but  was  persuaded  to  retain  his  office  and  take  a  trip 
abroad;  while  away,  and  without  his  fault,  losses  were  sus- 
tained by  the  bank.  In  a  suit  by  the  receiver  to  charge  the 
directors,  held,  that  the  president  was  not  liable,  nor  a  director 
who  had  sold  his  stock  and  orally  resigned  his  office  to  the 
president  before  the  losses.* 

(/)  Directors  of  a  national  bank  cannot  be  held  to  a  com- 
mon law  liability  for  inattention  to  duty  in  not  preventing  a 
hazardous  loan,  made  without  their  connivance  or  knowledge. 
Nor  can  the  officers  of  an  insolvent  national  bank  be  held 
liable  to  creditors  for  losses  on  loans  made  by  them  in  good 
faith,  merely  because  such  loans  seem  unwise  and  perilous 
when  looked  back  upon.^ 

8  United  Society  v.  Underwood,  9  Bush  (Ky.),  609  ;  Miller  v.  Howard, 
95  Tenn.  407,  411  (32  S.  W.  305)  (1895). 

8«  L'llerbette  v.  Pittsfield  National  Bank,  162  Mass.  137  (38  N.  E. 
368)  (1894). 

*  Movius  V.  Lee,  30  Fed.  R.  298  (May,  1887). 

6  Witters  v.  Sowles,  31  Fed.  R.  1  (July,  1887). 

288 


LIABILITY   OF   DIRECTORS.  §  131 

((7)    Managers  of  a  savings  bank  may  be  liable  if  they  par- 
ticipate ill  or  promote  prohibited  acts  cau8ing  loss,    gavinffsbank. 
or  if  they  neglect  to  bestow  due  care,  whereby  their   managers, 
associates  are  not  restrained,  or  are  enabled  to  do  those  acts 
which  prove  disastrous  to  the  institution.^ 

It  is  competent  to  consider  the  course  of  conduct  when 
certain  managers  were  present  in  order  to  decide  if  they  are 
liable  for  similar  conduct  of  their  associates  in  their  absence. 

§  131.  Personal  Liability  of  one  held  out  as  a  Director,  —  The 
owners  of  a  State  bank  for  more  than  four  years  published 
an  advertisement  of  the  bank,  containing  tiie  names 

Hume  t». 

of   persons    (A.,  B.,  &c.)    as    directors    who   had   (>>mmerciai 
never  accepted  the  ofifice,  or  acted  as  directors,  or 
done  or  said  anything  to  lead  creditors  to  believe  that  they 
■were  directors.     The   bank  failed,  and  it  was  decided    that 
the  creditors  could  not  hold  such  persons  as  directors.^ 

(a)  Freeman,  J.  dissented,  thinking  A.,  B.,  &c.  had  es- 
topped themselves  by  allowing  an  official  notice  by  the  bank 
of  its  organizing  with  them  for  directors.  It  was  notice  of  a 
business  organization,  inviting  public  patronage  on  the  basis 
of  confidence  in  those  parties,  and  when  parties  stand  by  and 
permit  the  public  to  be  notified  for  years  that  they  are  man- 
agers of  such  an  institution  nntil  it  is  insolvent,  they  should 
not  escape  the  responsibility  jnstly  attaching  to  such  a  position 
announced  to  the  world,  Tliey  assented  to  the  advertisement 
as  fully  as  if  they  had  authorized  it. 

(&)  There  is  an  immense  confusion  in  the  cases  npon  this 
subject  of  the  personal  responsibility  of  one  held  out  as  being 
in  a  position  of  responsibility,  resulting,  I  think, 
from  the  alternate  or  mingled  application  of  two 
principles.  To  put  a  penalty  on  conduct  likely  to  lead  to 
unsound  credit,  and  to  hold  A.  responsible  for  loss  resulting 
from  unsound  credit  actually  given  by  his  fault,  —  that  is,  to 
hold  that  A.  shall  make  good  to  B.  and  C,  the  credit  A.'s 
conduct  has  led  them  really  to  give  him,  —  are  two  very  dif- 

6  Dodd  V.  Wilkinson,  9  Atlantic  R.  685  (N.  J.,  June,  1887)  ;  Toledo 
Savings  Bank  v.  Johnston,  94  Iowa,  212  (62  N.  W.  748)  (1895). 
^  §  131.    Ilume  V.  Commercial  Bank  of  Knoxville,  9  Lea,  728. 
VOL.  I.  — 19  289 


§  132  DIRECTORS. 

ferent  matters.  If  the  judge  follows  the  first  line  of  thought 
he  will  hold  A.,  whether  the  plaintiff  knew  that  A,  had  al- 
lowed himself  to  be  held  out  or  not.^  If  he  acts  on  the  second 
ground,  the  defendant  will  only  be  liable  when  the  plaintiff 
knew  that  A.  was  so  held  out,  or  the  holding  out  was  under 
such  circumstances  of  publicity  as  to  satisfy  the  jury  that  the 
plaintiff  knew  of  it,  and  believed  A.  to  be  really  a  partner  or 
director,  or  in  such  other  position  as  the  holding  out  would 
indicate.^ 

It  would  seem  that  the  only  proper  ground  in  a  civil  suit 
would  be  the  second,  for  no  person  should  recover  for  injury 
to  others,  but  only  to  himself,  and  must  show  that  the  defend- 
ant's conduct  has  really  caused  him  loss.  The  repression  of 
conduct  injurious  to  the  public  is  a  matter  for  the  State,  al- 
though until  the  State  wakes  up  to  the  matter  it  may  be  very 
well  for  the  judges  to  apply  the  just  penalty  in  the  best  way 
they  can ;  as  giving  to  some  innocent  person  a  little  more 
than  his  just  due,  or  relieving  one  from  the  consequence  of 
his  own  error  of  judgment  in  trusting  a  firm,  is  probably  a 
less  evil  to  the  community  than  allowing  conduct  subversive 
of  sound  credit  and  good  faith. 

§  132.  False  Statements  of  the  Condition  of  the  Bank.  —  It 
often  happens  that  the  officers  of  corporations  put  forth  decep- 
tive and  fraudulent  reports,  and  make  false  statements  con- 
cerning its  affairs,  in  order  to  keep  up  its  good  repute  with 
the  public,  and  to  sustain  or  raise  the  price  of  shares  by 
attracting  purchasers.  As  our  banking  corporations  are  con- 
ducted at  present  under  the  National  Banking  Act,  deception 
cannot  be  easily  effected  by  such  artifices.  Indeed,  miscon- 
duct of  this  kind  seems  always  to  have  been  rare  in  the 
banking  institutions  of  our  own  country,  and  most  of  the 
cases  are  English.  The  bank  in  its  corporate  capacity  can 
never  be  held  to  answer  for  any  species  of  fraud  or  deception 
of  this  nature  practised  by  any  of  its  directors  or  other  offi- 
cers individually,  though  at  the  banking-house  and  in  bank- 

2  Young  V.  Axtell,  24  Black,  242. 

8  Dickinson  v.  Valpy,  10  B.  &  C.  128  ;  Carter  v.  Whalley,  1  B.  &  Ad. 
11;  Alderson  v.  Pope,  1  Camp.  404. 
200 


MISREPRESENTATIONS.  §  132 

ing  hours.  No  single  director,  ncitlier  any  other  official,  has 
it  within  the  scope  of  his  custoniarj  authority  to  bind  the  bank 
by  any  representations  whatsoever  made  concerning  its  con- 
dition or  affairs.  The  bank  docs  not  hold  them  out  as 
competent  to  give  information  of  this  character,  and  any 
person  who  relies  on  statements  thus  received  puts  his  confi- 
dence in  the  individual  from  whom  the  statements  proceed  ; 
and  though  he  may  have  a  good  cause  of  action  against  him, 
it  is  against  him  as  a  private  individual,  and  not  as  an  officer® 
of  the  bank,  and  can  by  no  means  be  against  the  bank  itself. 

(a)  The  corporation  can  only  be  held  liable  if  it  publishes 
corporate  reports,  as  such,  falsely  and  with  criminal  intent. 
Such  would  be  a  statement  adopted  at  a  general  when  bank 
meeting  of  the  directors  and  intentionally  put  forth  '^  liable, 
to  the  public,  or  left  to  reach  the  community  in  the  ordinary 
course  of  business. 

(6)  Where  the  directors  have  been  assisted  in  the  prepara- 
tion of  their  deceptive  or  fictitious  statements  by  any  subordi- 
nate officers,  these  officers  will  be  under  the  same 

Officers  per- 

personal  liability  as  the  individual  directors,  though  sonai  iia- 
the  directors  alone  have  signed  the  document.^  The 
tendency  in  England  seems  to  be  generally  to  hold  the  direc- 
tors liable  if  possible,  and  statutory  enactments  come  to  the 
aid  of  this  tendency  with  thorough  provisions  and  stringent 
punishments.  Thus  directors  and  any  officer  in  collusion  with 
them  are  liable  to  indictment  for  conspiracy  to  defraud  by  the 
publication  of  false  balance-sheets  and  the  circulation  of  false 
reports  as  to  the  condition  and  solvency  of  the  bank ;  or  the 
issuing  and  offering  for  sale  new  stock,  at  a  time  when  they 
know  the  bank  to  be  insolvent.^  So  again  they  were  held 
criminally  responsible  for  representing  the  affairs  of  the  com- 

0  §  132.  Wolfe  V.  Simmons,  75  Miss.  539  (23  So.  586)  (1897)  ;  Tate 
V.  Bates,  118  N.  C.  287  (2i  S.  E.  482)  (1896);  Seale  v.  Baker,  70  Tex. 
283  (7  S.  W.  742)  (1888). 

1  CuDen  v.  Thomson,  4  Macq.  PI.  L.  Cas.  (Sc.)  431 ;  9  Jur.  N.  8. 
85;  Ex  parte  Frowd,  9  W.  R.  328;  3  L.  T.  n.  s.  843  ;  Re  Royal  British 
Bank,  Ex  parte  Nicol,  5  Jur.  n.  s.  205 ;  28  L.  J.  n.  s.  257. 

2  Regina  v.  Esdaile,  1  F.  &  F.  213  ;  Grant  on  Bankers  and  Banking, 
p.  543,  and  cases  cited. 

291 


S  132  DIRECTORS. 

pany  to  be  prosperous,  and  declaring  large  dividends,  when 
in  fact  the  bank  was  embarrassed.^  Directors  are  liable  for 
injuries  to  a  person  who  relics  upon  a  statement  issued  by 
them,  which  they  did  not  know  to  be  true,  as  well  as  when 
they  knew  it  to  be  false.^" 

In  a  New  York  case,^  one  count  alleged  that  a  falsehood 
concerning  the  amount  of  stock  actually  subscribed  and  paid 
in  had  been  uttered  by  the  defendant,  as  director,  together 
with  the  other  directors,  in  the  articles  of  association,  whereby 
the  plaintiff  had  been  induced  to  buy  shares.  The  court  said 
that  it  was  difficult  to  understand  how  a  director  could  be 
individually  chargeable  for  false  statements  in  the  articles  of 
association,  which  necessarily  preceded  in  order  of  time  the 
election  of  directors;  or  how  such  articles  could  have  the 
character  of  a  continuing  false  representation  by  every  di- 
rector who  might  subsequently  come  into  the  board,  so  as 
to  give  a  right  of  action  against  him  to  every  one  there- 
after purchasing  stock.  The  second  count  alleged  that  the 
defendant  falsely  and  fraudulently  represented  to  the  plaintiff 
that  the  shares  were  actually  worth  par  or  over,  whereby  the 
plaintiff  was  induced  to  purchase.  In  order  to  sustain  this 
count  it  was  necessary  to  make  out  a  good  cause  of  action 
against  the  defendant  in  his  individual  capacity.  As  director 
he  could  not  be  charged  with  knowledge  of  the  value  of  the 
stock.  But  at  any  rate  the  pleading  was  fatally  defective  in 
failing  to  allege  that  the  misrepresentations  were  made  with 
the  intent  to  deceive  the  plaintiff.  The  whole  statement  of 
the  count  might  be  true,  and  yet  this  intent  might  have  been 
absent ;  and  the  allegation  and  proof  of  the  intent  are  a  sine 
qua  non  to  a  recovery.  The  principles  laid  down  in  this 
decision  are  unquestionably  correct.  Yet  as  the  professional 
man  studies  the  case  he  will  be  obliged  to  regret,  either  that 
it  was  so  wofully  misunderstood  or  mismanaged  by  the  plain- 

8  Burnes  v.  Pennell,  2  H.  L.  C.  497;  Seale  v.  Baker,  70  Tex.  2S3  (7 
S.W.  742)  (1888). 

8«  Solomon  v.  Bates,  118  N.  C.  287  (21  S.  E.  482)  (1896);  Houston  v. 
Thornton,  122  N.  C.  365  (29  S.  E.  827)  (1898). 

♦  Mabey  v.  Adams,  3  Bosw.  (N.  Y.)  346. 
292 


NOTICE   TO    DIRECTORS.  §   133 

tiff's  counsel,  or  that  it  was  so  clumsily  reported.  One  or  the 
other  of  these  misfortunes  has  robbed  it  of  mucli  of  its  value 
as  an  authority. 

The  liability  of  directors  of  a  national  bank  to  a  common 
law  action  of  deceit  for  false  and  fraudulent  representations 
made  by  them  in  the  pretended  performance  of  duties  imposed 
upon  them  by  the  national  banl<;ing  law  is  not  precluded  by 
the  liability  imposed  in  that  law  for  violation  of  its  provisions.' 

If  the  action  against  the  directors  is  for  deceit,  damage 
must  be  shown.^ 

§  133.  Notice  to  the  Board.  —  It  is  a  question  of  frequent 
occurrence  and  considerable  moment,  under  what  circum- 
stances a  bank  will  be  affected  with  notice  of  a  fact  which  has 
not  been  actually  and  formally  notified  to  its  assembled  direc- 
torial board.  It  is  not,  of  course,  indispensable  that  a  formal 
statement  should  be  made  to  the  board  at  its  regular  meet- 
ing. A  discussion  or  open  mention  of  the  matter  there, 
however  introduced,  is  amply  sufficient.^  But  where  the 
information  remains  the  private  knowledge  of  a  portion  only 
of  those  present,  it  is  important  to  know  when  the  knowl- 
edge of  this  portion  will,  and  when  it  will  not,  be  considered  to 
be  the  knowledge  of  the  bank.  Knowledge  once  received  by 
any  board  of  directors  is  in  law,  however  it  may  be  in  fact,  re- 
tained by  every  subsequent  board,  and  the  bank  will  be  affected 
by  it  without  a  repetition  of  the  communication.^ 

What  the  directors  ought  to  have  known  by  proper  dili- 
gence as  to  the  general  course  of  the  bank's  business,  they 
are  presumed  to  have  known  in  a  contest  between  the  bank 
and  third  persons  dealing  with  it  in  good  faith.^ 

B  Prescott  V.  Haughey,  65  Fed.  653. 
«  Brady  v.  Evans,  78  Fed.  558. 

1  §  133.  Bank  of  Pittsburg  v.  Whithead,  10  Watts  (Pa.),  397.  In  this 
case  it  was  noted  as  a  qucere  whether  publication  in  a  newspaper  subscribed 
for  by  the  bank  would  operate  as  constructive  notice  to  the  bank.  It  is 
hardly  probable  that  such  a  notion  could  be  sustained  ;  it  is  going  much 
too  far. 

2  Mechanics'  Bank  of  Alexandria  v.  Seton,  1  Pet.  299  ;  Fulton  Bank 
V.  New  York  &  Sharon  Canal  Co.,  4  Paige  (N.  Y.),  127. 

8  Martin  v.  Webb,  110  U.  S.  7 ;  McDaniel  v.  Harvey,  51  Mo.  App.  198; 

298 


§134 


DIRECTORS. 


§  134.  Notice  to  a  Single  Director.  —  The  question  whether 
it  is  just  to  hold  the  bank  bound  by  the  knowledge  of  a  single 
member  of  a  composite  agency  unless  he  decides  the  vote  or 
action  of  the  body,  is  discussed  above,  §  112. 

The  general  rule  actually  adoj^ted  is  as  follows.  If  the 
director  acquired  it  in  his  official  capacity,  or  in  the  course  of 
^        ,     ,     or  in  relation  to  any  special  matter  or  function  of 

General  rule  •'       ^ 

as  actually       whicli  he  had  charge  as  an  agent  of  the  bank,  then 

adopted.  ^  ° 

he  knows  it  as  a  director,  and  the  law  holds  that 
the  bank  also  knows  it.  If  he  acquired  it,  however,  solely 
as  any  other  private  individual  might  have  acquired  it,  and 
not  officially,  or  in  connection  with  his  discharge  of  the 
functions  of  his  office,  or  if  it  did  not  relate  to  auy  matter  in 
which  he  owed  a  peculiar  duty  to  the  bank,  he  does  not  know 
it  as  director,  and  the  bank  does  not  know  it  by  implication 
from  his  knowledge,  except  when  he  afterward  acts  for  the 
bank  having  such  knowledge  presumably  still  present  in  his 
mind  at  the  time  he  acts  in  the  matter  to  which  it  relates, 
and  having  no  adverse  interest  to  keep  him  from  fulfilling 
his  duty  by  communicating  his  information  to  the  bank  ; 
or,  if  lie  has  such  adverse  interest,  then  to  hold  the  bank 
two  facts  must  coexist ;  viz.  the  party  C.  in  controversy  with 
the  bank,  or  the  one  on  whose  right  he  stands,  must  have  been 
aware  that  the  director  possessed  the  knowledge,  and  not 
aware  of  the  adverse  interest.^     §  136. 

Roberts  v.  Washingtou  National  Bank,  11  Wash.   550  (10  Pac.   225) 
(1895). 

^  §  131.  Custer  y.  Tompkins  County  Bank,  9  Barr  (Pa),  27,  National 
Bank  v.  Norton,  1  Hill  (N.  Y.),  572  (a  leading  authoritv);  Bank  of  United 
States  V.  Davis,  2  id.  451;  Fulton  Bank  v.  Benedict,  1  Hail  (N.  Y.),  480; 
Fulton  Bank  v.  New  York  &  Sharon  Canal  Co.,  4  Paige  (N.  Y.),  127; 
Washington  Bank  v.  Lewis,  22  Pick.  (Mass.)  24;  Looniis  v.  Eagle  Bank 
of  lloche.ster,  Disney  (Ohio),  285;  Bank  of  Pittsburg  v.  Whiteiiead,  10 
Watts  (Pa.),  397;  Louisiana  State  Bank  v.  Senecal,  13  La.  525;  Powles 
r.  Page,  3  C.  B.  16;  15  L.  J.  C.  P.  217;  In  re  Carew,  31  Beav.  39.  See 
The  Distillery  Spirits,  11  Wall.  356;  National  Bank  v.  Cushman,  121  Mass. 
490;  Fairfield  Savings  Bank  v.  Chase,  72  Me.  226;  Anketel  v.  Converse, 
17  Ohio  St.  11;  Hart  v.  The  F.  &  M.  Bank,  33  Vt.  252;  Blumenthal  v. 
Brainard,  38  Vt.  410 ;  Hayward  v.  National  Ins.  Co.,  52  ]\Io.  181 ;  Dresser  v. 
Norwood,  17  C.  B.  n.  s.  466.     But  Pennsylvania  holds  notice  to  an  agent 

294 


NOTICE   TO    DIRECTORS,  §  134 

The  knowledge  of  the  single  director  must  be  actual,  not 
merely  constructive.     §  135. 

(a)  Many  cases  have  arisen  wherein  the  interpretation 
of  the  courts  has  been  called  in,  not  to  determine  the  rule, 
but  to  declare  whether  or  not  the  circumstances  bring  the 
case  within  the  one  or  the  other  division  of  the  rule.  The 
question  is  wliether  the  law  will  endow  the  receiver  of  the 
knowledge  with  an  official  and  directorial  character,  or  only 
with  his  private  and  individual  personality  at  the  time  when 
he  came  by  the  information  in  question.  It  is  by  no  means 
easy  to  establish  any  definite  test  by  which,  as  by  a  touch- 
stone, all  doubtful  cases  can  be  at  once  and  infallibly  solved, 
and  arrayed  upon  the  one  or  the  other  horn  of  the  dilemma. 
Nothing  better  can  be  done  than  to  give  brief  abstracts  of  ten 
or  twelve  from  among  the  cited  cases,  selected  with  a  view  to 
showing,  as  well  as  may  be,  the  tendency  of  the  courts  in  such 
causes. 

(&)  In  Bank  of  the  United  States  v.  Davis,  a  bill  of  ex- 
change was  forwarded  to  one  who  was  a  director  in  the  bank, 
with  the  request  that  he  would  procure  a  discount 

'■  •  1  •    1       when  direc- 

upon  it.  He  did  so ;  but  at  the  meetmg  which  tor  acts, 
made  the  loan,  he  was  present  and  joined  in  all 
the  proceedings,  and  there  falsely  alleged  that  the  discount 
was  for  his  own  benefit,  and  dishonestly  received  the  money. 
It  was  held  that  the  bank  was  affected  with  knowledge  of 
the  fraud,  and  could  not  recover  the  amount  of  the  bill  from  the 
defrauded  party.  The  court  said  that  it  was  not  true  that  the 
director  was  not  acting  at  the  time  on  the  behalf  of  the  bank. 
He  was  present,  consulting,  advising,  doubtless  recommending 
the  loan  upon  this  very  paper,  all  in  his  capacity  as  director, 
and  it  is  fair  to  suppose  that  his  influence  as  a  director  pro- 
cured this  discount.  It  is  urged  that  he  was  only  one  of  five 
directors  engaged  in  the  transaction.  But  the  bank,  having 
employed  several  agents  to  transact  jointly  a  particular  busi- 
ness, is  equally  responsible  for  the  conduct  of  each  and  of  all 
The  duty  of  any  one  of  them  to  communicate  his  knowledge 

twenty-four  hours  before  the  agency  no  more  notice  to  the  principal  than 
if  it  came  twenty-four  hours  after  the  agency  ceased.     81  Pa.  St.  256. 

295 


§  135  DIRECTORS. 

is  as  obligatory  as  if  he  were  a  sole  agent.^  It  will  be  seen 
from  the  language  of  this  decision  how  inextricably  the 
matter  of  notice  is  intertwined  with  the  principle  of  holding 
the  bank  liable  for  the  default  of  its  agent  committed  within 
the  scope  of  his  duty.  Indeed,  the  rule  may  be  expressed  in  the 
language  of  the  latter  principle  as  correctly  as  in  any  other 
form,  —  thus  :  Whatever  knowledge  a  director  acquires  within 
the  scope  of  Ms  official  employment,  he  is  bound  to  communi- 
cate to  his  co-directors,  that  is  to  say,  to  the  bank  itself.  If 
he  neglects  to  do  so,  the  bank  is  liable  for  the  neglect  of  its 
agent  to  perform  the  duty  of  his  agency ,2"  By  either  road 
the  same  conclusion  is  arrived  at,  which  is  the  liability  of  the 
bank  to  the  same  extent  as  if  it  had  known  what  its  director 
knew  and  what  he  ought  to  have  communicated.  It  may  be 
said  that  it  is  chargeable  with  his  knowledge,  received  within 
the  scope  of  his  agency  and  employment ;  or  it  may  be  said 
that  it  is  chargeable  with  the  result  of  his  neglect  to  perform 
the  duty  of  communication  imposed  upon  him  by  his  agency 
and  employment.  Practically,  it  matters  little  which  course 
is  chosen,  or  whether,  as  in  the  foregoing  case,  an  effort  is 
made  to  combine  both. 

In  North  River  Bank  v.  Aymar  the  director  was  present 
and  did  act  in  his  official  character,  and  in  prosecution  of  his 
Director  directorial  agency.  It  was  there  held  that,  if  the 
acted.  j^Q^g  q£  ^  ^Yva.  were  discounted  by  a  bank,  one  of 

the  directors  who  was  present  and  acted  concerning  the  dis- 
count being  also  a  member  of  the  firm,  and  having  knowledge 
of  facts  tending  to  invalidate  the  note,  the  bank  would  be 
affected  with  his  knowledge  and  chargeable  with  notice.^ 

In  order  to  bind  the  bank  the  facts  known  by  the  director 
must  be  material  to  the  transaction.* 

§  ]  35.  The  Knowledge  of  the  Director  must  be  Actual.  — 
A.  was  director  in  a  bank,  and  a  member  of  the  discount 

2  2  Hill  (N.  Y.),  451. 

2"  Twenty-sixth  Ward  Bank  v.  Stearns,  148  N.  Y.  515  (42  N.  E.  1050). 
8  North  River  Bank  v.  Aymar,  3  Hill  (N.  Y.),  262. 
*  Casco  National  Bank  v.  Clark,  139  N.  Y.  307  (34  N.  E.  908) ;  Mer- 
chants' National  Bank  i--.  Clark,  139  N.  Y.  314' (34  N.  E.  910). 
296 


NOTICE   TO    DIRECTORS.  §  136 

committee;  he  was  also  president  of  a  corporation,  one  of 
whose  agents  had  such  knowledge  of  certain  infirmities  in  a 
note  discounted  by  the  bank  as  affected  this  corporation  with 
knowledge.  Held,  that  the  bank  was  not  affected  by  this 
merely  constructive  knowledge  of  its  director.^ 

§  136.  If  the  Director  having  Notice  does  not  act  in  the 
Matter,  or  is  known  by  the  Third  Party  to  be  adverse  to  the 
Bank's  Interest,  the  information  he  has  is  not  imputed  to 
the  bank. 

In  Terrell  v.  The  Branch  Bank  of  Mobile,^  the  opinion, 
though  not  emanating  from  a  leading  bench,  is  eminently 
sound  and  keen  ;  and  the  contrast  with  Bank  v.  Davis  is  well 
worth  examination.  A,  signed  a  promissory  note  in  blank 
and  gave  it  to  B.,  a  director  in  the  defendant  bank,  with 
directions  to  fill  it  up  with  the  sum  of  "  five  hundred  dollars," 
and  to  use  it  in  renewal  of  A.'s  note  for  the  same  amount 
already  held  by  the  bank.  B.  filled  it  up  with  a  larger  sum,  and 
had  it  discounted  for  his  own  benefit.  He  was  present  at  the 
meeting  of  the  board  which  made  the  discount,  but  of  course 
he  did  not  disclose  the  truth.  In  this  case  his  knowledge 
was  not  held  to  affect  the  bank,  and  A.  was  obliged  to  pay 
upon  the  note  the  amount  fraudulently  filled  in.  The  two 
cases  seem  strikingly  alike  in  their  facts,  yet  the  opposite 
decisions  in  them  respectively  seem  equally  satisfactory.  The 
point  at  once  of  reconcilement  and  of  difference  lies  in  this 
fact.  The  fraud  in  Bank  v.  Davis  was  committed  by  the  direc- 
tor, or  at  least  the  first  steps  in  it  were  taken  by  him,  when 
he  was  acting  officially  and  on  behalf  of  the  bank,  and  within 
the  scope  of  his  agency  for  the  bank  ;  his  undisclosed  knowl- 
edge of  the  truth  therefore  affected  the  bank,  for  he  possessed 
his  knowledge  officially  ;  the  fraud  in  the  second  case  was 
committed  by  the  director  as  an  individual,  when  he  was  act- 
ing as  agent  for  A.  in  a  matter  in  which  A.  had  specially  com- 
missioned and  intrusted  him  to  act ;  his  knowledge  of  the 
truth,  therefore,  was  his  private  knowledge,  and  not  the  knowl- 
edge of  the  bank  ;  for  he  did  not  possess  it  officially.     In  each 

1  §  135.   Mann  t;.  Second  National  Bank  of  Springfield,  34  Kans.  746. 
1  §  136.   12  Ala.  502. 

297 


§  loG  DIRECTORS. 

case,  the  principal  in  whose  business  the  director  was  agent  for 
the  time  being,  and  within  the  scope  of  his  agency  for  whom 
he  committed  the  fraud  and  possessed  a  knowledge  of  the  truth 
wiiicli  he  did  not  disclose,  was  obliged  to  suffer  the  penalty  of 
liis  breach  of  his  trust,  and  to  make  good  his  fraud. 

(a)  In  Loomis  v.  Eagle  Bank  of  Rochester,^  a  bank  director 
was  payee  of  a  note,  a  part  of  which  the  makers  claimed  the 
right  to  recoup  by  reason  of  an  alleged  breach  of  contract  be- 
tween themselves  and  the  payee.  The  director  transferred  and 
Director         iudorscd  ovcr  the  note  to  the  bank  for  value  and  in 

adverse  to  „  ,        .  .   ,  .... 

bank.  duc  coursc  01  busmess,  but  without  informing  them 

of  the  claim  of  the  makers.  It  was  held  that  the  claim  could 
not  be  sustained  as  against  the  bank.  The  knowledge  of  him 
who  was  at  once  payee  and  director  was  not  the  knowledge  of 
the  bank.  He  did  not  come  by  it  or  possess  it  officially.  The 
court  remarked  that  to  insist  that  the  private  knowledge  of  any 
director  should  bind  the  bank  would  work  indefinite  mischief 
in  business. 

In  Washington  Bank  v.  Lewis,^  a  director  procured  the 
discount  of  a  note  which  was  afterwards  disputed  for  fraud. 
The  defence  was  not  considered  good.  But  this  case  is  to 
be  distinguished  from  the  case  of  Bank  of  the  United  States 
V.  Davis ;  for  whereas  in  that  case  the  director  had,  at  least 
presumably,  acted  as  a  director  in  procuring  the  loan,  in  the 
present  case  the  court  distinctly  state  that  it  was  because  he 
did  not  act  officially  in  the  making  of  the  loan,  but  simply  ap- 
plied for  and  obtained  it  as  any  other  person,  wholly  an  out- 
sider, would  and  must  have  done,  that  the  defence  cannot  be 
sustained. 

(6)  The  two  cases  differ  from  each  other  in  precisely  the 
vital  point; — in  the  former,  the  director  had  knowledge, 
Director  did  within  the  scopc  of  his  agency,  which,  since  he 
Banif n  actcd  in  the  prosecution    of  his   agency,  he   was 

bound.  bound  to  communicate,  and  which  was  therefore 

in  law  the  knowledge  of  the  bank ;  in  the  latter  case  the  di- 
rector, having,  in  fact  or  presumably,  the  same  species  of 
knowledge,  explicitly  refrained  and  declined  to  exercise  his 

2  Disney  (Ohio),  285.  s  22  Pick.  (Mass.)  24. 

298 


NOTICE   TO    DIRECTORS.  §  136 

official  agency  in  the  matter,  but  dealt,  as  lie  had  a  riglit  to 
do,  with  the  other  directors  wholly  in  the  character  of  an  out- 
side negotiator  and  contractor  ;  since  he  was  not  acting  in  his 
agency,  it  followed,  unavoidably,  that  he  owed  no  duty  to  the 
bank,  and  that  his  knowledge  was  private,  not  corporate,  in 
its  character. 

Where,  in  absence  of  a  director  by  whom  a  note  has  been 
offered  for  discount,  the  bank  accepts  it,  and  accepts  as  col- 
lateral a  note  payable  to  him  and  indorsed  to  it  as   Absent  di- 

rector's 

collateral,  the  bank's  rights  are  not  affected  by  his   knowledge, 
knowledge  of  illegality  in  the  inception  of  the  note  accepted 
as  security.* 

(e)    A  cashier  wishing  to  procure  of  the  bank  money  to 
buy  railroad  stock,  agreed  with  H,,  a  third  party,  who  knew 
that  a  rule  of  the  bank  forbade  its  officers  to  be-   ^^ 
come  its  debtors,  to  buy  two   hundred   shares  of   The  party 

*^  dealinfT  with 

stock,  the  cashier  to  advance  to  H.  money  oi  the    the  cashier 
bank  to  pay  therefor,  H.  to  give  his  note  to  the    acu^g  ad- 
bank  for  the  money,  and  deposit  the  stock  as  col-   ^^'■*'^'-^'- 
lateral  security.     This  was  done,  and  the  cashier  assumed  pay- 
ment of  the  note,  the  stock  being  his.     The  bank  had  no  notice 
of  this  arrangement  except  the  cashier's  knowledge.     H.  after- 
wards advised  the  cashier  to  sell  the  stock,  and  the  cashier 
agreed  that  H.   might  use  his  own  discretion  therein.      II. 
thereupon  effected  a  sale,  but  the  cashier  refused  to  confirm 
it  or  to  deliver  the  stock. 

In  an  action  by  the  bank  on  H.'s  note,  the  court  held  that 
the  bank  was  not  concluded  by  the  cashier's  knowledge.  He 
acted  adversely  to  the  bank,  and  the  third  party  in  the  dealing 
knew  it.^ 

(t^)  The  law  has  been  laid  down  in  Massachusetts  to  the 
same  effect,  where  a  director  borrowed  money  from  his  own 
bank.  It  seems  that  in  such  a  transaction  the  Mass. 
director  is  to  be  regarded  as  acting  in  his  inde-  ing  adverse- 
pendent  and  individual  capacity,  and  not  on  behalf  bmmdYvhis 
or  for  the  interest  of  the  bank,  for  he  is  in  fact  the    knowledge. 

4  Third  National  Bank  of  St.  Louis  v.  Harrison,  3  McCrary,  316  (1882). 

5  Savannah  Bank  &  Trust  Co.  v.  Hartridge,  73  Ga.  223  (1884). 

299 


§  136  DIRECTORS. 

other  party  to  the  contract,  and  naturally  must  be  expected 
to  look  out  for  himself,  and  to  assume  to  a  certain  extent 
the  character  of  an  adversary  in  the  bargain.  A.  shipped 
sugar  to  B.,  with  authority  to  B.  to  sell  it  in  due  course  of 
business  for  a  long  while  conducted  between  them.  The  bill 
of  lading  stated  the  shipment  to  be  made  by  order  of  B., 
and  that  the  sugar  was  deliverable  to  his  order,  with  no  words 
indicative  of  agency  on  his  part.  B.  indorsed  this  document, 
and  pledged  it  as  collateral  security  for  a  loan  which  he  ne- 
gotiated with  a  bank  of  which  he  was  a  director;  and  he  him- 
self was  present  at  the  meeting  of  directors  which  passed 
upon  the  loan.  It  was  held,  in  an  action  by  A.  against  the 
bank,  that  the  bank  could  not  be  charged  with  the  knowledge 
of  the  director  that  his  act  was  fraudulent.^ 

(e)  In  Shaw  v.  Clark  a  note  was  discounted  by  a  bank.  It 
,,  ,  was  claimed  that  one  of  the  directors,  E.,  knew  the 

Mich. 

Director  did     notc  was  upon  a  gaming  consideration.     E.  recom- 

not  (ict,  and  -     -     ,         -, .  ,     ^      ,     t  -\  ,  5»  ,, 

the  bank  mcudcd  the  discouut,  but  did  not  ^^  act  nor  "con- 
not  oun  .  ^^,^1  ^j^g  discretion  "  of  the  board  in  making  the 
discount.  The  court  held  that  the  bank  was  not  charged  with 
his  knowledge.' 

(f)  A  note  was  obtained  from  the  maker  by  fraud.  P.,  a 
director  of  the  bank  discounting  the  note,  had  notice  of  the 
^^  ^  fraud,  but  did  not  communicate  his  knowledge  to 

N.  J. 

Director  did  any  other  bank  officers,  neither  did  he  take  part  in 
the  discounting,  wherefore  his  information  did  not 

affect  the  bank.^ 

If  a  director  is  not  present  and  acting  at  the  discount  of  a 

note,  his  knowledge  of  illegality  or  want  of  consideration  is 
not  notice  to  the  bank ;  but  if  he  acts  with  the 
board  the  bank  is  held  by  his  knowledge.^ 

6  Innerarity  v.  Merchants'  National  Bank,  139  INIass.  332. 
^  Shaw  V.   Clark,  49    Mich.  384   (1882);  National   Security  Bank  i'. 
Cushman,  121  Mass.  490. 

8  First  National  Bank  of  Hightstown  v.  Christopher,  40  N.  J.  L.  435 
(1878). 

9  North  River  Bank  v.  Aymar,  3  Hill  (N.  Y.),  262  ;  National  Security 
Bank  v.  Cushman,  121  Mass.  490;  Farmers'  Bank  v.  Payne,  25  Conn. 
444;  The  President  v.  Cornen,  37  N.  Y.  320;  Commercial  Bank  v.  Cun- 

300 


NOTICE   TO    DIRECTORS.  §  137 

(^)    The  knowledge  of  usurious  taint  in  negotiable  paper 
acquired  by  a  director,  but  not  wliile  acting  for  the  bank,  is 
not  thereby  the  knowledge  of    the  bank ;   and  as     ^ 
said  director  did  not,  while  having  such  notice,  do    Director  did 
any  act  for  the  bank  in  respect  to  such  paper,  the 
bank  is  in  no  way  affected  by  his  information. ^^ 

The  same  distinction  is  taken  in  a  case  where  one  of  the 
directors  who  did  oiot  act  at  the  discounting  had  notice  of  ir- 
regularities attaching  to  the  note.  The  bank  was  not  affected 
with  notice.^^ 

§  137.  Director  chargeable  with  Knowledge  as  against  him- 
self.—  The  converse  of  the  doctrine  just  discussed  is  much 
more  simple.  Whatever  knowledge  a  director  has  or  ought 
to  have  officially,  he  has,  or  will  be  conclusively  presumed  at 
law  to  have,  as  a  private  individual.  In  any  transactions  with 
the  bank,  either  on  his  own  separate  account  or  where  others 
are  so  far  jointly  interested  with  him  that  his  knowledge  is 
their  knowledge,  he  and  his  joint  contractors  will  be  affected 
by  this  knowledge  which  he  has,  or  which  he  ought,  if  he  had 
duly  performed  his  official  duties,  to  have  acquired.^  Thus,  a 
director  is  affected  with  notice  of  the  condition  '^'^  and  transac- 
tions of  the  bank,  of  its  legal  rights,  and  of  the  action  of  its 
directorial  board  on  any  subject.  If  the  bank  is  insolvent,  or 
if  it  offers  him  for  purchase  notes  which  could  only  be  legally 
sold  by  authority  of  a  directorial  vote  which  has  never  been 
given,  he  is  affected  with  knowledge  of  the  insolvency,  and  of 
the  illegality  of  the  notes.  He  cannot  collect  upon  them  from 
the  bank,  on  the  ground  of  presumed  regularity,  as  a  bona 
fide  outside  purcliaser  of  them,  without  notice  and  for  value, 

ningham,  24  Pick.  (Mass.)  270  ;  Washington  Bank  v.  Lewis,  22  Pick. 
(Mass  )  24  ;  Housatonic  Bank  v.  Martin,  1  Met.  (Mass.)  294 ;  Mayor  of 
New  York  v.  Tenth  National  Bank,  111  N.  Y.  440  (18  N.  E.  618)  (1888). 

1"  Atlantic  State  Bank  v.  Savery,  82  N.  Y.  291. 

11  National  Park  Bank  v.  German  Mutual  W.  &  Security  Co.,  53  N.  Y. 
Superior  Ct.  367. 

1  §  137.  Lyman  v.  United  States  Bank,  12  How.  225;  1  Blatch.  C.  C. 
297. 

i"  Tate  V.  Bates,  118  N.  C.  287  (24  S.  E.  482)  (1896)  ;  Hauser  v. 
Tate,  85  N.  C  81. 

301 


§137  DIRECTORS. 

could  do.2  But  in  a  suit  between  a  bank  and  its  directors, 
a  director  is  not  presumed  to  have  knowledge  of  all  that  is 
shown  on  the  bank  books.-" 

If  a  director  of  a  bank  is  surety  on  a  note,  or  if  a  director  is 
a  partner  in  a  firm  which  is  surety  on  a  note,  held  by  the 
bank,  the  surety  will  be  affected  with  knowledge  of  the  pay- 
ment or  nonpayment  of  the  note  without  regard  to  any  state- 
ment made  by  the  cashier.  A  director  is  chargeable  with  this 
amount  of  knowledge  of  the  affairs  of  the  bank,  whether  in 
fact  he  has  it  or  not,  and  cannot  escape  any  i-esponsibility 
which  such  knowledge  properly  entails.^ 

In  the  discussion  of  this  topic  a  brief  abstract  of  the  case  of 
Curtis  V.  Leavitt  should  not  be  omitted.*  Bank  directors 
authorized  the  issue  of  bonds  to  certain  trustees  for  sale.  The 
officers  whose  duty  it  was  to  make  the  issue  assigned  the 
bonds  to  persons  other  than  those  named  as  trustees,  and  also 
to  an  amount  in  excess  of  that  authorized.  Their  action  in 
the  latter  particular,  however,  was  subsequently  ratified  by 
the  corporation.  One  of  the  persons  acting  as  a  trustee  was 
also  a  director.  The  court  declared  the  assignment  valid  for 
the  benefit  of  bona  fide  purchasers  of  the  bonds  for  value  and 
without  notice,  and  that  the  knowledge  possessed  by  him  who 
combined  the  positions  of  director  and  trustee,  that  the  as- 
signment was  in  fact  without  due  authority,  did  not  make  the 
purchasers  of  bonds  under  the  trust  chargeable  with  a  like 
knowledge.  It  is  clear  from  the  language  of  the  court,  that, 
if  the  director  and  trustee  had,  in  his  latter  capacity,  been 
the  real  party  in  interest,  instead  of  only  a  trustee  nominally 
representing  entirely  innocent  third  parties,  the  decision  would 
have  been  to  the  contrary  effect.  So  that  this  case  at  once 
proves  the  general  doctrine,  and  furnishes  a  valuable  specimen 
of  exception  to  it. 

It  is  not  a  conclusive  presumption  that  a  director  knows  the 

2  Gillet  V.  Phillips,  3  Kern.  (N.  Y.)  114. 

2«  Wallace  v.  Lincoln  Savings  Bank,  89  Tenn.  630  (15  S.  W.  448) 
(1890). 

8  Merchants'  Bank  v.  Rudolf,  5  iseb.  527. 
*  15  N.  Y.  9. 
302 


QUALIFICATIONS   OF   DIRECTORS.  §  138 

circumstances  under  which  a  bank  takes  a  note.  B.,  a  direc- 
tor, bought  a  note,  not  knowing  that  the  payee  had  dehvered 
it  to  the  bank  without  indorsement  as  collateral  security.  In 
a  suit  against  the  maker,  it  was  held  that  B.'s  directorship 
did  not  affect  him  with  notice.^ 

§  138.  Qualifications  of  Directors.  —  A  method  frequently 
resorted  to  for  securing  the  fidelity  of  directors  in  the  exer- 
cise of  their  duties  is  to  require  them  to  own  in  their  own 
risht  and  unincumbered  a  certain  number  of  the  shares  of 
the  corporation.  Imperfect  as  this  must  be  as  a  check  upon 
men  of  large  property,  it  is  perhaps  the  best  available  plan. 
It  has  been  adopted  in  our  National  Banking  Act,  which  de- 
clares (sect.  9)  that  each  director  shall  own  at  least  ten 
shares  of  the  corporate  stock.  This  regulation,  however,  sim- 
ply prescribes  the  requisite  qualification  for  election  to  the 
office.  If  a  person  not  thus  qualified  is  elected,  and  seeks  to 
enter  upon  the  office  without  qualifying  by  the  purchase  of 
the  i-equisite  number  of  shares,  he  may  be  ousted  by  legal  pro- 
cess. But  his  acting  as  a  director  will  not  make  him  in  any 
manner  liable  for  this  number  of  shares.  Neither  can  he  be 
regarded  either  at  law  or  in  equity,  or  for  any  purposes,  as 
the  constructive  owner  of  them.  His  entering  upon  the  en- 
joyment of  the  office  does  not  in  any  case  estop  him  from 
alleging  his  non-ownership  of  the  requisite  number  of  shares 
to  qualify  him  for  the  position.^  The  cases  cited  show  that, 
in  England,  where  a  person  who  had  subscribed  for  twenty- 
five  shares  was  chosen  a  director,  and  acted  as  such,  though 
the  ownership  of  fifty  shares  was  required  by  law  in  order  to 
qualify  him  for  the  position,  yet  he  could  be  held  liable  as  a 
contributor  only  for  the  price  of  the  twenty-five  shares,  though 
the  company  was  insolvent  and  the  creditors  were  sufferers. 
A  stronger  or  more  conclusive  case  than  this  one  could  not 
be  desired.2 

6  Baldwin  v.  Proctor,  82  Ind.  370. 

1  §  138.  Ex  parte  Marquis  of  Abercorn,  31  L.  J.  Ch.  828;  Ex  parte 
Koney,  33  id.  733. 

'^  Richards  v.  Attleborough  National  Bank,  148  Mass.  187  (19  X.  E. 
353)  (1889);  Crease  v.  Babcock,  23  Pick.  334;  Thornton  v.  JNIarginal 
Freight  Railway,  123  Mass.  32. 

303 


^  140  DIRECTORS. 

§  139.  Continuance  in  Office.  —  It  is  a  common  proviso  that 
directors,  once  chosen,  shall  remain  m  office  until  a  choice  of 
successors  has  been  made.  It  is  a  useful  and  convenient  pre- 
caution, by  which  accidental  or  imavoidable  intervals  are 
bridged  over  without  an  interregnum,  than  which  nothing 
could  be  more  injurious  to  the  interests  of  the  bank.  Though 
the  original  term  of  office  be  limited  to  one  year,  yet  it  may 
be  indefinitely  prolonged  under  this  provision.  The  irregu- 
larity in  failing  to  make  a  choice  in  due  season  may  subject 
the  corporation  to  statutory  penalties ;  but  this  is  a  different 
matter,  and  does  not  touch  the  tenure  of  office  of  the  old 
board.  The  rule  and  its  working  are  usually  simple  enough, 
and  we  have  found  only  one  case  where  litigation  has  arisen 
under  it.  Here  choice  of  a  board  of  directors  was  made,  but 
the  company  was  hopelessly  insolvent.  It  was  not  formally 
dissolved,  but  no  business  whatsoever  was  undertaken  by  it 
for  sixteen  years  thereafter.  It  was  held  that  the  last 
chosen  directors  could  not  be  regarded  as  continuing  in  office 
throughout  this  period,  on  the  ground  that  no  choice  of  suc- 
cessors had  relieved  them.  Their  neglect,  not  objected  to, 
to  perform  any  official  duty  in  so  long  a  time,  was  construed 
as  equivalent  to  their  abandonment  or  resignation  of  their 
position.^ 

The  provision  in  the  United  States  Revised  Statutes, 
§  5145,  that,  when  elected,  a  director  shall  hold  office  for  one 
year  and  until  his  successor  is  elected,  does  not  preclude  him 
from  resigning  within  the  year.^" 

The  mere  fact  that  the  bank  is  insolvent  or  bankrupt  does 
not  vacate  the  office  of  director.^ 

§  140.  Pay  of  Directors  for  Services. —  Ordinarily  the  posi- 
tion of  director,  whether  in  a  bank  or  any  other  corporation, 
is  not  one  entitling  the  incumbent  to  demand  compensation 
for  his  services.  Usage  is  so  uniformly  to  the  effect  that  the 
services  are  rendered  gratuitously,  that  an  especial  contract 
or  vote  could  alone  enable  a  director  to  demand  pay  as  a  legal 

»  §  139.    Bartholomew  v.  Bentley,  1  Ohio  St.  37. 
i«  Briggs  I'.  Spaulding,  141  U.  S.  133  (1889). 
2  Holland  v.  Heyman,  60  Ga.  174  (1878). 

304 


PAY   OF   DIRECTORS.  §  l40 

right.  Nor  could  even  a  formal  vote  confer  upon  him  this 
right,  if  it  were  not  passed  until  after  the  rendition  of  the 
services.  For  it  would  then  become  invalid  on  the  ground  of 
want  of  consideration.^  So  it  has  been  held  that  a  director, 
who  was  receiving  no  compensation,  could  not  recover  from 
the  bank  a  reward  offered  by  it  for  the  recovery  of  money 
stolen  and  the  detection  of  the  thief.  For  it  was  only  a  part 
of  the  legal  duty  imposed  by  his  office  to  give  all  the  informa- 
tion upon  these  points  which  he  might  succeed  in  acquiring. 
But  the  principle  applies  only  to  the  services  performed  by 
directors  in  the  execution  of  their  directorial  functions.  For 
services  rendered  prior  to  their  becoming  directors  they  may 
properly  be  paid.  So  also  for  services  in  any  special  duty  or 
agency  wholly  outside  of  the  ordinary  duty  or  agency  of  a 
director,  they  are  entitled  to  pay  upon  the  principle  of  quan- 
tum meruit?  If  a  peculiar  and  especial  task  is  undertaken  by 
a  director  at  the  request  of  the  board,  which  he  is  under  no 
obligation  to  undertake  simply  because  he  is  a  director,  and 
which  he  could  not  reasonably  be  expected  or  required  to  un- 
dertake gratuitously  after  the  fashion  of  his  ordinary  direc- 
torial functions,  neither  justice  nor  any  judicial  decisions 
oppose  his  receiving  or  requiring  just  compensation  for  the 
labor.3  But  in  Alabama,  where  pay  was  allowed  to  directors 
of  the  State  Bank,  and  the  amount  was  fixed  by  law,  it  was 
declared  that  no  additional  pay  could  be  allowed  for  extra 
services  rendered  during  incumbency  in  the  office.*  The  fact 
that  regular  pay  was  given  takes  this  case  out  of  the  opera- 
tion of  the  general  rule.  It  was  probably  considered  that  the 
pay  was  intended  to  buy  all  such  services  as  the  directors 
should  undertake,  or  be  able  or  called  upon  to  render, 
whether  strictly  within  their  ordinary  duties  or  not.     If  the 

1  §  140.  Hall  V.  Vermont  &  Massachusetts  R.  R.  Co.,  28  Vt.  401 ; 
Pierson  v.  Thompson,  1  Edw.  Ch.  (N.  Y.)  212;  Loan  Association  v. 
Stonemetz,  29  Pa.  St.  534;  Godbold  v.  Branch  Bank,  11  Ala.  191; 
Dunston  v.  Imperial  Gas  Co.,  3  B.  &  Ad.  125. 

2  Stacy  V.  State  Bank,  4  Scamm.  (111.)  91. 

3  Branch  Bank  v.  Collins,  7  Ala.  95;  Chandler  v.  Monmouth  Bank, 
1  Green  (N.  J.  Sup.  C),  255. 

4  Branch  Bank  v.  Collins,  7  Ala.  95 ;  Branch  Bank  r.  Scott,  id.  107. 

VOL.  I. —20  305 


S  141  DIRECTORS. 

duty  was  unusual,  so  also  was  the  receipt  of  any  salary  at 
least  equally  unusual. 

(a)    If  the  directors  are  guilty  of  misconduct  they  forfeit 

all  right  to  compensation.     As  against   the  holders  of   the 

bank's  notes,  and  other  creditors  of  the  bank,  the 

Misconduct  ■■,■,,  i  •  •       j. 

in  a  transac-  trustccs  are  entitled  to  no  compensation  ;  as  against 
payforser-  the  stockholdcrs,  whosc  wishes  they  had  carried 
vice  m  It.  ^^^j.^  ^  different  rule  might  apply,  did  not  the  prin- 
ciple of  public  policy  intervene,  denying  compensation  to  a 
trustee  who  has  shown  bad  faith  toward  the  public.^ 

Where  bank  officials  omit  to  charge  and  draw  their  salaries 
in  order  to  make  a  better  showing  in  the  published  reports, 
they  are  not  estopped,  as  against  the  stockholders,  from 
claiming  their  salaries  upon  the  failure  of  the  bank.^ 

§  141.  Records.  —  Records  of  the  proceedings  of  the  board 
of  directors  are  good  at  law,  although  not  taken  at  the  time 
of  the  meeting.  They  may  be  made  at  any  time  subsequently, 
and  relate  back.^ 

6  Moses  V.  Ocoll  Bank,  1  Lea  (Tenn.),  398. 

e  Wheeler  v.  Aiken  Co.  Loan  and  Savings  Bank,  75  Fed.  781  (1896). 

1  §  141.    Commercial  Bank  v.  Bonner,  13  Sm.  &  M.  (Miss.)  649. 


306 


CHAPTER   X. 

THE     PRESIDENT. 

§  142.    Analysis. 

AUTHORITT.     §§  98,  114,  151. 
§  143.  Inlierent,  confined  to  charge  of  bank's  litigation. 

(d)  May  enter  remittitur  for  sufficient  consideration. 

(e)  May  receive  deposits. 

(/)  May  offer  reward  in  certain  cases. 
{g)   May  assign  a  judgment. 

{h)   May  take  from  debtor  property  incumbered  by  other  debts. 
(i)    May  bind  the  bank  by  liis  fraud  in  certain  cases. 
§  144.        (J)    May  give  a  receipt  for  securities  deposited. 
May  certify  checks.     §§  155  rf,  413. 
(g)    May  agree  on  a  place  of  payment  other  than  that  named  in  a 
note. 

(a)  And  may  bind  the  bank  in  other  ways,  where  the  usage  of  banks 

and  routine  of  business,  or  the  custom  of  the  particular  bank, 
give  him   implied   authority,  or  where  he  has  authority  ex- 
pressly by  the  charter  or  vote  of  directors,  or  where  lie  has 
publicly  done  a  series  of  acts  of  a  certain  character  without 
objection  from  the  bank,  or  where  his  act  has  been  ratified  by 
the  bank,  as  by  long  acquiescence. 
§  145.        (c)   For  example,  the  president  may,  by  custom,  have  power  to  take 
a  debt  due  from  the  bank  out  of  the  statute. 
DoTT.     §§  114,  125,  151. 
§  143.  To  preside  at  board  meetings,  and  give  careful  supervision  to 

the  affairs  of  the  bank. 
No  Power  inherent.     §§  125,  127,  671. 
§  144.         {b)    To  draw  checks  against  the  bank's  funds. 

{j)    Or  to  indorse  negotiable  paper  belonging  to  the  bank. 

(b)  Or  to  control  its  finances. 
(6)    Or  to  settle  with  creditors. 

(b)    Or  to  dispose  of  or  control  the  bank's  property  any  more  than 
any  other  director. 

(i)    Or  to  certify  his  own  check. 
(c,  h)    Or  to  release  a  claim  or  stay  execution,  though  by  long  acquies- 
cence in  such  act  the  bank  is  bound. 

{d)    Or  to  contract  for  the  bank,  though  he  may  bind  the  bank  by 
express  or  implied  authority.     See  above  (a),  and  Chap.  VIII. 

307 


§  143  THE  PRESIDENT. 

{k)    Cases  in  which  a  narrower  doctrine  as  to  the  president's  contract 

power  was  held. 
(/)    Statutory  autiiority. 
(m,  n)    Authority  given  to  president  and  cashier  construed  strictly. 
8  145.    Represkntations  and  Admissions.    §§  42  c.  2,  lOo,  124,  167,  168,  203. 

(a)  Made  vvitliin  tiie  scope  of  iiis  agency  (i.  e.  while  transacting  busi- 

ness for  wiiicli  he  has  authority,  either  express  or  implied) 
bind  the  bank. 

(b)  No  inherent  authority  to  release  debt  by  admission. 

(d)  Nor  to  charge  the  bank  with  a  debt. 

(c)  By  usage,  his  acknowledgment  at  the  bank  or  away  from  it  may 

take  a  debt  out  of  the  statute. 
(e,  g)   Not  made  as  agent  for  the  bank,  in  its  business  do  not  affect  the 
bank. 
(/)   Representations  to  be  construed  strictly. 
§  146.     Knowledge  of  the  President.     §  9,  n.  9,  §§  104,  133,  166. 

(a)    His  knowledge  of  an  indorser's  address  is  the  bank's  knowledge, 
and  though  he  may  be  accidentally  absent,  the  bank  is  not 
excused  for  failure  to  notify. 
(6)   Notice  of  suit  is  properly  served  on  president,  though  away  from 

bank, 
(c)   President's  knowledge  that  a  payment  to  bank  is  in  fraud  of  the 
bankruptcy  laws  is  imputed  to  the  bank. 
{d,  e,  k,  I)   President's   knowledge  of  his  own   frauds   not  attributable  to 
bank. 
{g)    President's  knowledge  that  note  is  for  accommodation  binds  the 

bank. 
{h)   Notice  to  the  president  that  a  note  was  procured  by  fraud  does 
not  bind  the  bank  if  made  to  the  president  in  an  unofficial 
capacity, 
(j)    Otherwise,  if  made  to  him  in  his  official  capacity. 
§  147.    Liability  of  the  President  to  the  Bank  for  Breach  of  Trust. 
§§  79,  128,  129,  717  c;  II.  §§  5:},  153. 

(a)  Passing  bank's  money  to  an  irresponsible  person. 

(b)  Selling  property  without  authority. 

(c)  Statute  of  Limitations  only  begins  to  run  against  the  bank  from 

the  time  it  discovers  the  fraud. 
Liability  to  Third  Parties. 
{d)   Not  liable  unless  tiie  parties  acted  upon  his  false  representations. 

(e)  Approving  false  report. 

(/)    Constructive  knowledge  of  president  a  question  for  the  jury. 
§  148.     Liability  of  One  held  out  as  President.     §  130. 
§  149.     Personal  Undertakings  for  the  Benefit  of  the  Corporation. 
§  150.    Pat  of  the  President. 
§  150a.  Power  to  tax  President. 

State  cannot  tax  president  of  a  national  bank. 

§   143.    President's  Authority  Virtute  Officii.  —  The  president 
of  the  bank  is  usually,  perhaps  universally,  a  member  of  the 

308 


AUTHORITY.  §  143 

board  of  directors,  and  is  customarily  chosen  by  the  board 
from  their  own  number.  Sections  8  and  9  of  our  National 
Bankings  Act  prescribe  this  method  for  all  banks  organized 
under  it.  It  is  the  duty  of  the  president  to  preside  at  meet- 
in  q-s  of  the  board  of  directors.  The  amount  and  nature  of 
the  duties  imposed  upon  him  may  vary  in  different  associ- 
ations according  to  the  usages  or  the  by-laws  of  each.  But 
ordinarily  the  position  is  one  of  dignity,  and  of  an  indefi- 
nite general  responsihility,  rather  than  of  any  accurately 
known  power.  The  president  is  usually  expected  to  exercise 
a  more  constant,  immediate,  and  personal  supervision  over 
the  daily  affairs  of  the  bank  than  is  required  from  any  other 
director. 

(a)  Usage  or  directorial  votes  may  confer  upon  him  special 
functions,  and  may  extend  his  authority  to  correspond  with 
the  increase  of  active  duties.    But  the  authority  in-     ,  ^ 

''  ^     ^         Inherent 

herent  in  the  office  itself  is  very  small ;  indeed,  it  is  authority 
very  difficult  to  say  precisely  how  or  wherein  it  is 
really  much  in  excess  of  that  which  can  be  exercised  by  any 
other  single  director.  Practically  this  legal  principle  is  not 
known,  or  not  distinctly  recognized,  in  very  many  banks,  and 
frequently  presidents  undertake  to  exercise  a  very  considerable 
control  in  the  daily  routine  of  business.  When  this  is  done 
with  the  knowledge  and  approbation,  or  the  tacit  sanction,  of 
the  board  of  directors,  it  may  be  regarded  as  legalized  by  the 
principles  of  ratification  or  usage.  Yet  these  afford  an  indefi- 
nite and  dangerous  basis  on  which  to  rest  important  dealings. 
A  careful  collation  of  all  the  adjudicated  cases,  it  must  be 
confessed,  wears  a  striking  and  peculiar  aspect,  which  is  not 
very  favorable  to  the  assumption  of  any  species  of  executive 
power  by  a  bank  president  without  direct  authorization.  With 
scarcely  an  exception,  all  the  decisions  are  to  the  cases  nearly 
effect  that  the  president  had  no  right  to  perform  ^'^  negative. 
some  particular  act,  which  he  had  undertaken  probably  in 
perfectly  good  faith  to  perform,  and  which  had  been  called  in 
question,  and  had  given  rise  to  the  ligitation  in  which  it  was 
condemned.  So  the  reader  will  notice  that  in  discussing 
this  topic  we  are  obliged,  in  order  to  keep  within  the  bounds 

309 


§143 


THE   PRESIDENT. 


of  established  law,  to  confine  ourselves  almost  wholly  to 
declaring  what  a  president  can  not  do. 

(6)    Indeed,  it  is  a  singular  fact  that  the  entire  collection 

of  judicial  authorities  justifies  the  enunciation  of  only  one  act 

as  falling  within  the  properly  inherent  power  of  the 

Chara:e  of  ^  p  •  i         i 

bank's  liti-  president.  This  solitary  function  is  to  take  charge 
^*''°"'  of  the  litigation  of  the  bank.     There  is  no  question 

that  this  matter  belongs  to  him  by  virtue  of  his  office.'^  He 
may  institute  and  carry  on  legal  proceedings  to  collect  de- 
mands or  claims  of  the  bank.  He  may  appear,  answer,  and 
defend  in  suits  against  the  bank.  He  may  retain  and  employ 
counsel  on  behalf  of  the  bank.  Counsel  requested  by  him  to 
act  for  the  bank  will  bind  it  by  their  action  in  the  case,  within 
the  ordinary  powers  of  counsel,  by  sole  authority  of  their  en- 
gagement by  him.  Nor  will  it  make  any  difference,  though 
circumstances  render  that  engagement  originally  wrong  or 
improper.!  This  would  be  his  own  breach  of  trust  towards  the 
bank,  committed  within  the  scope  of  his  authority,  damages 
for  which  the  bank  could  only  recover  from  himself,  and  which 
could  affect  no  innocent  outside  parties,  whether  these  should 
be  the  counsel  employed,  or  the  other  ligitants  in  the  cause. 

In  Pacific  Bank  v.  Stone,i"  it  was  held  that  a  president,  or 
acting  president,  has  no  authority,  as  such,  to  engage  an 
attorney,  in  addition  to  the  regular  counsel  employed  by  the 
bank,  unless  with  the  sanction  or  ratification  of  the  directors. 
It  is  to  be  noted  in  this  case  that  the  bank  sued  the  attorney 
on  a  note,  and  he  set  up  his  special  contract  with  the  presi- 
dent. It  would  seem  that  he  might  have  recovered  against  the 
bank  on  quantum  meruit  by  showing  that  the  bank  received 
the  services. 

(c)  The  National  Banking  Act  does  not  specify  the  powers 
of  president  or  cashier.      They  are  held,  therefore,  to  have 

0  §  143.   National  Bank  v.  Berry,  53  Kans.  696  (37  Pac.  131)  (1894). 

1  Savings  Bank  of  Cincinnati  v.  Benton,  2  Met.  (Ky.)  240;  American 
Ins.  Co.  V.  Oakley,  9  Paige  (X.  Y.),  496;  Mumford  v.  Hawkins,  5  Den. 
(N.  Y.)  355  ;  Oakley  v.  Workingmen's  Benevolent  Society,  2  Hilt.  487; 
Alexandria  Canal  Co.  v.  Swann,  5  How.  83. 

1"  Pacific  Bank  v.  Stone,  121  Cal.  202  (53  Pac.  634)  (1898). 
310 


AUTHORITY.  §  144 

only  such  powers  as  are  inherent  in  such  positions  by  the  \cry 
nature  of  things.  All  other  powers  are  left  to  the  directors. 
The  president  is  generally,  if  not  always,  a  member  of  the 
board  of  directors,  and  it  his  duty  to  preside  over  their 
meetings.  He  has  inherently  only  one  power  beyond  that  of 
any  other  director,  viz.  charge  of  tiie  bank's  litigation.^ 

(d)  A  bank  president  may,  on  sufficient  consideration, 
contract  with  the  defendant  in  a  judgment  in  favor  of  the 
bank  to  enter  a  remittitur.^ 

(e)  The  president  may  receive  a  deposit  for  the  bank,  and 
it  is  not  necessary  for  the  depositor  to  show  that  such  deposit 
was  actually  applied  to  her  credit  upon  the  books  of  the 
bank> 

(/)  The  offer  of  a  reward  made  by  the  president  of  a 
bank,  for  information  leading  to  the  arrest  of  a  defaulting 
paying  teller,  is  binding  on  the  bank,  unless  contrary  to  its 
by-laws.^ 

(g)  And,  in  Guernsey  v.  Black  Diamond  Coal  and  Mining 
Co.,^  it  was  held  that  the  president  by  virtue  of  his  office 
may  make  a  valid  assignment  of  a  judgment  in  favor  of  a 
bank. 

(/i)  The  president  may,  for  the  purpose  of  making  up  a 
debt  due  the  bank,  take  from  the  debtor  property  incumbered 
by  other  debts.'^ 

(i)  If  the  president  commits  a  fraud,  relative  to  a  subject 
that  concerns  his  duty  to  the  bank,  in  dealing  with  persons 
having  business  with  the  bank,  the  bank  will  be  liable  to  such 
third  person.^ 

§  144.  (a)  Where  the  President  has  no  Inherent  Power,  he 
binds  the  bank  in  many  cases  by  usage  or  express  authority. 

2  Hodges,  Executor,  v.  First  National  Bank,  22  Gratt.  51. 
8  Case  V.  Hawkins,  53  Ala.  702  (1876). 
*  Juniper  v.  Bank,  48  S.  C.  430  (1890). 
6  Bank  v.  Griffin,  168  111.  314  (48  N.  E.  154)  (1897). 
«  68  N.  W.  777  (1896). 

■^  Panhandle  National  Bank  v.  Emery,  78  Tex.  498  (15  S.  W.  23) 
(1890). 

8  Bickley  v.  Bank,  43  S.  C.  528  (21  S.  E.  886)  (1892). 

311 


§  144  THE   PRESIDENT. 

The  cases,  though  largely  occupied  in  deciding  that  a  presi- 
dent lias  no  authority  by  virtue  of  his  office,  yet  hold  the  bank 
T„  .„„,„r         bound   by  his  action  wherever  the   charter,  or  a 

in  iii«n\  •^  ' 

cases  bank      yote  of   the  directors,  or  usajre   of   the    bank,  or 

bound  bv  '  c-  7 

piesideiu,  long  acquiescence  by  the  bank  in  a  course  of 
lias  no  in-  actiou  by  the  president,^  or  any  facts  constituting 
to'^ac't  iiTthr  ^  holding  out  of  the  president  by  the  bank  as  hav- 
niatter.  jj-,g  ^  right   to    act   for   it,  lay  a  foundation  for 

authority  actual  or  inferred,  and  whenever  the  bank  has  rati- 
fied his  action. 

The  general  rule  is,  a  corporation  acts  through  its  president, 
and  through  him  executes  its  contracts  and  agreements,  and 
an  act  pertaining  to  the  business  of  the  corporation,  not 
clearly  foreign  to  the  general  power  of  the  president,  done 
through  him,  will,  in  the  absence  of  proof  to  the  contrary,  be 
presumed  to  have  been  authorized  to  be  done  by  the  corporate 
body.O" 

(i)  The  control  of  the  president  of  a  bank  over  its  property 
of  any  description  whatsoever,  from  real  estate  down  to  a 
No  inherent  naked  right  to  bring  an  action  at  law,  is  of  the 
bank-sprop-  slightest.  He  has  no  power  to  draw  checks  in 
^'"^>'-  its  behalf,  or  against  its  funds.     Nor  has  he  author- 

ity to  bind  the  bank  by  executing  a  note  in  its  name.^*  He  is 
not  the  executive  officer  who  has  charge  of  its  moneyed 
operations.  It  is  not  among  his  functions  to  withdraw  or 
remove  its  deposited  funds,  or  to  use  them  for  any  purpose 
whatsoever.  He  cannot  even  employ  any  portion  of  the  assets 
or  credits  of  the  bank  for  paying  or  settling  with  its  creditors, 
unless  by  virtue  of  an  express  delegation  of  authority  from 
the  directors.  Nor  has  he  implied  authority  to  use  the  funds 
of  the  bank  to  pay  his  personal  obligations.^''  He  has  no 
more  power  of  management  or  disposal  over  the  property  of 
the  corporation  than  any  other  single  member  of  the  board.^ 

°  §  144.     Bell  V.  Hanover  National  Bank,  57  Fed.  821. 
0"  Bank  v.  Griffin,  168  III.  314  (48  N.  E.  154)  (1897). 
0*  National  Bank  v.  Atkinson,  55  Fed.  465. 
0=  Chrystie  v.  Foster,  61  Fed.  551. 

1  Gibson  v.  Goldthwaite,  7  Ala.  281.    Where  a  president  loses  in  specu- 
312 


AUTHORITY.  §  144 

These  remarks,  of  course,  refer  to  his  inherent  powers  enjoyed 
virtute  officii  ;  for,  of  course,  if  any  resolution  or  au}^  established 
usage  gives  him  the  power,  either  at  all  times  or  under  special 
circumstances,  to  draw  against  the  corporate  deposits,  he  may 
do  so  within  the  limits  of  the  power.  Thus,  in  a  Tennessee 
case,  a  usage  was  shown  for  the  president  to  draw  checks 
when  the  cashier  was  absent,  and  the  judges  went  the  length 
of  holding  that  he  might  legally  do  so  in  the  absence  of  the 
regular  cashier,  even  though  a  cashier  pro  tern,  had  been 
chosen.2 

When  the  general  management  of  the  affairs  of  the  bank  is 
left,  as  is  customary,  with  the  directors,  the  president  has  not 
power  to  mortgage,  assign,  or  pledge,  any  more  than  he  has 
to  dispose  otherwise  of  any  of  its  property  of  any  description 
whatsoever,  or  for  any  purpose,  however  proper  and  justifiable 
in  itself.^  In  the  case  in  Selden's  Reports  the  court  say  :  "  In 
Massachusetts  it  has  been  held  that  neither  the  president  nor 
the  cashier  has  power,  virtute  officii,  to  transfer  negotiable 
funds,  without  express  authority  from  the  directors.  This, 
however,  must  be  erroneous,  if  the  transfer  be  made  in  the 
usual  course  of  business,  and  bona  fide.  But  it  is  safe  to  say 
that,  when  the  sale,  assignment,  or  transfer  requires  the  use 
of  the  corporate  seal,  it  cannot  be  made  without  the  assent 
and  authority  of  the  board."  However  reluctant  Ave  may  be 
to  confess  that  the  learned  judge  correctly  interpreted  the 
opinion  of  the  Massachusetts  court,  it  cannot  be  denied  that 
his  amendment  thereof  and  the  doctrine  laid  down  by  him  are 
correct.     But  this  is  by  no  means  necessarily  to  be  construed 

lative  dealings  and  pays  his  brokers  with  drafts  of  the  bank,  the  brokers 
are  chargeable  with  notice  that  the  drafts  represent  money  embezzled 
from  the  bank.  Beard  v.  Milmiue,  88  Fed.  868  (1898)  ;  Lamson  v. 
Beard,  94  Fed.  30  (1899). 

2  Neiffer  v.  Bank  of  Knoxville,  1  Head  (Tenn.),  162;  Fulton  Bank  v. 
New  York  &  Sharon  Canal  Co.,  4  Paige  (^.  Y.),  127.  But  as  to  when 
the  bank  is  justified  in  paying  on  the  signature  of  the  president,  see 
chapter  on  Checks. 

8  Hoyt  V.  Thompson,  1  Seld.  (N.  Y.)  320;  Leggett  v.  New  Jersey 
Manufacturing  &  Banking  Co.,  Saxt.  Ch.  (N.  J.)  542  ;  Parker  v.  Carolina 
Savings  Bank,  53  S.  C.  583  (31  S.  E.  673)  (1898). 

313 


§  144  THE   PRESIDENT. 

as  extending  the  power  of  the  president  to  the  performance 
of  any  of  the  acts  specified.  The  judge  says  only  that  the 
president  or  cashier  must  be  able  to  do  them,  and  certainly 
the  cashier  is  able  to  do  them.  Equally  certain  it  is  that 
there  is  no  authority  whatsoever  for  supposing  that  the  inten- 
tion was  to  declare  the  president  also  able  to  do  them. 

(c)  The  same  species  of  limitation  upon  the  power  of  the 
president  forbids  him  to  surrender  or  release-*  claims  of  the 
Cannot  re-  bank  against  any  person,  from  whatsoever  source 
lease  claim,      arisino- ;  or  to  stav  the  collection  of  an  execution 

or  stay  exe-       "•' •"      o  '  J 

cution.  against   the    estate    of   a   judgment    debtor.      For 

either  of  these  acts  is  the  exercise  of  a  discretionary  autliority 
over  the  affairs  and  property  of  the  bank,  which  is  the  pecu- 
liar and  exclusive  province  of  all  the  directors.^ 

{d)  The  president,  unless  specially  empowered,  cannot  en- 
ter into  contracts  or  agreements  on  behalf  of  the  corporation.^" 
No  inherent  Authority  so  to  do  may,  however,  be  conferred  on 
coi7tract"for  ^"^  ^y  the  charter,  by  vote  of  the  board  of  direc- 
bank.  tors,  or  by  the  existence  of  such  facts  as  constitute 

a  public  holding  out,  and  warrant  the  public  in  believing  that 
the  undertaking  is  within  the  scope  of  his  legitimate  delegated 
authority.^ 

The  president  of  a  savings  bank,  having  authority  to  carry 
T,y  ,     on  its  o-eneral  business,  is  not   virtute    officii   em- 

JNo  power  to  o  '  •■'^ 

borrow.  powcrcd  to  borrow  money  on  its  behalf.^" 

(g)  Where  one  transacts  business  or  enters  into  contracts 
or  agreements  with  the  president  of  the  bank,  which  in 
When  presi-  form  ruu  bctwccn  the  person  upon  the  one  part, 
fr*a"c\' blends'  ^'^^  *^^®  president,  described  as  such,  upon  the 
bank.  other,  if   it   was   understood   by  the    party  at  the 

*  Olney  v.  Chadsev,  7  R.  I.  224. 

6  Ibid.;  Brouwer  v.  Appleby,  1  Sandf.  Super.  (X.  Y.)  158;  Sypker  v. 
Spence,  8  Ala.  333. 

5«  Robertson  v.  Buffalo  Co.  Xational  Bank,  40  Xeb.  235  (58  X.  W. 
715)  (1894). 

«  Mt.  Sterling  Turnpike  Co.  t;.  Looney,  1  Met.  (Ky.)  550 ;  Farmers' 
Bank  v.  McKee,  2  Pa.  St.  318. 

5"  Fifth  Ward  Savings  Bank  v.  First  Xatioual  Bank,  47  N.  J.  L. 
357  (1885). 

311 


AUTHORITY.  §  144 

time  that  he  was  in  fact  dealing  or  agreeing  with  the  bank, 
if  he  acted  upon  this  supposition  in  good  faith,  if  the  presi- 
dent had  from  any  source  authority  to  bind  the  bank  in  such 
a  transaction,  and  especially  if  the  bank  actually  receives 
whatever  benefit  may  accrue  from  it,  —  then  there  can  be  no 
doubt  that  the  bank  could  be  held  to  perform  whatever  was 
undertaken  on  its  behalf  by  its  president^  But  if  the  presi- 
dent was  acting  beyond  the  scope  of  any  authority  derived 
from  his  office,  or  from  directorial  votes,  or  from  usage,  then 
his  act,  except  of  course  by  virtue  of  a  subsequent  ratification, 
could  not  bind  the  bank.'^"  Even  where  the  president  does  not 
designate  himself  as  such,  yet  the  circumstances  of  the  trans- 
action may  be  put  in  evidence,  to  show,  so  far  as  they  may  be 
able,  that  he  was  in  fact  acting  in  his  official  capacity ;  and 
if  this  be  established,  the  failure  to  designate  himself  for- 
mally by  his  official  title  will  not  aifect  the  binding  force  of 
the  transaction  upon  the  bank.  But  if  the  dealing  was  with 
him  as  an  individual,  not  as  an  officer,  the  bank  has  nothing 
to  do  with  the  affair  J*  Thus  where  one  gave  money  to  a  bank 
president,  who  signed  a  receipt  for  it  "to  be  deposited  in  the 
bank  to  the  credit  of  A."  and  signed  the  receipt  simply  with 
his  name  alone,  it  was  held  tbat  the  facts  were  admissible  to 
go  to  the  jury  for  what  they  might  be  worth  as  tending  to 
show  that  the  money  was  paid  to  and  received  by  the  presi- 
dent in  his  official  capacity  on  behalf  of  the  bank ;  but  that 
they  were  by  no  means  conclusive  of  this,  and  that  if  the  jury 
should  find  that  the  money  was  intrusted  to  the  president  as 
a  private  individual  simply  for  the  convenience  of  getting  him 
to  deposit  it  on  behalf  of  A.,  then  he  was  A.'s  agent,  and  if  he 
failed  to  make  the  deposit  regularly  and  honestly,  it  was  his 
individual,  not  his  official  default,  and  the  bank  was  not 
liable.^     Precisely  to  the   same   effect   was  the   decision   in 

7  Tremont  Bank  v.  Paine,  28  Vt.  24. 

^«  First  National  Bank  v.  Hanover  National  Bank,  66  Fed  34. 

''^  It  is  for  the  jury  to  determine  whether  a  contract  made  by  the  presi- 
dent in  his  own  name  was  really  made  as  agent  of  the  bank.  Northern 
National  Bank  v.  Lewis,  78  Wis.  475  (47  N.  W.  834). 

8  Sterling  v.  Marietta  &  Susquehanna  Trading  Co.,  11  Serg.  &  R.  (Pa.) 
179. 

315 


§144 


THE   PRESIDENT. 


Terrell  v.  Branch  Bank.^  Though  the  officer  receiving  the 
money  was  in  this  case  a  director,  the  principle  of  law  is 
identical  in  the  two  rulings. 

In  Northern  National  Bank  v.  Lewis,^''  a  firm,  which  was 
indebted  to  a  bank,  gave  to  the  president,  in  his  own  name,  a 
contract  under  seal  by  which  he  received  an  option  to  pur- 
chase certain  land.  Tlie  contract  further  provided  that  in 
case  he  purcliased  the  land  he  might  retain  out  of  the  purchase 
price  a  sum  sufficient  to  pay  the  indebtedness  of  the  firm  to 
the  bank.  It  was  held  that  parol  evidence  was  admissible 
to  show  that  the  contract  was  taken  by  the  president  as  agent 
of  the  bank,  for  its  benefit,  and  as  security  for  the  payment 
of  the  firm's  indebtedness. 

(/)  Government  securities  were  given  to  a  bank  president 
_  .      to  exchange  ;  he,  using  bank  paper,  gave  a  receipt. 

When  presi-  o     7  ?  011^ 

dent's  act  is  signing  liis  owu  name.  In  a  suit  to  recover  the 
bank"  value   of  the  securities,  the  act  of   the   president 

^'"'^^''-         was  held  the  bank's  act.io 

{g)  The  president  of  a  bank  may,  without  special  authority, 
Mayascree      agree  with  the  payor  of  a  note,  or  an  agent,  to 

to  receive  "     .  -i      .     i      • 

money  on  reccivc  the  moncy  at  another  place  than  that  desig- 
pkce^oiher  natcd  in  the  note  for  payment,  to  forward  it  to  the 
named!' '"''    bank  whcre  the  note  is  held  and  payable." 

{h)  W.,  a  director  of  a  bank,  owed  it  a  note  of  |1,000,  and 
held  11,000  of  its  stock.     T.,  the  president,  agreed 

Cannot  dis-  '  ir  •       j    • 

charge  a  with  him  to  buy  the  stock  for  himself,  received  it 

bank,  even  from   him,   handed  it  to  the   cashier,  instructing 

substlmte^  him  to  hold  it  in  place  of  W.'s  note  and  to  surrcn- 

himseif.  ^gj.  ^i^g  ^^^^  ^Q  ^^  saying  that  he,  T.,  would  pay 

the  amount  to  the  bank.  The  cashier  received  the  stock, 
stamped  the  note  paid,  and  surrendered  it  to  W.  Held,  that 
the  bank,  not  having  ratified  the  transaction,  was  not  bound 
by  it,  and  that  it  did  not  discharge  W.'s  liability  upon  the 
note.^2 

9  12  Ala.  502. 

»«  Northern  National  Bank  v.  Lewis,  78  Wis.  475  (48  N.  W.  834). 
10  Van  Leuven  v.  First  National  Bank  of  Kingston,  54  N.  Y.  671. 
"  Vilas  National  Bank  of  Plattsbrrgh  v.  Strait,  58  Vt.  448. 
i-i  Rhodes  v.  Webb,  24  Miuu.  292  (1877). 

316 


AUTHORITY.  §  144 

But  where  a  president  released  the  lien  of  a  judgment, 
the   long   acquiescence   of   the   bank  was  held  a      Acquies- 
ratifiCation.^3  cence. 

(i)  A  president  cannot  certify  his  own  check  ;  such  certifi- 
cation is  on  its  face  notice  of  fraud  to  all.^*  Nor  can  he  use 
the  bank  funds  to  pay  his  personal  obligations.^*" 

(j )  The  president  has   no   inherent  power  to  indorse  or 
transfer  negotiable  paper  belonging  to  the  bank,   indorsement 
but  such  authority  may  be  implied  from  his  habit   habit  kTiown 
of  doing  acts  of  the  same  general  character,  known   ^°  ^oavd. 
to  the  directors.^^ 

One  receiving  a  note  from  a  president  who  has  no  authority 
to  transfer  it  is  not  a  bona  fide  holder,  though  he  supposes 
the  president  to  have  such  power,  such  supposition  being  a 
mistake  of  law.^^ 

Where  the  president  returns  A.'s  note,  held  by  the  bank,  as 
paid,  in  consideration  of  the  discharge  of  a  mortgage  held  by 
A.  and  executed  by  the  president  in  his  individual  capacity, 
which  mortgage  has  never  been  held  or  pledged  to  the  bank, 
the  bank  is  not  bound  by  the  act  of  the  president  and  the 
note  is  not  thereby  discharged. ^^^ 

{k)  Such  is  the  general  doctrine,  forbidding  any  species  of 
contract  to  be  made  by  a  president  on  behalf  of  his  bank. 
But  in  some  few  cases,  such  as  will  occasionally   ^ 

'_  •'      Cases  m 

arise,  in  which  the  special  contract  could   be  con-   whichanar- 

•  CI        rower  doc- 

demned  as  invalid  without  the  necessity  of  mak-  trine  was 
ing  the  prohibition  against  contracting  at  all  quite 
so  sweeping  and  absolute,  the  courts  have  contented  them- 
selves with  holding  that  a  president  cannot  bind  the  bank 
in  any  unusual  manner,  or  in  any  undertaking  lying  outside 
of  its  customary  routine  of  business.  Upon  this  narrower 
ground  have  been  based  rulings  :  (1)  That  a  bank  president 

18  Wiiiton  V.  Little.  94  Pa.  St.  64  (1880). 

"  Claflin  V.  Bank,  25  N.  Y.  293. 

"«  Chrystie  v.  Foster,  61  Fed.  551. 

15  Smith  V.  Lawson,  18  W.  Va.  212  (1881);  United  States  National 
Bank  v.  First  National  Bank,  79  Fed.  296  (1897). 

15a  Dundee  National  Bank  v.  Huntington,  20  App.  Div.  (Hun,  N.  Y.) 
104  (1897). 

31T 


§  144  THE   PRESIDENT. 

has  no  right  to  agree  to  receive  deposits  of  money  on  interest, 
it  not  being  a  part  of  the  ordinary  business  of  banking  to  do 
soJ^  (2)  That  the  president  cannot  charge  the  bank  with 
any  greater  liability  for  the  safety  of  a  special  deposit  than 
the  bank  is  wont  to  undertake  for  such.^^  To  tlie  same  prin- 
ciple may  be  also  referred  the  ruling  that  the  promise  of  the 
president  and  cashier  that  an  indorser  shall  not  be  liable  on 
his  indorsement  does  not  bind  the  bank,  though  it  may  be  so 
specific  as  to  bind  the  president  and  cashier  as  individuals. 
An  agreement  so  contrary  to  the  usual  course  of  business  and 
to  the  probable  interest  of  the  corporation  can  be  made  by  no 
less  an  authority  than  that  of  the  directors. 

In  a  recent  case  it  is  a  qucere  whether  the  president  of  a 
bank  has  power  to  bind  the  bank  by  his  agreement  with  an 
accommodation  acceptor  of  a  draft  discounted  by  the  bank 
that  the  bank  will  not  look  to  him  for  payment  of  the  draft 
(other  security  having  been  furnished  to  the  bank  by  the 
drawer).  It  was  not  necessary  to  determine  this  point, 
because  the  arrangement  between  the  president  and  the 
acceptor  was  merely  verbal,  and  the  court  held  it  void  under 
the  Statute  of  Frauds.^^ 

If  the  president  negotiates  notes  for  value,  and  at  the 
same  time  executes  in  the  name  of  the  bank  a  written  guaranty 
of  payment,  the  retention  and  enjoyment  by  the  bank  of  the 
proceeds  of  such  transaction  constitutes  a  ratification  of  the 
president's  act.^^'* 

Statutory,  Charter,  or  Special  Authority  of  President.  —  (/)  In 
New  York,  special  statutes  have  allowed  many  matters  to  be 
conducted  in  the  president's  name.  Thus  the  bank  may  sue 
and  be  sued  in  the  name  of  its  president,  provided  the  cause  of 
action  is  distinctly  laid  to  be  for  or  against  the  corporation, 
and  not  for  or  against  him.^^  Mortgages  to  secure  sub- 
is  Fulton  Bank  v.  New  York  &  Sharon  Canal  Co.,  4  Paige  (N.  Y.), 
127. 

1'  Foster  v.  Essex  Bank,  17  Mass.  479. 

"  Davis  V.  Randall,  ]  15  Mass.  547. 

"a  Thomas  v.  City  National  Bank,  40  Neb.  501  (58  N.  W.  943)  (1894)  ; 
Rich  V.  State  National  Bank,  7  Neb.  201. 

19  Delafield  v.  Kinney,  24  Wend.  (N.  Y.)  345  ;  Ogdensburgh  Bank  v. 
818 


JOINT   AUTHORITY.  §  144 

scriptions  for  stock  property  run  to  him.  And  it  has  been 
accordingly  held  that  the  assignment  of  such  mortgages 
should  be  executed  by  him,  personally,  in  his  own  name,  with 
the  addition  of  his  official  designation,  and  under  his  private 
seal,  rather  than  under  the  corporate  seal.^^  A  transfer  made 
to  "  D.  L.,  President  of  the  American  Exchange  Bank,"  was 
construed  to  be,  by  fair  interpretation,  a  transfer  directly  to 
the  bank,2i  with  the  same  effect  of  vesting  title  as  if  it  had 
been  made  to  the  bank  itself  by  its  corporate  name.  In  sup- 
port of  this  case  the  statutes  of  the  State  were  referred  to. 
But  the  reference  seems  needless,  for  the  decision  could  well 
have  rested  solely  upon  the  general  principles  enunciated. 
These  perhaps  afford  some  support  to  the  doctrine  advanced 
in  the  preceding  paragraph  (k),  and  certainly  made  the  cited 
case  useful  as  a  general  precedent,  without  regard  to  the  effect 
of  local  legislation. 

(m)  A  charter  provision,  or  a  directorial  vote  conferring  a 
power  upon  the  "  president  and  directors,"  or  the  "  president 
and  cashier,"  will  be  strictly  construed  as  conferring  only  a 
joint  power,  exclusively,  and  by  no  means  a  joint  and  several 
power.  The  execution  can  be  by  neither  of  the  designated 
parties  singly,  but  must  always  be  strictly  by  both  in  con- 
junction.22  Though,  if  both  agree  that  a  certain  course  shall 
be  pursued,  and  that  an  executive  act  occurring  therein  shall 
be  done  by  one  alone,  that  act  may  be  legally  performed 
according  to  such  arrangement.  This  is  mere  matter  of 
detail,  and  pertains  to  the  execution,  not  to  the  exercise,  of 
the  power.  For  example,  where  their  power  is  to  borrow 
money,  if  they  agree  upon  all  the  items  going  to  make  up  the 
transaction,  but  that  the  note  given  for  the  loan  shall  be  in- 


Van  Rensselaer,  6  Hill  (N.  Y.),  240;  Pentz  v.  Sackett,  Hill  &  D.  (N.  Y.) 
113.     See  also  Hunt  v.  Van  Alstyne,  25  Wend.  (N.  Y.)  G05. 

20  Valk  V.  Crandall,  1  Sandf.  Ch.  (N.  Y.)  179. 

21  Leavitt  v.  Fisher,  4  Duer  (N.  Y.),  1. 

22  Ridgway  v.  Farmers'  Bank,  12  Serg.  &  R.  (Pa.)  256;  Macbean  r. 
Irvine,  4  Bibb  (Ky.),  17.  Nor  can  they  delegate  their  authority  to  a 
third  person.  Bryant  v.  Bank  of  Commerce,  95  Wis.  476  (70  N.  W. 
480)  (1897). 

319 


§  145  THE    PRESIDENT. 

dorscd  by  the  cashier  alone,  this  will  be  a  perfectly  regular 
and  sufficient  execution  of  the  duty  intrusted  to  them.^^ 

Authority  given  by  the  directors  to  the  president  to  sell 
and  convey  certain  real  estate  includes  an  authority  to  enter 
iuto  a  valid  written  contract  for  such  sale  and  conveyance  to 
he  made  at  a  certain  day  future.^* 

(/i)  But  where  the  president  is  authorized  to  execute  to  the 
purchaser  of  certain  property,  a  bond  of  indemnity  against  the 
claims  of  a  certain  company,  and  said  president,  instead,  exe- 
cutes a  bond  conditioned  upon  the  bank's  procuring  from  the 
company  a  good  and  sufficient  lease  of  the  property,  the  presi- 
dent exceeds  his  authority  and  the  bank  is  not  bound.^^ 

(o)  Where  the  president  is  held  out  to  the  public  as  empow- 
ered to  attend  to  all  the  bank's  business,  he  has  authority  to  ad- 
just a  claim  in  favor  of  the  bank  by  taking  an  assignment  of  a 
judgment,  and  such  adjustment  is  valid  if  the  agreement  is 
afterwards  carried  into  effect.^'^ 

§  145,  Representations  and  Admissions  of  the  President.  — • 
Admissions  of  the  president  affect  tlie  bank  only  when  they 
relate  to  matters  within  the  scope  of  his  agency .^  The  fact  of 
his  high  and  responsible  position  does  not  operate  to  extend 
in  any  degree  the  rigidity  of  this  rule  of  the  common  law. 

(a)  Representations  of  a  president,  made  in  transacting 
the  bank's  business,  are  admissible  against  it ;  but  statements 
in  which  the  bank  has  no  interest  are  not ;  neither  are  decla- 
rations made  after  completion  of  the  transaction.^"  Like  other 
agents,  the  president  must  act  within  the  scope  of  his  author- 
ity to  bind  his  principal,  unless  his  acts  are  ratified.^ 

He  and  the  bank  are  different  parties,  and,  in  an  action  in 
which  the  plaintiff  seeks  to  reach  securities  in  the  hands  of 

23  Fleckner  v.  Bank  of  United  States,  8  Wheat.  334. 
2*  Auo;usta  Bank  v.  Harablet,  35  Me.  491. 

25  National  Bank  ;;.  Levanseler,  115  Mich.  372  (73  N.  W.  399)  (1898). 

26  First  National  Bank  v.  New,  146  Tnd.  411  (45  N.  E.  597)  (1896). 

1  §  145.  Spalding  v.  Bank  of  Susquehanna  County,  9  Barr  (Pa.),  28; 
Panhandle  National  Bank  v.  Emery,  78  Tex.  498  (15  S.  W.  23)  (1890). 
See  remarks  on  Declarations  and  Admissions  of  Cashiers,  post. 

1"  First  National  Bank  i;.  Booth,  102  Iowa,  333  (71  N.  W.  238)  (1897). 

2  Kennedy  v.  Otoe  County  National  Bank,  7  Neb.  59. 

320 


ADMISSIONS.  §  145 

the  bank,  the  fact  that  the  president,  when  called  as  a  witness 
by  the  plaintiff,  prevaricates,  cannot  be  charged  against  the 
bank  .2'* 

(b)  The  president  has  no  inherent  authority  to  make  admis- 
sions that  will  release  the  maker  of  a  note  from  his  liability 
on  it.^ 

(c)  The  president.  P.,  acknowledged  a  debt  due  from  the 
bank  to  C,  which  was  guaranteed  by  the  E.  firm,  of  which  P. 
was  a  member.     Not  as  inherent  in  his  ofhce,  but  By  usage,  a 
by  the  custom  of  the  bank,  P.  had  power  to  make  ^ave  pow^^to 
such  admissions,  and  his  interest  as  guarantor  did  S''stat'ute°<? 
not  destroy  its  effect,  since  his  act  did  not  affect  Limitations. 
his  liability  as  guarantor ;  he  was  liable  after  as  truly  as  be- 
fore the  admission.    After  so  remarking,  the  court  proceeded  : 
"  Can  the  admission  of  an  unquestionable  fact,  which  did  not 
in  any  way  affect  his  liability,  or  promote  his  otvn  interest,  or 
wrong  his  principal,  be  held  to  place  him  in  a  position  antago- 
nistic to  his  principal  ?^     Such  admission  may  be  made  away 
from  the  bank. 

(d)  The  president  of  a  bank  cannot  by  his  admissions 
charge  it  with  a  debt.^ 

(e)  A.,  a  business   man  accustomed   to   financial   transac- 
tions, inquired   of  a  bank  president  whether  the  bank  paid 
interest  on  deposits.     The  president  replied  that  it   Representa- 
did  not,  but  that  he  would  give  him  a  certificate   }ecUng°the ' 
that  would.     He  thereupon  gave  A.,  for  his  money    b*'^'^- 

an  interest-bearing  certificate  of  deposit  with  a  banking  firm 
of  which  the  president  was  a  member.  A.  noticed  that  the 
certificate  was  not  that  of  the  bank,  and  the  president  replied 
that  it  was  all  the  same  thing ;  that  the  firm  owned  the  bank, 
and  that  A.  could  get  his  money  at  the  bank  at  any  time. 

2«  Brown  v.  Thompson  and  Ohmstede,  79  Tex.  58  (15  S.  W.  168) 
(1890). 

8  Hodges,  Executor,  v.  First  National  Bank  of  Richmond,  22  Gratt. 
(Ga.)  51  ;  Farmers'  National  Bank  v.  Templeton,  40  S.  W.  412  (1897). 

*  Morgan  v.  Merchants'  National  Bank  of  Memphis,  13  Lea  (Tenn., 
1884),  234.     See  Morawetz,  §  251. 

6  Henry  v.  Northern  Bank  of  Alabama,  63  Ala.  527  (1879). 
VOL.  I.  — 21  321 


R  146  THE  PRESIDENT. 

The  firm,  in  fact,  owned  1,500  of  2,500  shares  of  the  bank 
stock.  The  firm  became  insolvent ;  and  it  was  held  that  A. 
had  no  claim  on  the  bank.  The  president  did  not  mislead 
A. ;  he  knew  the  certificate  was  not  that  of  the  bank,  and  all 
the  president  told  him  was  that  the  certificate  was  as  good 
as  the  bank's,  which  was  a  matter  of  opinion,  and  would 
hardly  base  an  action,  unless  the  president  knew  the  firm  was 
in  a  dangerous  condition,  or  otherwise  was  guilty  of  inten- 
tional fraud,  and  then  the  suit  would  be,  not  against  the  bank, 
but  the  president.  The  court  distinguished  the  case  from 
Steckcl  V.  First  National  Bank  of  Allentown.  In  that  case, 
the  bank  officers  positively  asserted  that  the  certificates  were 
those  of  the  bank.^ 

(/)  P.,  who  was  liable  as  second  indorser  on  a  promissory  note 
held  by  a  bank,  met  its  president,  and  said  to  him,  "  Well,  K. 
[the  first  indorser]  did  n't  pay  the  note  ? "  The  president  re- 
plied, "  The  matter  is  arranged."  P.  thereupon  satisfied  the 
judgment  against  K.,  which  was  held  as  a  security  against 
liability  as  indorser.  In  this  case  the  president  was  not  asked 
to  say,  nor  did  he  say,  how  "  the  matter  "  was  "  arranged." 
His  statement  did  not  justify  the  inference  that  he  meant  to 
assert  that  the  note  was  paid.'^ 

(^)  The  president  conspires  with  the  cashier  to  rob  the  bank, 
and  in  pursuance  of  such  conspiracy  gives  to  a  surety  company 
a  certificate  required  from  the  bank,  and  relating  to  the 
cashier's  honesty.  The  directors  having  no  knowledge  of  the 
misrepresentation,  the  bank  is  not  responsible  therefor.  The 
giving  of  certificates  relating  to  the  character  of  employees  is 
no  part  of  the  ordinary  business  of  a  bank,^ 

§  146.  Knowledge  of  President.  —  (a)  A  bank  president 
knew  the  address  of  an  indorser  who  should  have  been  notified 
of  the  dishonor  of  a  note  ;  but  as  the  president  was  absent, 

6  First  National  Bank  of  Allentown  v.  Williams,  100  Pa.  St.  123 
(1882),  distinguishing  Steckel  v.  First  National  Bank  of  Allentown,  93 
Pa.  St.  376. 

'  First  National  Bank  of  Lock  Haven  v.  Peltz,  186  Pa.  St.  204  (40  Atl. 
470)  (1898). 

8  American  Surety  Co.  v.  Pauly,  72  Fed.  470,  482. 

322 


KNOWLEDGE  OF  PRESIDENT.  §  146 

and  the  cashier  did  not  know  the  address,  the  bank  failed  to 
give  the  proper  notice.  The  court  held  the  accidental  absence 
of  the  president  no  excuse  for  the  bank's  failure 
to  act  on  the  knowledge  possessed  by  him.  An  of"jndorser's 
officer  should  provide  for  such  contingencies ;  and  ^^'^'■®^^- 
between  the  bank,  the  negligence  of  whose  president  prevented 
proper  action,  and  the  indorser,  entirely  without  fault  and  not 
receiving  the  notice  to  which  the  law  entitles  him,  the  loss 
clearly  rests  with  the  bank.^ 

(b)  Notice  of   an   action  against   the   bank   is     Notice  of 
well  served  on  the  president,  though  away  from     ^'^'^■ 
the  bank. 2 

(c)  In  an  action  by  an  assignee  in  bankruptcy  to  recover  of 
a  bank  a  payment  made  to  it,  as  in  violation  of  U.  S.  Rev.  Sts. 
§  5128,  the  bank  is  chargeable  with  knowledge  of  all  facts  in 
regard  to  the  debtor's  intention  and  solvency  which  its  presi- 
dent had  acquired  while  acting  as  president  in  its  behalf.^ 

Whenever  information  is  given  to  the  president  for  the 
purpose  of  transmission  through  him  to  the  bank,  the  law 
will  regard  it  as  having  been  so  transmitted.^" 

{d)  Knowledge  of  the  president  of  his  own  frauds,  appear- 
ing upon  books  of  the  bank  purposely  kept  by  him  in  a 
manner  to  conceal  the  truth,  is  not  attributable  to  the  bank.^ 

And  where  the  president  kept  a  deposit,  as  executor, 
and  fraudulently  appropriated  the  fund  to  his  own  use,  without 
the  knowledge  of  the  bank,  the  bank  is  not  liable.*" 

(e)   Knowledge  of  a  president,   who  is  also  a  member  of 

1  §  146.    Central  National  Bank  v.  Levin,  6  Mo.  App.  543  (1879). 

2  Village  of  Port  Jervis  v.  First  National  Bank  of  Port  Jervis,  96  N.  Y. 
550. 

8  Getman  v.  Second  National  Bank  of  Oswego,  23  Hun  (N.  Y.),  498. 

2"  Bartlett  v.  Woodbine  Savings  Bank,  57  111.  App.  425;  Millward  v. 
Cliff  Estate,  161  Pa.  157  (28  Atl.  1072)  ;  Smith  v.  Anderson,  57  Hun 
(N.  Y.),  72;  Chipman  v.  McClellan,  159  Mass.  363  (34  N.  E.  379)  (1893); 
Forbes  v.  Howe,  102  Mass.  427 ;  Ditty  v.  Dominion  National  Bank,  75 
Fed.  769. 

*  Lamson  v.  Beard,  94  Fed.  30  (1899). 

*«  Knobelock  v.  Germania  Savings  Bank,  50  S.  C.  259  (27  S.  E.  962) 
(1897). 

323 


§  146  THE   PRESIDENT. 

the  discount  committee,  that  a  note  which  was  discounted  for 
his  benefit  was  given  for  an  unlawful  purpose,  is  not  to  be 
imputed  to  the  bank.^ 

(/)  Where  the  president,  who  is  also  a  member  of  the 
discount  committee,  has  knowledge  that  the  indorser  of  a  note 
has  become  incompetent  to  do  business,  but  is  not  present 
when  a  renewal  of  the  note  is  taken,  and  has  no  part  in  such 
transaction,  nor  knowledge  of  it  until  its  completion,  his 
knowledge  is  not  enough  to  charge  the  bank  with  notice  of 
such  incompetency.^ 

{g)  If  the  president  of  a  bank,  which  is  assignee  of  a  note, 
receives  notice  that  the  same  is  for  accommodation,  and  that  it 
was  made  under  an  agreement  which  was  violated  by  the 
transfer,  without  the  consent  of  the  maker,  of  certain  col- 
laterals given  to  secure  the  note,  the  bank  cannot  enforce 
payment  against  the  makerJ 

(Ji)  Where  tlie  maker  of  a  promissory  note  tells  the  presi- 
dent of  a  bank  that  said  note  was  procured  by  fraud  and  that 
he  will  not  pay  it,  such  remark,  not  being  made  to  the 
president  in  his  official  capacity,  nor  at  the  bank,  nor  with 
reference  to  the  bank's  business,  does  not  bind  the  bank  when 
it  subsequently  discounts  the  note.^ 

(i)  The  president's  knowledge  of  fraud  in  obtaining  notes 
payable  to  the  bank  is  notice  to  the  bank  if  such  notice  comes 
to  the  president  in  his  official  capacity.^ 

(y)  H.,  who  is  a  school  trustee,  deposits  the  school  funds 
in  a  common  deposit  with  his  own.  He  does  this  with  the 
knowledge  of  the  president  and  other  officers.  If  H.  draws 
money  from  the  common  deposit  to  buy  a  homestead,  the  bank, 
in  order  to  claim  a  trust  interest  in  the  homestead  as  being 

5  Graham  v.  Orange  Co.  National  Bank,  59  N.  J.  L.  225  (35  Atl.  1053) 
(1896). 

6  Bank  v.  Sneed,  97  Tenn.  120  (36  S.  W.  716)  (1896). 

7  Smith  V.  Traders'  National  Bank,  74  Tex.  457  (12  S.  W.  113) 
(1889). 

8  Washington  National  Bank  v.  Pierce,  6  Wash.  491  (33  Pac.  972) 
(1893). 

9  Wilson  r.  Pauly,  72  Fed.  129. 

324 


LIABILITY.  §  147 

purchased  with  the  bank's  money,  cannot  set  up  the  fact  that 
the  school  money  did  not  belong  to  H.^*^ 

(^)  Where  the  president,  acting  in  his  own  interest  and 
not  that  of  the  bank,  procures  from  the  directors  the  discount 
of  promissory  notes  given  by  the  treasurer  of  another  company, 
the  directors  having  no  knowledge  or  notice  of  any  fact 
affecting  the  validity  of  the  notes,  the  bank  is  not  chargeable 
with  the  president's  knowledge.^^ 

{I)  If  the  president  for  his  own  purposes  obtains  a  promis- 
sory note  from  a  third  person,  without  consideration,  and  the 
cashier  of  the  bank,  although  without  authority,  discounts 
the  note  at  the  president's  request  and  places  the  proceeds  to 
the  credit  of  the  latter,  who  uses  them  for  his  own  benefit, 
and  does  not  disclose  to  the  directors  of  the  bank  the  character 
of  the  note,  or  the  nature  of  the  transaction,  the  president's 
knowledge  is  not  to  be  imputed  to  the  bank,  and  the  latter 
can  recover  on  the  note.^^ 

§  147.  Liability  of  President  to  Bank  for  Breach  of  his  Trust, 
(a)  A  president  of  a  bank,  who,  knowing  a  customer  to  be 
without  means,  induces  him  to  open  an  account  passing 
at  a  bank,  and  to  overdraw  that  account,  and  who  J'^^^r'^esponsf/ 
by  his  orders  to  the  cashier  establishes  the  custom  ^^^  person. 
of  paying  such  overdrafts,  may  be  held  liable  to  the  bank  for 
the  amount  of  the  overdrafts. ^ 

The  president,  P.,  who  directed  the  cashier  to  pay  the  bank's 
money  to  N.,  an  irresponsible  person  (in  whose  business  P. 
was  interested),  without  security,  and  charge  it  to  N,  on  the 
bank  books,  is  personally  responsible  to  the  bank  for  the  money 
thus  paid  under  his  direction  in  violation  of  his  trust.^ 

Where  the  president  of  a  bank,  its  managing  officer,  took  a 
note  and  paid  $20,000  of  the  bank's  funds  for  it  with  the 
knowledge  that  it  was  burdened  with  a  guaranty  which  might 

10  Hale  V.  "Richards,  80  la.  161  (45  N.  W.  734). 

"  Corcoran  v.  Snow  Cattle  Co.,  151    Mass.  74  (23  N.  E.  727)   (1894); 
Innerarity  v.  Merchants'  National  Bank,  139  Mass.  332  (1  N.  E.  282). 
12  National  Bank  v.  Babbidge,  160  Mass.  563  (36  N.  E.  362)  (1894). 

1  §  147.    Oakland  Bank  of  Savings  v.  Wilcox,  60  Cal.  127  (1882). 

2  Fu-st  National  Bank  of  Sturgis  v.  Reed,  36  Mich.  263. 

325 


§  147  THE   PRESIDENT. 

destroy  its  value  and  cause  loss  to  the  bank,  it  is  such  negli- 
gence as  will  render  the  president  liable  to  account  for  any 
loss  which  might  result.^" 

If  the  president  negligently  accepts  doubtful  securities  in 
payment  of  good  debts  he  is  chargeable  with  any  resulting 
loss.2* 

(b)    As  between  the  corporation  and  himself,  a  president  of 

a  bank  ordinarily  has  no  authority  to  sell  the  property  of  the 

corporation  of  which  he  is  such  officer.     Before  he 

Selling  prop-  '■ 

erty  without  cau  legally  do  so,  he  must  have  authority  by  the 
charter,  the  direction  of  the  board  of  directors  or 
managing  committee,  or  by  usage.  And  where  the  property 
of  a  bank  is  sold  by  a  president  without  authority,  and  the 
bank  suffers  loss  thereby,  he  may  be  held  to  respond  in  dam- 
ages to  the  extent  of  such  loss.^ 

((?)  The  Statute  of  Limitations  does  not  run  to  shield  a 
Statute  of  president  from  suit  by  the  bank  to  recover  for  dam- 
Lnmtations.  j^gg  ^y  j^jg  fi-^ud.  Until  tlic  fraud  is  discovered  by 
the  bank.* 

(c?)  It  is  the  duty  of  the  president  to  use  reasonable  dili- 
gence to  acquaint  himself  with  the  affairs  of  the  bank  ;  and, 
if  by  due  diligence  he  can  ascertain  the  condition 

Liability  to  *'  ° 

third  par-  of  the  bank,  and  fails  to  do  so,  he  is  responsible  for 
any  false  representations  in  regard  to  that  condi- 
tion although  made  in  good  faith.°  But  in  actions  against 
him  for  making  such  representations,  unless  they  were  the  in- 
ducement that  caused  the  plaintiffs  to  continue  their  relations 
with  the  bank,  they  cannot  recover.^ 

(g)  The  president  is  liable  to  a  person  who  has  suffered 
loss  by  a  false  statement  or  report  of  its  affairs  officially  made 
or  approved  by  him,  especially  when  he  has  been  personally 
benefited  thereby.^ 

2«  Stearns  v.  Lawrence,  83  Fed.  738  (1897). 

^  Lawrence  v.  Stearns,  79  Fed.  878. 

8  First  National  Bank  of  Central  City  v.  Lucas,  21  Neb.  281  (1887). 

*  Atlantic  National  Bank  v.  Harris,  118  Mass.  147. 

5  Giddings  v.  Baker,  80  Tex.  308  (16  S.  W.  33)  (1891)  ;  Seale  i;.  Baker, 
70  Tex.  283  (7  S.  W.  742). 

6  Prewitt,  Trustee,  v.  Trimble,  92  Ky.  176  (17  S.  W.  356)  (1891). 

326 


PAYMENT    OF   PRESIDENT.  §  150 

(/)  The  question  of  constructive  knowledge  by  the  presi- 
dent, sufficient  to  hold  him  liable  for  false  statements  made, 
should  be  found  as  a  question  of  fact  by  the  jury,  under  appro- 
priate instructions  from  the  court,  and  not  be  assumed  by  the 
court  conclusively  to  exist  J 

§  148.  Liability  of  One  held  out  as  President.  —  P.  allowed 
himself  to  be  held  out  as  president  of  a  bank  not  legally 
organized.  C.  deposited  money,  which  was  lost  by  the  cash- 
ier's mismanagement.  C.  sued  P.,  as  inducing  his  loss  by 
giving  an  appearance  of  integrity  to  an  unworthy  institution. 
The  court  held  the  president  chargeable  with  constructive 
notice  of  the  management  by  the  subordinate  officers.  The 
directors  invite  the  public  to  deal  with  the  bank,  and  the 
public  has  a  right  to  expect  reasonable  care  and  oversight  on 
their  part ;  and  the  law  will  presume  that  P.  knew  of  the 
cashier's  action,  as  it  was  his  duty  to  know.^ 

§  149.  Personal  Undertakings  for  the  Corporate  Benefit.  — 
If  the  notes  of  the  corporation  are  protested  for  nonpayment, 
and  are  thereafter  paid  by  the  president  individually  from  his 
own  private  funds,  for  the  honor  of  the  bank,  the  whole  trans- 
action having  been  conducted  throughout  in  strict  good  faith, 
the  president  becomes  thereby  a  creditor  of  the  bank  for  the 
amount  so  paid  by  him,  and  may  prove  the  claim  against  the  ■ 
bank  in  insolvency .^  But  if  the  president  guarantees  or  in- 
dorses the  promissory  notes  of  the  bank,  he  will  be  presumed 
to  do  it  gratuitously,  and  from  the  disinterested  motive  of  pro- 
moting the  welfare  of  the  institution  over  which  he  presides. 
He  will  not  be  allowed  to  maintain  any  claim  by  reason  of  his 
so  doing,  except  upon  proof  of  an  explicit  contract  entered 
into  by  himself  with  the  government  of  the  corporation.^ 

§  150.  Payment  of  the  President.  —  With  regard  to  whether 
or  not  a  president  is  entitled  to  payment  for  his  services,  no 
absolute  and  unvarying  rule  can  be  laid  down.     No  implied 

'  Trimble  v.  Raid,  97  Ky.  713  (31  S.  W.  861)  (1895). 

1  §  148.   Hauser  v.  Tate,  85  N.  C.  81  (1881). 

^  §  149.  Bank  Commissioners  v.  St.  Lawrence  Bank,  8  Barb.  (N.  Y.) 
436  ;  3  Seld.  (K  Y.)  135. 

2  Leavitt  v.  Beers,  Hill  &  D.  (N.  Y.)  221. 

327 


§  150  THE   PRESIDENT. 

promise  to  pay  him,  any  more  than  to  pay  any  other  director, 
is  raised  by  his  appointment  to  the  office.  On  the  contrary, 
it  has  been  said  that  the  presumption  is  that  he  is  not  to  be 
paid.  Even  for  such  a  service  as  superintending  the  repairs 
upon  the  bank's  real  estate,  it  has  been  held  in  Massachusetts 
that  the  president  cannot  recover  payment.^ 

But  frequently  a  bank  requires  so  much  of  the  time  of  its 
president  to  be  devoted  to  its  interests  and  affairs  that  it  in 
a  great  measure  precludes  or  materially  interferes  with  his 
prosecution  of  other  and  private  business.  In  such  cases  it  is 
customary  to  pay  him  a  salary,  as  a  cashier  or  any  other  offi- 
cer who  devotes  his  time  to  the  service  of  the  bank  is  paid. 
Ordinarily  the  matter  of  his  compensation,  in  such  cases,  is 
left  to  be  arranged  by  the  board  of  directors,^  and  whatever 
they  vote  to  pay  him  he  has  an  unquestionable  title  to  recover. 
But  if  they  take  no  defmite  action  in  the  premises,  his  right 
to  demand  pay  will  depend  upon  the  nature  of  the  services 
rendered  by  him,  and  upon  all  the  circumstances  attendant 
upon  his  acceptance  and  incumbency.  If  these  suffice  to  show 
that  he  had  a  right  to  expect  that  he  was  to  be  paid,  and  that 
the  bank  or  board  of  directors  ought  to  have  so  understood, 
and  ought  to  have  expected  to  pay  him,  then  he  may  recover 
what  would  have  been  a  fair  salary  for  the  position.^"  The 
presumption  that  payment  is  to  be  made  arises  where  the 
work  or  employment  is  usually  the  subject  of  pay.  But  it 
does  not  attach  simply  because  the  work  is  valuable,  and 
therefore  might  properly  be  given  in  exchange  for  money. 
The  custom  or  usage  to  pay  for  such  work  must  be  existent, 
and  established  like  any  other  custom  or  usage,  so  that  it 
cannot  but  be  presumed  that  the  parties  respectively  conferred 
and  accepted  the  office  and  functions  of  president  in  view  of 
this  custom  and  usage,  and  with  the  expectation  of  conform- 

1  §  150.   Pew  V.  First  National  Bank  of  Gloucester,  130  Mass.  391. 

2  Holland  v.  Lewiston  Falls  Bank,  52  Me.  564. 

2a  Under  the  Illinois  Banking  Act  the  directors  have  no  power  to  give 
the  president  a  bonus  (or  sum  in  addition  to  his  salary)  in  consideration 
of  his  "  acceptance  "  of  the  presidency  and  the  doing  of  acts  outside  the 
duties  of  his  office.  McNulta  v.  Corn  Belt  Bank,  164  111.  427  (45  N.  E. 
954). 

328 


POWER   TO   TAX   PRESIDENT.  §  150  a 

ing  to  it.  But  informal  statements,  or  remarks  made  by  the 
president  to  various  individuals,  members  of  the  board  of 
directors,  to  the  effect  that  he  shall  expect  or  require  pay, 
have  no  bearing  upon  his  rights  whatsoever ;  especially  where 
no  definite  reply  appears  to  have  been  elicited.^  If  the  bank 
charter  distinctly  provides  that  tlie  president  shall  have  no 
pay  unless  it  be  voted  to  him  by  the  directors,  any  service 
which  he  may  perform  for  the  bank  will  be  presumed  to  be 
done  by  him  as  president,  and  will  give  him  no  extraordinary 
right  to  pay,  unless  from  its  nature,  or  from  evidence  adduced, 
it  is  shown  beyond  a  reasonable  doubt  that  the  act  was  really 
rendered  outside  of  the  duties  appurtenant  to  the  official 
position.* 

§  150  a.  Power  to  tax  President.  —  A  State  act  imposing 
a  tax  upon  "  presidents  of  each  of  the  banks  of  the  State,"  is 
inoperative  as  to  presidents  of  national  banks  doing  business 
in  the  State,  as  tending  to  impair  the  efficiency  of  national 
banks  which  are  for  certain  purposes  agencies  of  the  Federal 
government.^ 

8  Sawyer  v.  Pawners'  Bank,  6  Allen  (N.  Y.),  207  ;  Olney  v.  Chadsey, 
7  R.  I.  224;  Hargroves  v.  Chambers,  30  Ga.  580. 
*  Oluey  V.  Chadsey,  supra. 
1  §  150  a.   Linton  v.  Childs,  105  Ga.  567  (32  S.  E.  617)  (1898). 


329 


CHAPTER   XI. 

THE    CASHIER. 

§  151.   Analysis. 

§  152.  The  cashier  is  the  bank's  executive,  the  performer.    He  has  charge 

of  the  routine  of  the  bank's  business,  but  is  not  clothed  with  dis- 
cretion in  weighty  matters  amounting  to  management. 

§  153.   Inherent  Powers.     §§  114,  143. 

§  154.  To  draw  checks  on  tlie  bank's  funds. 

(a)  Form  of  signature  that  will  bind  the  bank. 

(b)  Parol  admitted  when  on  the  face  of  the  instrument  there  is 

doubt. 

(c)  The  bank's  liability  depends  not  on  form,  but  on  the  facts, 

the  authority,  and  the  intent  of  the  parties.     §§  89,  94,  95  a, 
97,  98. 
§  155.  To  CERTIFY  Checks.    See  §  155/;  §  413. 

(a)  Not  those  given  as  collateral. 

(b)  Nor  his  own  checks.     See  (j). 

(c)  Form  of  certification. 

(d)  President  and  teller  may  perhaps  certify. 
(g)  Restrictions  on  the  power  of  certification. 

(A)   Wrongful  certification  good  as  to  innocent  party. 
§  156.  To  BUY  AND  SELL  BiLLS  OF  EXCHANGE,  and  to  arrange  for  ex- 

change.    Qucere  as  to  his  power  to  accept  bills  for  the  bank. 
§  157.  To  CONTROL  THE  Bank's  PERSONALTY,  uulcss  withdrawn  from  his 

charge  by  the  directors  (§  159),  and  to  dispose  of  it  in  regu- 
lar course  of  business. 
§  158.  To  INDORSE  the  bank's  negotiable   paper  for  collection,  discount 

(see  §  165  c/),  payment  of  bank's   debts  (?),  (A,  g),  or  to 
make  over  securities  held  for  a  debt  when  the  same  is  paid. 
§159^7. 
But  he  cannot,  by  virtue  of  his  office,  indorse  for  accommodation, 
nor  indorse  the  bank's  name  on  his  own  paper  (§  169),  nor 
transfer  non-negotiable  paper.     See  (a),  §  158. 
Bona  Jide  holder  without  notice  is  secure.      §§  171,  565,  n.  1". 
See  (?;),§  158. 
(a)  General  rule. 
(h)  Form  of  indorsement. 
(i)   Countersigning  bank  bills. 
§  159.  To  COLLECT  Debts  due  the  Bank. 

(a)  To  discharge  a  mortgage  as  an  incidental  power. 

330 


THE   CASHIER.'  §  151 

{h)  To  indorse  notes  for  collection. 

(c)  Protest. 

(d)  Authorizing  suit  for  a  debt  is  an  inherent  power  of  cashier. 

§§  143,  1G9. 

(e)  May  compromise  a  claim  as  far  as  usage  gives  him  authority, 

but  has  no  inlierent  power.     §  119. 
(/")  No  inherent  power  to  take  anything  but  money.    §  247. 
§  160.  To  borrow  money  in  tiie  bank's  name  in  the  regular  course  of  busi- 

ness, and  to  give  security  or  pledge.     §§  48,  63,  116  a. 
(a)  Borrowing  on  time. 
§  161.  To  receive  deposits.     §  179. 

§  162.  To  attend  to  tlie  correspondence  of  the  bank. 

§  163.  To  attend  to  the  transfer  of  shares. 

§  164.  To  buy  government  bonds.     §§  59,  77,  164 ;  II.  §  35. 

Special  Authority. 
§  165.  By  organic  law,  vote,  verbal  order  of  board,  usage  and  tacit  ap- 

proval (c),  or  by  necessity  (d).     §§  97,  116  a. 
(a)  Exercise  of  discretion. 

(6)  The  law  presumes  regularity ;  and  in  favor  of  third  parties 
the  cashier  is  presumed  to  be  acting  within  his  authority 
if  the  nature  of  the  act  is  such  that  he  might  be  authorized 
to  perform  it. 
§  166.   Notice  to  and  Knowledge  of  Cashier.     §  9,  n.  9,  §§  104,  13.3,  146. 
§  167.   Declarations  and  Admissions.     §  42  c.  2,  §§  103,  124,  145,  167,  168, 
203. 
(a)  and  (6)  Questions  as  to  genuineness  of  paper, 
(c)  Past  transactions. 

{d)  Representation  as  to  payment  of  note  held  to  bind  the  bank,  and  < 
(e)       this  even  if  the  cashier  had  an  adverse  interest  unknown  to  C. 

See,  on  this  principle,  §§  99,  109,  125,  136,  167  e. 
(/)  Representations  aside  from  duties  as  cashier  do  not  bind. 
§  168.   Limitations  of  Time  and  Place. 

(a)  Test.     Can  the  business  be  as  well  done  away  from  the  bank  as  at 

the  bank.     §§  45,  46. 

(b)  Checks  may  be  drawn  elsewhere. 

(c)  Indorsement  elsewhere  held  good,  also  notice  received  away  from 

bank. 

(d)  Must  not  pay  or  certify  checks,  nor  in  general  give  information 

away  from  the  bank.     §  412.     But  see  (h). 

(e)  But  bona  Jide  holder  is  not  affected  by  the  cashier  having  acted  in 

an  improper  place. 
{/)  Deposits  must  be  received  at  bank. 
(g)  Bank  may  adopt  an  act  wrongfully  done  away  from  it. 
§  169.   No  Power  inherent. 

To  pledge  the  bank's  property  for  antecedent  debt. 

Nor  make  an  agreement  to  indemnify  a  sheriff. 

Nor  sue  on  bank's  notes.     §  159  d. 

Nor  release  a  surety. 

Nor  to  indorse  the  bank's  name  on  his  own  paper, 

331 


§  152  THE   CASHIER. 

Nor  to  buy  or  sell  realty  for  the  bank,  &c.     See  above,  under  In- 
herent Powers. 
Nor  to  allow  over-draft.     §  357. 
Nor  to  make  loans  to  himself. 
§  170.   On  Instruments  in  form  to  or  from  the  cashier,  the  bank  may  sue  or 
be  sued  if  the  contract  is  really  a  corporate  one,  though  the  title 
"cashier"  is  omitted.     §§  95,  144 e. 
§  171.    When  the  Cashier  bixNDs  the  Bank.     §§  89,  94,  95,  97,  98. 
General  rule. 

Intra  vires  and  ultra  vires  acts  (j). 
{d)  Inherent  powers  and  honajide  third  parties.     See  also  (e),  (f). 
(g)  Holding  out  by  failure  to  object, 
(/i)  Payment  of  forged  paper  binds  the  bank. 
((')   Implications  from  cashier's  acts. 
§  172.   Liability  of  Cashier  to  the  Bank.     §§  79,  128,  129,  717  c;  II.  §§  53, 
153. 
(a)  Not  responsible  for  his  subordinates  if  he  properly  superintends 
them ;  and  he  is  not  obliged  to  examine  every  entry  made  by 
them,  but  only  to  exercise  such  care  as  a  man  of  ordinary  pru- 
dence does  in  his  own  business  of  a  similar  nature. 
(6)  Directors'  order  will  not  excuse  an  act  that  the  oflBcer  ought  to 
know  is  wrongful. 
§  173.   Cashier  as  Trustee. 
His  duty. 

(a)  Property  bought  with  funds  stolen  from  the  bank  not  subject  to  a 

resulting  trust. 

(b)  But  equity  will  compel  cashier  to  account. 
§  174.   The  Cashier's  Subordinates. 

Teller's  power  not  exclusive  of  the  cashier,  but  the  justice  of  this 
ruling  has  been  questioned, 
(a)  The  teller. 
§  175.  A  temporary  substitute's  authority. 

§  176.        Cashier  after  expiration  of  charter. 
§  176  a.      Cashier  estopped  to  deny  his  authority. 
§  180.   When  same  Officer  acts  for  two  Institutions. 

§  152.  The  Cashier  is  the  Chief  Executive  Officer,  through 
whom  the  whole  financial  operations  of  the  bank  are  con- 
ducted.^ In  the  discussion  of  the  powers  and  duties  of 
cashiers  we  enter  upon  a  very  difficult  topic.  In  no  other 
branch  of  banking   law  are  the  usages   of  business  so  fre- 

1  §  152.  Merchants'  Bank  v.  State  Bank,  10  Wall.  650.  Its  money 
transactions  of  every  description,  though  they  may  not  be  determined  by 
his  discretion,  will  yet  be  conducted  by  and  through  him.  Baldwin  v. 
Bank  of  Newbury,  1  Wall.  234 ;  United  States  v.  City  Bank  of  Columbus, 
21  How.  356. 
332 


THE   OFFICE   IS   EXECUTIVE.  §  152 

quently  at  variance  with  the  rules  of  law,  so  powerful  in 
warpiug  and  altering  those  rules,  so  diverse  among  them- 
selves in  different  places  and  different  institutions,  and  at 
different  times.  In  no  other  branch  of  banking  law  is  it  so 
difficult  to  reconcile  the  decisions  and  opinions  uttered  from 
numerous  independent  judicial  tribunals,  or  to  educe  from 
them  generalizations,  principles,  and  rules  in  any  satisfactory 
shape. 

The  key-note  to  the  whole  subject  lies  in  this:  that  the 
office  of  the  cashier  is  strictly  executive.  He  is  the  business 
officer  of  the  bank,  but  in  the  sense  of  one  who  transacts  the 
business,  not  of  one  who  regulates  and  controls  it.  The 
grand  difficulty  which  has  been  experienced  in  defining  his 
exact  functions  has  always  lain  in  the  necessity  of  giving  him 
sufficient  practical  power  to  enable  him  to  conduct  the  daily 
routine  of  business  without  trespassing  upon  the  domain  of 
discretionary  authority  which  pertains  exclusively,  and  for  the 
most  part  inalienably,  to  the  directors.  Acts  which  demand 
only  confidence  in  the  integrity  of  the  official,  and  familiarity 
tvith  the  forms  and  customs  of  business,  acts  strictly  of  jjer- 
formance,  which  do  not  rise  to  the  importance  of  the  semi-judi- 
cial character,  are  those  which  he  is  properly  delegated  to  do. 
But  the  responsible  conduct  and  management  of  the  affairs  of 
the  institution,  upon  the  soundness  and  wisdom  of  which  its 
prosperity  and  success  depend,  which  call  for  the  exercise  of 
a  high  degree  of  care,  knowledge,  and  experience,  and  a  semi- 
judicial  discretion,  which  demand  general  business  qualifica- 
tions of  a  high  order,  are  not,  and  never  have  been  held  to  be, 
appurtenant  to  the  office  of  cashier.  He  is  properly  the  ex- 
ecutive agent  of  the  directors.  It  is  his  duty  to  carry  out 
what  they  devise.  They  are  responsible  for  the  soundness  of 
the  action  resolved  upon  ;  he  is  responsible  for  the  honesty, 
accuracy,  regularity,  and  skill  with  which  that  action  is  car- 
ried out.  They  are  the  mind  and  he  is  the  hands  of  the 
corporation.  They  may  decide  to  make  a  certain  loan  or  dis- 
count, to  sell  or  mortgage  corporate  property.  He  will  pay 
over  the  money,  take  the  borrower's  promissory  note,  and  see 
that  it  is  in  proper  form  ;  he  may,  by  direction  of  the  board, 

333 


'  §  154  THE   CASHIER. 

affix  the  corporate  signature  and  seal,  and  make  delivery,  on 
behalf  of  the  corporation,  of  all  instruments  necessary  to  com- 
plete the  conveyance  or  the  mortgage.  It  is  not  wholly  unapt 
to  liken  the  board  of  directors  to  a  bench  of  judges,  and  the 
cashier  to  the  clerk  of  court. 

§  153.  Inherent  Powers  of  Cashier.^  —  There  are  certain 
functions  which  by  long  and  universal  usage  have  come  to 
be  recognized  as  belonging  to  the  office  of  cashier,  and  have 
been  judicially  ascertained  and  declared  to  be  inherent  in  the 
cashier  as  matter  of  law,  and  without  any  vote  of  the  directors 
or  provision  of  the  organic  law.  Such  power  may  of  course 
be  enlarged  or  restricted  by  the  charter,  the  bank,  or  the 
board  ;  but  in  the  absence  of  such  special  action  these  "  inher- 
ent "  powers  that  are  connoted  by  the  title  "  cashier  "  belong 
to  him  by  virtue  of  his  appointment'  to  such  office. 

§  154.  Power  to  draw  Checks.  —  The  Cashier  has  power  to 
draw  checks  or  drafts  upon  the  funds  of  the  bank  deposited 
elsewhere.  Indeed,  he  is  ordinarily  the  only  officer  of  the 
institution  who  can  legally  do  this.     It  is  proper  for  him  to 

designate  himself  as  "  Cashier  of  the Bank,"  in  order  to 

show  that  he  is  acting  officially,  and  that  the  check  is  intended 
to  withdraw  corporate  funds.  But  if  he  fails  to  make  this 
fact  clear  by  these  or  any  other  words  in  the  instrument, 
yet,  if  the  drawee  bank  pays  the  check  from  corporate  funds, 
it  will  be  protected  and  the  payment  will  be  valid,  if,  as  a 
matter  of  fact,  the  cashier  was  acting  officially,  and  did  in- 
tend to  draw  against  the  balance    standing  to  the  credit  of 

1  §  153.  The  question  whether  any  particular  act  does  or  does  not 
fall  within  the  general  power  of  a  cashier  has  been  said  to  be  a  question 
of  law  for  the  court,  and  not  of  fact  for  the  jury.  Farmers  &  Mechanics' 
Bank  v.  Troy  City  Bank,  1  Dougl.  (Mich.)  457;  Peninsular  Bank  v.  Han- 
mer,  14  Mich.  208;  Merchants'  Bank  v.  State  Bank,  10  Wall.  604.  The 
services  of  a  jury  may  indeed  be  called  in  when  it  is  claimed  that  acts  or 
conduct  of  the  board  have  amounted  to  a  public  holding  out,  or  that  a 
banking  usage  relative  to  the  subject  of  dispute  exists.  Merchants'  Bank 
V.  State  Bank,  10  Wall.  604.  But  after  the  jury  has  found  upon  these 
matters,  it  still  remains  for  the  court  to  declare  whether  or  not  the  usage 
is  one  which  accords  with  and  will  be  sanctioned  by  law ;  and  whether  the 
holding  out  was  within  the  possible  legal  scope  of  a  cashier's  authority. 
334 


cashier's  signature  to  check.  §  154 

his  corporation.  To  prove  this,  parol  evidence  is  admissible, 
and  by  such  evidence  the  paying  bank  may  even  be  allowed 
to  explain  away  the  fact  that  the  check  has  been  credited 
upon  its  books  to  the  cashier's  private  account,  and  to  rebut 
the  inference  against  itself  which  must  at  first  arise  from  this 
state  of  the  accounts.^ 

(a)  In  Mechanics'  Bank  v.  Bank  of  Columbia,  the  facts 
were  briefly  these.     William  Paton,  Jr.,  cashier  of   Yorm  of 
the  Mechanics'  Bank  of  Alexandria,  drew  a  check   cashier's  sig- 

'  nature. 

in  form  as  follows  :  — 


=q 


No.  18.  Mechanics'  Bank  of  Alexandria, 

June  25,  1817. 

Cashier  of  tlie  Bank  of  Columbia, 

Pay  to  the  order  of  P.  H.  Minor,  Esq.,  Ten  Thousand  Dollars. 
$10,000.  WM.  PATON,  JUN. 


Minor  was  the  teller  of  the  Mechanics'  Bank.     The  check 
was  one  of  the  printed  blanks  from  the  official  check-book  of 
the  bank.     Other  checks  had  been  customarily  drawn  by  the 
cashier  on  behalf  of  the  bank,  in  the  like  form  in  all  respects, 
save  that  he  usually  added  "  Cas."  or  "  Ca."   to  his  name. 
Much  testimony  was  introduced  with  the  object  of  showing 
that  in  drawing  this  check  he  was  acting  officially, 
and  intended   to  draw  it  on  behalf  of  the  bank,   the  act  offi- 
Mr.  Justice  Johnson  delivered  the  opinion  of  the 
court,  substantially  as  follows  :  — 

"  The  merits  of  this  case  lie  within  a  very  limited  compass. 
The  question  is,  whether  a  certain  act,  done  by  the  cashier  of 
a  bank,  was  done  in  his  official  or  individual  capacity.  Had 
the  draft  signed  by  Paton  borne  no  marks  of  an  official  charac- 
ter on  the  face  of  it,  the  case  would  have  presented  more  diffi- 

1  §  154.  Mechanics'  Bank  u.  Bank  of  Columbia,  5  Wheat.  326 ;  United 
States  V.  City  Bank  of  Columbus,  21  How.  356 ;  Merchants'  Bank  i;. 
Central  Bank,  1  Kelly  (Ga.),  418. 

335 


§  154  THE   CASHIER. 

culty.  But  if  marks  of  an  official  character  not  only  exist  on 
the  face,  but  predominate,  the  case  is  really  a  very  familiar  one. 
Evidence  to  fix  its  true  character  becomes  indispensable.  .  .  . 

"  Upon  comparing  the  exceptions  [taken]  with  the  evi- 
dence, it  does  not  appear  that  they  affirm  any  other  proposi- 
tion growing  out  of  that  evidence,  but  that  the  check  on  the 
face  of  it  purported  to  be  the  private  check  of  Paton ;  and  no 
extrinsic  evidence  could  be  received  to  prove  the  contrary. 

'•  The  ground  on  which  it  can  be  contended  that  this  check 
was  a  private  check  is,  that  it  had  not  below  the  name  the 
letters  '  Cas.'  or  '  Ca.'  But  the  fallacy  of  the  proposition  will 
at  once  appear  from  the  consideration  that  the  consequence 
■would  be  that  all  Paton's  checks  must  have  been  adjudged 
private.  For  no  definite  meaning  could  have  been  attached 
to  the  addition  of  those  letters  without  the  aid  of  parol 
testimony, 

(6)  "  But  the  fact  that  this  appeared  on  its  face  to  be  a  pri- 
vate check  is  by  no  means  to  be  conceded.  On  the  contrary, 
the  appearance  of  the  corporate  name  of  the  institution  on  the 
face  of  the  paper  at  once  leads  to  the  belief  that  it  is  a  cor- 
porate, and  not  an  individual  transaction ;  to  which  must  be 
added  the  circumstances,  that  the  cashier  is  the  drawer  and 
the  teller  the  payee,  and  the  form  of  ordinary  checks  deviated 
from  by  the  substitution  of  '  to  order '  or  '  to  bearer.'  The 
evidence,  therefore,  on  the  face  of  the  bill,  predominates  in 
favor  of  its  being  a  bank  transaction.  Applying  then  the 
plaintiff's  own  principle  to  the  case,  and  the  restriction  as  to 
the  prodution  of  parol  or  extrinsic  evidence  could 
mtued'whe'n  have  been  only  applicable  to  himself.  But  it  is 
of  the /nsTru-  Guough  for  the  purposcs  of  the  defendant  to  estab- 
ment  there      \[g\^  ^hat  there  cxistcd  on  the  face  of  the  paper 

IS  doubt. 

circumstances  from  which  it  might  reasonably  be 
inferred  that  it  was  either  one  or  the  other.  In  that  case,  it 
became  indispensable  to  resort  to  extrinsic  evidence  to  re- 
move the  doubt.  The  evidence  resorted  to  for  this  purpose 
was  the  most  obvious  and  reasonable  possible,  viz. :  that  this 
was  the  appropriate  form  of  an  official  check  ;  that  it  was,  in 
fact,  cut  out  of  the  official  check-book  of  the  bank,  and  noted 
336 


FORM    OF   SIGNATURE.  §  154 

on  the  margin ;  that  the  money  was  drawn  in  behalf  of,  and 
applied  to  the  use  of,  the  Mechanics'  Bank,  and  by  all  the 
banks  and  all  the  officers  of  the  banks  through  which  it 
passed  was  recognized  as  an  official  transaction.  It  is  true  it 
was  in  evidence  that  this  check  was  credited  to  Paton's  own 
account  on  the  books  of  his  bank.  But  it  was  done  by  his 
own  order,  and  with  the  evidence  before  their  eyes  that  it  was 
officially  drawn.  This  would  never  have  been  sanctioned  by 
the  directors  unless  for  reasons  which  they  best  understood, 
and  on  account  of  debits  which  they  only  could  explain. 

(c)  "  It  is  by  no  means  true,  as  was  contended  in  argument, 
that  the  acts  of  agents  derive  their  validity  from  professing 
on  the  face  of  them  to  have  been  done  in  the  exercise  of  their 
agency.     In  the  more  solemn  exercise  of  derivative  powers, 
as  applied  to  the  execution  of  instruments  known  to  the  com- 
mon law,  rules  of  form  have  been  prescribed.     But   In  general, 
in  the  diversified  exercise  of  the  duties  of  a  general   of  bank  de"- 
agent  the  liability  of  the  principal  depends  upon    forms  but  "'^ 
the  facts  ;  that  the  act  was  done  in  the  exercise   I'g/author- 
and   within    the   limits    of    the   power   delegated,    jjy  of  agent ; 

'■  _  ,         "  2d,  intent  ot 

These  facts  are  necessarily  inquirable  into  by  a  the  parties. 
court  and  jury ;  and  this  inquiry  is  not  confined  to  written 
instruments  (to  which  alone  the  principle  contended  for  could 
apply),  but  to  any  act  with  or  without  writing  within  the 
scope  of  the  power  or  confidence  reposed  in  the  agent ;  as,  for 
instance,  in  the  case  of  money  credited  in  the  books  of  a 
teller,  or  proved  to  have  been  deposited  with  him,  though  he 
omits  to  credit  it." 

The  law  concerning  the  manner  in  which  a  cashier  may 
sign  checks  intended  to  be  officially  drawn  against  deposits  or 
funds  standing  in  other  banks  to  the  credit  of  his  own  bank, 
is  contained  in  the  foregoing  opinion,  almost  as  in  a  nutshell. 
Any  form  of  check  whatsoever,  and  any  form  of  signature, 
provided  the  instrument  bears  anywhere  upon  its  face  any 
indication  of  a  corporate  character,  will  suffice  to  open  the 
door  for  the  introduction  of  testimony  to  prove  that  in  fact  the 
character  was  corporate.  And  even  though  there  be  noth- 
ing on  the  face  of  the  check  to  indicate  its  character,  it  might 
VOL.  I. —22  337 


§  154  THE   CASHIER. 

still  be  the  corporate  check,  under  the  general  principle  that, 
if  any  agent  has  authority  to  make  a  written  contract  (not 
under  seal),  and  makes  it  in  his  own  name,  whether  he  de- 
scribes himself  as  agent  or  not  (and  even  whether  his  principal 
be  known  or  not,  which  in  the  case  under  consideration  would 
not  happen),  both  the  agent  and  his  principal  can  hold  the 
third  party,  C,  and  C.  can  hold  them,  unless  from  attendant 
circumstances  it  is  clearly  manifest  that  an  exclusive  credit 
was  given  to  the  agent,  and  it  was  intended  by  both  parties 
that  no  resort  should  be  had  by  or  against  the  principal  in  any 
event.2  If  by  usage  or  otherwise  the  cashier  has  authority 
from  the  bank  to  check  against  its  funds  in  his  own  name, 
and  he  does  so,  the  bank  is  ultimately  liable  on  the  facts, 
whether  it  is  on  the  face  of  the  check  or  not,  and  therefore 
the  law  holds  it  immediately  liable. 

If  it  can  be  collected  from  the  whole  instrument  that  it  is 
the  intent  to  bind  the  bank,  it  will  be  held,  no  matter  how 
informal  the  expression,  and,  if  unintelligible  or  uncertain, 
parol  evidence  is  admissible  to  show  what  party  is  bound.^ 
In  the  case  just  cited,  a  note  signed  by  the  president,  directors, 
and  secretary  was  held  a  corporate  note  ;  and  in  New  York, 
where  S.  B.  S.  sent  the  plaintiff  a  bill  of  exchange  payable  to 
the  order  of  S.  B.  S.,  Cash.,  and  indorsed  the  same  and  en- 
closed it  in  a  letter  dated  at  bank  and  signed  by  S.  B.  S., 
Cash.,  the  indorsement  was  held  that  of  the  bank.* 

It  cannot  be  doubted  that  proof  that  the  check  was  drawn 
and  signed  in  the  maimer  in  which  the  cashier  was  uniformly 
wont  to  draw  and  sign  when  he  intended  to  draw  on  behalf  of 
his  bank,  and  which  the  drawee  bank  was  wont  to  pay,  with- 
out objection  from  the  cashier's  bank,  out  of  its  corporate 
credit,  would  always  be  regarded  as  prima  facie  and  by  most 
juries  as  conclusive  evidence  of  the  corporate  character,  and 
would,  wherever  the  interests  of  justice  required  it,  be  held 
to  estop  the  cashier's  bank  from  denying  this  character. 
Whence  it  follows,  that  a  check  in  any  form  customarily  used 

2  Story's  Agency,  §  160  a. 

8  Haile  v.  Peirce,  32  Md.  327. 

*  Bank  of  Genesee  v.  Patchin  Bank,  19  N.  Y.  312. 

338 


CERTIFICATION.  §  155 

by  the  cashier  in  drawing  checks  on  behalf  of  his  bank  would 
be  sustained  at  law  as  the  check  of  the  bank,  however  little 
in  accordance  with  old-fashioned  rules  might  be  the  agent's 
method  of  signing  on  behalf  of  his  principal.  Difficulty  could 
only  arise  where  the  cashier  had  a  private  account  at  the 
same  bank. 

§  155.  Power  to  certify  Checks  inherent.  —  By  the  universal 
usage  of  banks  the  certification  of  checks  has  become  a  part 
of  the  ordinary  daily  routine  of  banking  business  and  is 
therefore  inherent  in  the  cashier's  office,  being  a  matter  of 
execution  requiring  no  great  discretion.     (See/.) 

(a)  But  in  case  the  clieck  is  not  drawn  in  the  usual  course 
of  business,  as  if  it  is  given  as  collateral  security,  check  given 
the  cashier  has  no  inherent  authority  to  certify,  ^*  collateral. 
and  if  the  fact  appears  on  the  face  of  the  check,  as  where 
it  contained  the  words  "  To  hold  as  collat.  for,  <fec.,"  the 
holder  is  put  to  his  inquiry  concerning  the  special  power  that 
would  be  necessary  to  enable  the  cashier  to  certify.^  Of 
course  the  cashier  has  no  right  to  certify,  if  the  drawer  has 
not  sufficient  funds  in  the  bank,  nor  to  certify  his  own  checks. 
(See/.) 

(6)  The  certification  is  usually  made  by  writing  "  Good  " 
across  the  face  of  the  check,  followed  by  the  initials  of  the 
officer ;  but  it  may  perhaps  be  done  verbally,^  —  though  it  is 
much  to  be  regretted  that  any  such  decision  should  have  been 
made.     For  the  effect  of  certification,  see  §  403. 

We  have  here  to  deal  with  the  powers  and  duties  of  the 
various  bank  officers  concerning  this  transaction,  developing 
the  above  points  and  considering  the  important  cases  bearing 
thereon.  So  soon  as  a  check  has  been  certified,  the  amount 
should  at  once  be  debited  to  the  drawer  and  credited  to  the 
payee,  or,  as  is  sometimes  preferred,  to  a  "  certified  check 
account,"  upon  the  books  of  the  bank.  The  payee  thereafter 
occupies  in  several  respects,  as,  for  example,  the  running  of 
the  Statute  of  Limitations,  the  position  of  an  ordinary  deposi- 
tor.    Though  of  course  he  cannot  insist  upon  the  right  to  con- 

*  §  155.    Dorsey  v.  Abraras,  85  Pa.  299. 

3  Espy  V.  Bank  of  Cincinnati,  18  Wall.  604. 

339 


§155 


THE    CASHIER. 


tinue  a  deposit  account  if  the  bank  does  not  wish  to  open  it ; 
neither  can  he  draw  checks  against  his  credit,  which  is  prop- 
erly only  to  be  paid  over  upon  presentment  and  surrender  of 
the  accepted  check.  He  is  an  ordinary  contract  creditor  for 
the  amount.  The  duty  to  make  this  entry  is  what  might  be 
described  as  a  purely  internal  duty.  It  is  a  part  of  the  mech- 
anism of  the  institution  itself.  The  neglect  of  the  officials 
to  do  it  may  render  them  personally  liable  to  the  bank  for  any 
consequent  loss,  but  does  not  affect  the  rights  of  any  outside 
party.  For  the  substance  of  the  doctrines  thus  far  laid  down 
we  have  the  direct  authority  of  the  Girard  Bank  v.  Bank  of 
Penn  Township,^  a  case  in  which  the  object  of  the  court 
seemed  to  be  to  refrain  so  far  as  possible  from  saying  anything 
useful.  Also  we  have  the  indirect  authority  of  all  the  New 
York  cases,  which  tacitly  assume  the  inherent  legality  of  cer- 
tification as  the  necessary  basis  of  all  their  decisions  (post^. 

((?)    The  most  common  form  in  which  to  express  the  certifi- 
cation is  by  simply  writing  upon  the  check  the  word  "  good," 
followed  by  the  initials  of  the  certifying  officer.     But 
it  is  not  essential  that  this  form  should  be  observed. 
Any  other  writing,  as  the  name  or  initials  of  the  officer,  or 
the  word  "  good  "  alone,  if  intended  and  understood  to  bear 
this  meaning,  will  be  construed  accordingly.     In  England  the 
"  marked  checks,"  which  in  some  respects,  though  not  in  all, 
resembled  our  certified  checks,  were  customarily,  until  the 
statute  interfered,  literally  only  marked,  and  bore  no  written 
word  whatsoever.     It  makes  no  difference  how  meaningless 
in  itself  may  be  the  method  resorted  to,  or  even  that,  like 
the  word  "  good,"  it  might  seem  easily  capable  of  a  different 
meaning ;  it  will  be  construed  in  reference  to  the  customs  and 
usages  of  the  business,  and  to  the  understanding  of  the  par- 
ties, and  will  be  held  valid  or  invalid  solely  in  reference  to 
this  construction.     It  is  a  certification  if  it  be  done  aniino  cer- 
tifieandi,  if  we  may  be  allowed  to  coin  the  phrase.     See  (6) 
above,  and  Checks  and  Certification. 

((f)    Rarely  the  president  undertakes  to  certify  checks  ;  quite 
frequently  the  teller ;  but  perhaps  by  far  the  most  frequently 

8  39  Pa.  St.  92. 

340 


POWER  TO   CERTIFY.  §  155 

the  cashier.*  By  reason  of  this  proportion  it  has  always  been 
assumed  that,  if  the  power  be  inherent  in  any  office,  it  is  in- 
herent in  that  of  the  cashier.  But  here  has  been  who  may 
a  grand  question  and  doubt  in  this  whole  subject.  *^^''''^>'- 
Is  it,  or  is  it  not,  an  implied  power  of  the  cashier,  —  a  power 
which  is  to  be  assumed  as  constituting  by  custom  one  of  the 
essential  elements  of  his  office  and  position,  which  it  is  to  be 
taken  for  granted  that  he  can  exercise  simply  by  virtue  of  the 
fact  of  his  being  casliier  ?  Or,  from  another  point  of  view, 
Will  his  certification  of  a  check  bind  the  bank  in  favor  of  an 
innocent  holder  who  had  no  actual  notice  that  the  bank  had 
never  clothed  him  with  any  such  authority,  nor  intended  that 
he  should  exercise  it  ? 

(e)  The  well-known  case  of  Mussey  v.  The  Eagle  Bank  ^  is 
the  strongest  authority  against  the  inherent  power.  That  case, 
it  is  true,  passes  directly  only  upon  the  power  of  the  jjussev  v. 
teller,  but  the  line  of  argument  is  general  enough  ^^s^^  ^'i"^- 
to  include  also  the  cashier  or  the  president.  An  effort  was 
made  to  prove  a  usage  for  the  teller  to  certify.  But  the  evi- 
dence was  declared  wholly  incompetent  to  sustain  the  usage, 
and  the  court  went  on  to  say  that  the  usage,  even  if  proved, 
would  not  have  sustained  the  theory  that  the  power  was  "  in- 
herent." For  it  would  be  a  usage  to  allow  the  teller  to 
pledge  the  bank's  credit,  a  power  which  by  the  constitution  of 
the  bank  can  be  exercised  only  by  the  corporate  government, 
or  under  their  special  delegation,  and  consequently  cannot 
be  an  implied  or  resulting  function  of  any  individual  officer. 
Certainly  it  is  sound  to  say  that  a  power  exercised  by  virtue 
of  a  usage  is  strictly  a  power  exercised  by  virtue  of  a  dele- 
gation of  authority,  which  the  law,  by  reason  of  the  usage, 
conclusively  presumes  to  have  been  made.  Therefore  the 
recognition  of  the  fact  that  the  corporate  government  could 
delegate  this  power  carries  with  it  a  recognition  also  of  the 
further  fact,  that  the  usage  (which  conclusively  implies  such 
delegation  as  matter  of  imperative  law),  if  proved,  would  be 
good.     Yet  the  tendency  of  the  court  in  this  case  appeared  so 

*  Barnes  v.  Ontario  Bank,  19  N.  Y.  152. 
s  9  Met.  (Mass.)  306. 

341 


S  155  THE   CASHIER. 

strongly  opposed  to  any  possible  validity  of  the  usage,  that  it 
has  been  often  cited  and  commented  upon  as  if  it  went  to  this 
length.     In  point  of  fact,  it  is  an  unavoidable  logical  sequence 
from  the  language  used,  that  the  usage,  if  shown,  would  be 
valid,  though  perhaps  this  result  of  his  own  words  was  not 
recognized  even  by  the  learned  judge.     A  little  fault  also  can 
be  found  with  the  phraseology  in  this  opinion.     Certification 
is  said  to  be  a  pledging  of  the  credit  of  the  hank.     This  has 
a  formidable  sound,  as  though  an  act  so  important  should  be 
done  by  or  under  the  immediate  supervision  of  those  officials 
who  have  the  supreme  discretionary  control  of  the  corporate 
business.     But  the  phrase  is  deceptive.     It  is  obvious  that,  in 
point  of  fact,  if  the  ti:ansfer  of  credit  from  the  drawer  to  the 
payee  or  to  "  certified  check  account  "  is  duly  made,  contem- 
poraneously with  the  certification,  there  is  no  possibility  of 
any  loss  accruing  to  the  bank.     As  well  might  it  be  said  that, 
if  A.  draws  his  check  in  favor  of  B.,  both  being  depositors  in 
the  same  bank,  and  B.  deposits  it,  the  shifting  of  the  credit 
from  the  one  to  the  other  is  a  pledge  of  the  credit  of  the  bank. 
Practically,  instead  of  being  called  a  pledge  of  credit,  it  should 
he  considered  a  tra^isfer  of  credit,  and  should  be  regarded  as 
a  mere  matter  of  book-keeping.     It  is  true  that  the  bank  is 
bound  by  the  acceptance,  as  by  a  promise  to  pay  ;  but  it  is 
only  a  promise  to  pay  a  sum  actually  left  with  it  for  the  ex- 
press purpose  of  being  used  for  such  payment,  and  already  due 
and  owing.    It  is  under  a  similar  obligation  to  every  depositor 
in  the  bank,  though  the  ordinary  depositor  has  no  more  accu- 
rate written  evidence  of  the  amount  to  his  credit  than  is  fur- 
nished by  his  bank-book.     Before  the  acceptance  the  debt  ran 
to  A.,  the   drawer  ;    after  the  acceptance  to  B.,  the  holder. 
There  seems  nothing  very  objectionable  in  allowing  the  cash- 
ier to  make   this    change.     These  words,  therefore,  if   they 
can  be  regarded  as  describing  a  business  operation  involving 
risk  and  calling  for  discretion,  are  in  fact  seriously  deceitful. 
In  many  banks,  where  cashiers  are  not  permitted  to  certify, 
they  are  accustomed,  upon   request,  to  give  their  "  cashier's 
check,"  of  which  the  practical  effect  is  not  to  be  distinguished 
from  the  result  of  certification,  and  which  there  can  be  no 
342 


POWER  TO   CERTIFY   INHERENT.  §  155 

question  of  their  power  to  do.  The  real  objection  to  the  prac- 
tice of  certification  lies  in  the  dread  of  its  being  abused  by 
careless  certification  when  there  are  no  funds,  or  an  equally 
careless  subsequent  paying  out  of  funds  on  checks  of  the 
drawer,  so  as  to  reduce  his  deposit  below  the  amount  called 
for  by  the  certified  check.  Theoretically,  certification  is  harm- 
less ;  it  is  neglect  to  abide  by  the  theory  that  has  brought  it 
into  unmerited  disrepute. 

Even  if  this  case  ^  could  be  construed,  which  we  have  tried 
to  show  that  it  cannot,  to  support  the  view  that  usage  could 
not  confer  upon  an  officer  the  power  to  bind  the  bank  by  certifi- 
cation, yet  in  this  it  would  stand  alone  against  a  great  weight 
of  contrary  authority.  The  Pennsylvania  case,  cited  above,^ 
shows  that  in  that  State  the  power  may  be  conferred,  and  will 
be  upheld.  And  though  the  reticence  of  the  judges  is  such 
that  they  do  not  intimate  how  it  should  be  conferred,  or  under 
what  circumstances  it  will  be  upheld,  yet  if  it  can  be  thus 
treated  by  any  means,  even  by  the  most  formal  vote,  it  can 
also  be  sustained  by  inference  resting  upon  proof  of  estab- 
lished usage.  The  New  York  cases  are  numerous,  and  united 
in  sustaining  the  authority  derived  from  usage.^  It  would  seem 
to  be  a  universal  custom  in  that  State  for  either  the  cashier  or 
the  teller  to  certify  checks.  Nothing  being  easier  than  to  prove 
this  custom,  it  was  usually  done  at  the  trial  of  all  the  causes. 

(/)  But  a  recent  case  declares  directly  that  the  power  of  cer- 
tification is  inherent  in  the  office  of  cashier,  and  criticises  the 
Massachusetts  decision  quite  sharply,  as  being  based   ^^^  ^^^^ 
upon  an  idea  that  the  power  of  certification  was   declares  the 

-  •    •  •        power  of 

the  creature  of  usage  or  custom.     The  decision  is  certification 

said  to  be  twenty  years  old,  to  have  been  never  reit-  ihe^office'of 

erated  in  Massachusetts,  to  have  been  repudiated  in  u.'sf  c.  c.° 
New  York  and  other  States,  and  not  now  properly 

6  Mussey  v.  Eagle  Bank,  9  Met.  (Mass.)  306. 

7  Girard  Bank  v.  Bank  of  Penn  Township,  39  Pa.  St.  92. 

8  Farmers  &  Mechanics'  Bank  v.  Butchers  &  Drovers'  Bank,  16  N.  Y. 
125;  Meads  v.  Merchants'  Bank,  25  id.  143;  Clarke  National  Bank  v. 
Bank  of  Albion,  52  Barb.  (X.  Y.)  592  ;  Willets  v.  Phoenix  Bank,  2  Duer 
(N".  Y.),  121 ;  and  the  New  York  cases  cited  in  the  remainder  of  this 

chapter. 

^  343 


§  155  THE   CASHIER. 

to  be  regarded  as  law,  even  in  Massachusetts,  so  as  to  override 
"  a  general  rule  of  construction,  based  upon  the  principles 
of  the  common  law  of  universal  application."  ^  Previously 
the  New  York  cases  had  not  strictly  been  precedents  upon 
the  point  of  the  inherent  character  of  the  power ;  though  the 
Massachusetts  case  had  already  been  severely  criticised,  and 
a  plain  wiUingness  shown  to  override  it  upon  necessary 
occasion.^*' 

The  most  important  case  which  has  ever  arisen  concerning 
the  power  of  the  cashier  to  certify  is  that  of  the  Merchants' 
Bank  v.  State  Bank,ii  which  was  first  tried  in  the  United  States 
Circuit  Court  for  the  first  circuit,  before  Clifford  and  Lowell, 
JJ.  The  decision  in  the  lower  court  was  against  the  validity 
of  the  certified  checks.  The  case  was  carried  to  the  Supreme 
Court  of  the  United  States,  and  this  decision  was  reversed. 
It  was  there  held  that  the  power  of  the  cashier  to  do  such  an 
act  might  be  properly  inferred  by  the  jury  from  the  facts  of 
his  doing  such  cognate  acts  as  drawing  checks  against  the 
bank,  borrowing  and  lending  money,  and  the  like.  But  sub- 
stantially the  court  upheld  the  power  as  inherent  in  the  office. 
It  is  the  duty  of  the  cashier,  say  the  court,  "  to  receive  all  the 
funds  which  come  into  the  bank,  and  to  enter  them  upon  its 
books.  The  authority  to  receive  implies  and  carries  with  it 
authority  to  give  certificates  of  deposit  and  other  proper 
vouchers.  Where  the  money  is  in  the  bank,  he  has  the  same 
authority  to  certify  a  check  to  be  good,  charge  the  amount  to 
the  drawer,  appropriate  it  to  the  payment  of  the  check,  and 
make  the  proper  entry  on  the  books  of  the  bank.  This  he  is 
authorized  to  do  virtute  officii.  The  power  is  inherent  in  the 
office."  It  should  be  remembered  that  the  court  is  here  deal- 
ing with  the  cashier  of  a  bank  organized  under  the  act  of 
Congress  creating  the  national  banking  system  of  the  United 
States,  which  act  expressly  allowed  the  bank  to  make  such  a 

9  Cooke  V.  State  National  Bank  of  Boston,  52  N.  Y.  96,  affirming  same 
case  in  50  Barb.  (N.  Y.)  339,  1  Lans.  (N.  Y.)  491. 

10  In  Farmers  &  Mechanics'  Bank  v.  Butchers  &  Drovers'  Bank,  16 
N.  Y.  125. 

"  10  AVall.  604. 
344 


CERTIFICATION.  §  155 

purchase  of  coin  as  that  for  which  this  cashier  had  given 
these  certified  checks.  The  by-laws  of  the  bank  were  also 
referred  to,  which  made  the  cashier  responsible  "  for  the 
moneys,  funds,  and  all  other  valuables  of  the  bank "  ;  and 
declared  that  "  all  contracts,  checks,  drafts,  receipts,  &c.  shall 
be  signed  either  by  the  cashier  or  president."  But  no  especial 
knowledge  of  these  by-laws  was  asserted  or  shown  on  behalf 
of  the  plaintiff,  nor  can  it  be  said  that  they  confer  upon  the 
cashier  any  more  extensive  or  different  authority  than  that 
naturally  and  customarily  enjoyed  and  exercised  by  any 
cashier  according  to  the  ordinary  and  well-known  usage  and 
general  manner  of  conducting  the  banking  business. 

The  bank  may  expressly  delegate  the  power  of  certifying  to 
its  president,  its  cashier,  or  its  teller.  But  it  would  seem 
that  the  fact  that  such  power  is  so  specially  delegated  to 
any  other  officer  than  the  cashier  would  not  necessarily 
be  exclusive  of  such  power  as  inhering  in  the  cashier  also, 
at  least  in  the  absence  of  actual  notice  to  any  party  to  be 
affected.^2 

Judge  Selden  regards  the  teller  as  the  more  proper  officer, 
on  the  ground  that  of  course  the  cashier  could  certify,  but 
that  the  teller's  office  is  an  offshoot  of  the  cashier's,  and  has 
appropriated  that  peculiar  description  of  duties,  which  ren- 
ders it  more  convenient  for  the  teller  to  assume  this  function 
also.^3 

(^)  A  bank  which  allows  an  officer  to  certify  checks  can 
of  course  impose  upon  his  authority  any  restrictions  it  may 
choose.     As  usual,  these  restrictions  will  alwavs  be   „ 

Restrictions 

valid  as  between  the  officer  and  the  bank.  But  if  on  certifica- 
it  should  be  decided  that  the  power  of  certification 
is  inherent  in  any  special  officer,  or  if  local  usage  should  be 
such  that  he  is  to  be  regarded  as  held  out  to  the  world  as 
possessing  the  general  power  of  certification  subject  to  no 
unusual  limitations,  notice  of  the  existence  of  such  restric- 
tions must  be  brought  home  to  the  knowledge  of  any  third 

12  Merchants'  Bank  v.  State  Bank,  10  Wall.  604,  at  p.  650. 
1^  Farmers   &   Mechanics'   Bank   v.    Butchers   &   Drovers'    Bank,    16 
N.  Y.  125 ;  Irving  Bank  v.  Wetherald,  36  N.  Y.  335. 

345 


§  155  THE   CASHIER. 

persons  who  are  to  be  affected  by  them."  Notice  that  a  bank 
has  refused  to  become  party  to  an  agreement  entered  into  be- 
tween other  banks  in  the  same  city,  for  settling  clearing-house 
balances  by  certified  checks,  is  not  notice  that  the  same  bank 
does  not  permit  its  cashier  to  certify  checks  in  the  ordinary 
manner  in  the  daily  course  of  business.  The  two  things  are 
not  equivalent.^^ 

(A)  One  limitation,  however,  the  law  lays  down  in  all  cases. 
A  cashier  cannot  certify  the  check  of  a  drawer  who  has  not  un- 
Wrongfu\  incumbered  funds  in  the  bank  sufficient  to  meet  the 
certification.  c];igc]j^_  j^^y  person  having  notice  of  the  fact  that 
the  bank  had  not  enough  of  the  drawer's  funds  on  hand  to 
meet  the  check  at  the  time  of  certification,  will  be  presumed 
to  know  that  the  act  was  unauthorized  and  void,  and  will  not 
be  allowed  to  hold  the  bank  liable  upon  it.^^  But  any  outside 
party  is  justified  in  accepting  the  representation  of  the  officer 
as  to  the  sufficiency  of  the  drawer's  credit,  or  in  assuming 
without  special  inquiry  that  all  is  right  solely  on  the  strength 
of  the  undertaking  itself.  Knowledge  that  the  agent  cannot 
certify  without  funds,  is  not  knowledge  that  there  are  no 
funds.  This  is  an  extrinsic  matter.  A  certification  accepted 
on  the  faith  of  the  cashier's  or  teller's  statement  that  he  was 
authorized  to  certify,  would  not  bind  the  bank  if  he  was  not 
so  authorized.  But  his  statement,  directly  or  by  implication, 
that  there  are  the  requisite  funds  in  the  bank  is  of  a  different 
nature,  and  will  bind  the  bank. 

(^)  In  general  terms,  it  may  be  said  that,  where  one  deal- 
ing with  an  agent  ascertains  that  the  agent's  act  corresponds 
Representa-  exactly  with  the  terms  of  the  power,  he  may  take 
tions.  ^YiQ  agent's  representation  as  to  any  extrinsic  fact, 

peculiarly  within  the  agent's  knowledge,  and  not  ascertain- 
able by  a  comparison  of  the  power  with  the  act  done  under 
it.i"     "  The  certificate  of  the  cashier  of  a  bank  that  a  check 

"  Clarke  National  Bank  v.  Bank  of  Albion,  52  Barb.  (N.  Y.)  592 ; 
Merchants'  Bank  v.  State  Bank,  10  AVall.  604. 

15  Cooke  V.  State  National  Bank  of  Boston,  52  N.  Y.  96. 

"  Ibid.,  affirming  same  case  in  50  Barb.  (N.  Y.)  339, 1  Lans.  (N.  Y.)  494. 

"  Farmers  &  Mechanics'  Bank,  &c.  v.  Butchers  &  Drovers'  Bank,  16 
N.  Y.  125. 
346 


CERTIFICATION.  §  155 

is  'good,'  is  a  representation  of  a  present  existing  fact, 
within  his  knowledge  as  cashier;  and  if  that  certificate  be 
made  by  him  in  the  course  of  his  ordinary  business  as  casliier, 
it  will  bind  the  bank  in  favor  of  innocent  third  persons, 
upon  the  principle  of  estoppel  in  pais,  even  if  the  certificate 
be  not  true,  and  the  drawer  of  the  check  has  no  funds  on 
deposit  in  the  bank."  ^^ 

Whether  banks  are  competent,  by  usage  or  express  agree- 
ment, to  extend  their  liability  so  as  to  include  cases  where 
the  certification  is  known  to  be  made  without  sufficient  funds 
of  the  drawer,  is  a  qucere  in  Cooke  v.  State  National  Bank  ;  ^^ 
though  it  is  said  that  Selden,  J.  has  expressed  an  opinion  in 
the  ncgativc^*^ 

(y)  An  officer,  though  authorized  to  certify  generally,  yet 
cannot  legally  certify  his  own  checks.     Apparently  the  rule 
covers  equally  cases  where  he  has  and  where  he    officer  can- 
has  not  money  to  the  designated  amount  standiuir   T'-''  ^'ertify 

•'  ~  o     his  own 

to  his  credit  in  the  bank.  The  principles  laid  <'hecks. 
down  in  §§  99,  125  seem  sufficiently  to  sustain  this  position. 
But  if  this  certification  is  false,  we  have  the  authority  of  a 
thoroughly  considered  case  for  saying  that  it  is  utterly  void 
as  against  the  bank.  The  cause  of  Claflin  v.  The  Farmers 
and  Citizens'  Bank  turned  upon  the  validity  of  the  president's 
false  certification  of  his  own  check,  in  the  hands  of  a  bona 
fide  holder  for  value.  In  the  Supreme  Court  it  was  not 
denied  that  the  act  was  wrongful  and  unauthorized  as  be- 
tween the  bank  and  the  president.  But  it  was  said  that  the 
mere  identity  of  name  signed  upon  the  check  as  drawer  with 
the  president's  name  was  not  alone  sufficient  to  charge  the 
holder  with  notice  that  they  were  one  and  the  same  person ; 
and  there  being  no  other  proof  of  such  notice,  the  bank  was 
declared  liable.  But  in  the  Court  of  Appeals  this  ingenious 
evasion  of  the  wholesome  rule  was  rejected.     The  identity  of 

"  Morse  V.  Massachusetts  National  Bank,  1  Holmes,  209,  per  Shepley,  J. 
And  to  the  same  purport  is  Pope  v.  Bank  of  Albion,  59  Barb.  (N.  Y.)  226. 

19  52  N.  Y.  96. 

^  Farmers  &  Mechanics'  Bank  v.  Butchers  &  Drovers'  Bank,  16 
N.  Y.  125. 

347 


§  156  THE    CASHIER. 

name  was  regarded  as  sufficient  to  put  every  one  to  whom  it 
came  upon  inquiry  as  to  whether  the  president  was  seeking  to 
use  his  official  character  for  his  private  benefit ;  and,  indeed, 
it  may  be  suggested  that  there  was  not  alone  identity  in 
name,  but  the  similarity  of  handwriting  in  the  two  signatures 
ought  also  to  have  been  taken  into  consideration.  In  a  final 
and  very  satisfactory  decision,  the  bank  was  declared  not  to 
be  bound  by  the  acceptance.^^ 

§  156.  Dealings  in  Bills  of  Exchange.  —  A  cashier  has  in- 
herent power  to  buy  and  sell  bills  of  exchange,  and  to  make 
contracts  and  arrangements  to  secure  exchange,  and  pro- 
vide for  the  acceptance  of  bills  drawn  by  the  bank.  He 
cannot  accept  for  the  bank  bills  drawn  against  it,  for 
accommodation,  and  whether  he  can  accept  at  all  is  doubt- 
ful. 

The  business  of  dealing  in  bills  of  exchange  is  a  depart- 
ment of  the  general  business  of  banking.  It  may  or  not  be 
undertaken  by  the  corporation,  at  its  own  option.  If  it  is  un- 
dertaken, the  duty  of  buying  and  selling  the  bills  and  indors- 
ing them  over  to  the  purchaser  is  within  the  ordinary  scope  of 
the  cashier's  office.^  The  presumption  of  his  power  to  do  so 
must,  therefore,  be  imperative  in  favor  of  a  third  party  dealing 
with  him  without  notice  to  the  contrary.  But  whether  his 
general  charge  of  this  department  would  give  him  power  to 
bind  the  bank  by  his  acceptance  of  bills  of  exchange  drawn 
against  it,  is  a  matter  scarcely  to  be  regarded  as  beyond  a 
question.  The  cashier  of  the  Bank  of  Kentucky  was  declared, 
in  a  State  court,  not  to  have  this  power  by  virtue  of  his  office.^ 
In  Michigan,  however,  in  ruling  that  a  cashier  could  not  accept 
bills  for  accommodation,  it  was  said  that  such  an  acceptance 
would  be  void  in  the  hands  of  a  holder  with  notice  of  its 


21  Claflin  V.  Farmers  &  Citizens'  Bank,  36  Barb.  (N.  Y.)  540  (Supreme 
Court),  overruled  in  25  N.  Y.  293  (Court  of  Appeals). 

1  §  156.  Lafayette  Bank  v.  State  Bank,  4  McLean,  208;  Robb  v.  Ross 
County  Bank,  41  Barb.  (N.  Y.)  586;  Marvine  v.  Hymers,  2  Kern.  (N.  Y.) 
223;  Wild  v.  Bank  of  Passamaquoddy,  3  Mason,  505;  Fleckner  v.  Bank 
of  United  States,  8  Wheat.  360. 

2  Pendleton  v.  Bank  of  Kentucky,  1  T.  B.  Hour.  (Ky.)  179. 

348 


DEALING   WITH   BILLS   OF   EXCHANGE.  §  156 

character.^  From  this  it  might  perhaps  be  inferred  that  the 
cashier  could  accept  on  behalf  of  the  bank  if  it  were  for  a  hona 
fide  purpose,  not  being  accommodation.  It  is  certain  that  the 
cashier  never  has  authority  to  bind  the  bank  by  any  of  the 
numerous  species  of  "accommodation"  contracts,  which,  in 
one  shape  and  another,  are  so  common  in  business  circles,* 
though  an  innocent  holder  may  have  a  right  to  hold  the  bank. 

Where  a  bill  of  exchange  is  indorsed  by  a  cashier,  though 
only  for  the  purpose  of  transmitting  it  for  collection,  he  be- 
comes a  "  party  "  to  it  in  the  sense  of  a  statute  which  makes 
a  notarial  certificate  of  notice  of  presentment  and  nonpayment 
to  "  parties  "  admissible  as  evidence  of  such  notice  ;  the  cer- 
tificate is  evidence  of  notice  having  been  given  to  the  cashier, 
and  therefore  to  the  bank,  since  the  subject  matter  falls  within 
the  scope  of  his  agency.^ 

The  cashier  of  a  Kansas  City  bank  orally  agreed  with  a 
firm  which  was  its  New  York  correspondent,  that,  if  the  firm 
would  accept  certain  drafts  to  the  amount  of  835,000  nego- 
tiated by  the  bank,  it  would  keep  on  deposit  with  tlie  firm 
until  their  maturity  a  balance  equal  to  their  amount,  and  the 
firm  have  a  lien  on  such  balance  as  security,  with  the  right  to 
charge  the  account  at  any  time  with  the  acceptances,  and 
appropriate  to  their  payment  so  much  of  the  deposit  as  neces- 
sary therefor ;  the  firm  to  be  kept  informed  of  the  condition 
of  the  bank,  which  the  cashier  stated  to  be  embarrassed,  but, 
with  certain  expected  aid,  able  to  continue  business.  Held^ 
that  this  agreement  was  not  invalid  as  against  public  policy, 
was  not  fraudulent  as  to  the  holders  of  drafts  drawn  on  the 
firm  after  it  was  made,  and  was  within  the  poiver  of  the  cashier 
to  make,  both  under  his  general  authority,  and  by  virtue  of  a 
by-law  which  gave  him  supervision  of  the  bank,  with  duty  to 
"  attend  to  the  making  of  loans,  discounts,  and  other  active 
business  transactions  of  the  bank." 

3  Farmers  &  Mechanics'  Bank  v.  Troy  City  Bank,  1  Dougl.  (Mich.) 
457. 

*  West  St.  Louis  Savings  Bank  v.  Shawnee  County  Bank,  95  U.  S. 
557. 

6  Bank  of  United  States  v.  Davis,  2  Hill  (N.  Y.),  451. 

349 


§  158  THE   CASHIER. 

§  157.  Personalty.  —  The  cashier  has  full  charge  of  the 
bank's  personal  property,  except  so  far  as  withdrawn  from 
his  control  by  the  bank  or  by  the  directors. 

The  cashier  has  full  charge,  and  power  of  disposition  in 
the  regular  course  of  business,  of  all  personal  property  of  the 
bank,  wliether  specie,  notes,  bills,  bonds,  securities,  valuable 
papers,  or  of  whatsoever  other  description  of  personal  property 
the  bank  may  have  in  its  possession.^ 

He  has  the  superintendence  of  its  books  of  accounts.^ 
Judge  Shepley  has  given  the  following  very  good  abstract  of 
the  ordinary  duties  of  a  cashier  :  "  To  keep  the  funds,  notes, 
bills,  and  other  choses  in  action  of  the  bank,  to  be  used  from 
time  to  time  for  the  exigencies  of  the  bank ;  to  receive 
directly,  and  through  subordinate  officers,  all  moneys  and 
notes  of  the  bank ;  to  surrender  notes  and  securities  upon 
payment ;  to  draw  checks  ;  to  withdraw  funds  of  the  bank  on 
deposit ;  and  generally  to  transact,  as  the  executive  officer  of 
the  bank,  the  ordinary  routine  of  business.  But  the  ordinary 
duties  of  a  cashier  do  not  comprehend  the  making  of  a  con- 
tract, which  involves  the  payment  of  money,  without  an  express 
authority  from  the  directors,  unless  it  be  such  as  relates  to  the 
usual  customary  transactions  of  tlie  bank."^ 

§  158.  Indorsement.  —  The  cashier  has  inherent  power  to 
indorse  and  transfer  negotiable  paper  on  behalf  of  the  bank,  for 
collection,  discount  (/),  payment  of  the  bank's  debts  (e,  ^), 
"Weight  of  or  by  way  of  making  over  securities  held  by  the 
authority.  jjauk  on  payment  of  the  loan  (§  159^),  or  in  any 
other  case  arising  in  the  regular  course  of  business,  but  has 
no  inherent  authority  to  indorse  for  accommodation,  nor  to 
put  the  bank's  name  on  his  own  paper,  nor  to  give  title  to  any 
other  than  negotiable  property  of  the  bank. 

1  §  157.  Wild  r.  Bank  of  Passamaquoddy,  3  Mason,  505;  Franklin 
Bank  v.  Steward,  37  Me.  519 ;  Morse  v.  Massachusetts  National  Bank, 
1  Holmes,  C.  C.  209;  Hawkins  v.  Fourth  National  Bank,  150  Ind.  117 
(49  N.  E.  957)  (1897). 

2  Sturges  V.  Bank  of  Circleville,  11  Ohio  St.  153;  Baldwin  v.  Bank  of 
Newbury,  1  Wall.  234. 

3  Morse  v.  Massachusetts  National  Bank,  1  Holmes,  C.  C.  209. 

350 


POWER  TO  TRANSFER  BANK's  PROPERTY.       §  158 

Any  indorsement  made  by  the  cashier  on  behalf  of  the 
bank,  though  wrongful,  will  bind  the  bank  in  favor    g^,„„  ^^^g 
of  a  bona  fide  holder  for  value  without  notice.  holder. 

Any  form  of  indorsement  will  be  good,  even  though  only  the 
name  of  the  cashier  without  his  title,  if  in  fact  the 

iorm. 

transaction  was  on  behalf  of  the  bank,  and  within 

the  cashier's  authority.     See  §  154  h.     These  points  will  now 

be  illustrated  and  expanded. 

(a)  All  the  bank's  negotiable  paper  the  cashier  may  nego- 
tiate and  transfer  on  its  behalf,^  and  to  this  end  may  indorse 
it  over,  so  as  to  bind  the  bank  like  any  ordinary  May  trans- 
indorser  on  similar  paper.  But  the  character  of  [fegotiabie 
negotiability  is  a  strict  limitation  upon  his  in-  J,'|J['o'['j,ej' 
herent  power.  He  cannot  solely  by  virtue  of  his  property, 
office,  pass  title  to  non-negotiable  paper  of  any  sort,  or  to  any 
other  description  of  corporate  property,  as,  for  example,  a 
judgment  given  in  favor  of  the  bank.  His  action  in  making 
transfers  of  this  latter  description  can  be  sustained  only  by 
authority  directly  conferred  by  the  directors,  or  arising  from 
established  usage.^  Of  course  this  power  of  transfer,  like 
almost  every  power  which  an  agent  can  possess,  may  easily  be 
so  abused  by  him  as  to  render  liim  liable  to  his  principal.  It 
is  very  difficult  to  say  precisely  how  much  discretion  can  be 
properly  exercised  by  the  cashier  in  trading  in  negotiable 
securities.  Clearly  he  has  no  right  to  push  it  to  that  point 
where  virtually  it  becomes  a  considerable  and  important 
branch  of  the  bank's  business,  and  is  nevertheless  conducted 
solely  by  himself.  It  was  never  contemplated,  either  by 
the  legislature  in  conferring  the  franchise  or  by  the  stock- 
holders in  investing  their  capital,  that  trading  in  negotia- 
ble securities,  if  carried  to  such  an  extent  as  to  become  an 
essential  and    vital  element  in  the   corporate   business   and 

1  §  158.  Wild  V.  Bank  of  Passamaquoddy,  3  Mason,  505 ;  State  Bank 
V.  Wheeler,  21  Ind.  90;  City  Bank  v.  Perkins,  29  N.  Y.  554;  Cooper  v. 
Curtis,  30  Me.  488;  Kimball  v.  Cleveland,  4  Mich.  606  ;  Crocket  v.  Young, 
1  Sno.  &  M.  (Miss.)  241;  Everett  v.  United  States,  6  Port.  (Ala.)  166;  Bri- 
denbecker  v.  Lowell,  32  Barb.  (N.  Y".)  9. 

2  Barrick  v.  Austin,  21  Barb.  (N.  Y.)  241;  Holt  j;.  Bacon,  25  Miss.  567. 

351 


§  158  THE  CASHIER. 

prosperity,  should  be  conducted  solely  upon  the  single  discre- 
tion of  the  cashier.  The  management  of  the  important  affairs 
of  the  institution  was  intended  to  be  the  function  of  the  directors. 

"We  can  only  state  this  principle  in  general  terms.  It  would 
be  a  matter  of  infinite  difficulty  to  draw  the  boundary  line, 
and  no  adjudicated  cases  assist  us  in  so  doing.  Certainly, 
in  a  well-ordered  bank  the  directors  would  not  allow  the 
cashier  to  usurp  their  powers  improperly  in  this  respect.  Nor 
could  he  do  so  without  their  knowledge. 

(5)  It  may  also  happen  that  a  casliier  may  wilfully  make  a 
transfer  or  indorsement  in  direct  disobedience  to  special  direc- 
torial instructions.     But  in  any  of  these  cases  of 

Transfer  i  •         i  •         i 

without  au-      improper  transfers  by  the  cashier,  he  simply  ren- 
°"  ^'  ders  himself  responsible  to  the  bank  for  the  conse- 

quences of  his  misconduct.  The  outside  party  dealing  with 
him  in  good  faith,  and  without  notice  of  the  irregularity, 
holds  the  bank  as  if  the  transaction  had  been  unobjectionable 
throughout.  For  it  is  an  inherent  power  of  the  cashier,  which 
he  exercises  simply  by  virtue  of  his  office,  to  make  the  trans- 
fer, and  no  person  can  be  required,  in  a  case  where  no  cir- 
cumstances of  suspicion  put  him  upon  inquiry,  to  go  behind 
this  authority.  If  the  agent  exceeds  it,  the  matter  lies 
wholly  between  himself  and  his  principal.^ 

((?)  Since  the  cashier  has  the  general  power  to  indorse  over 
bills  and  notes  of  the  bank,  for  the  purpose  of  passing  title 
T  ,  ^    therein,  he  of  course  has  the  lesser  and  included 

Indorsement  " 

for  discount,     power  to  iudorso  for  special  purposes,  as  for  dis- 

CoUeCtion,  &C.  nic  ^^  •  t      r 

count.     So  also  for  collection,  and  for  transmis- 

'  City  Bank  v.  Perkins,  29  N.  Y.  554.  In  this  case  the  cashier  had 
pledged  a  note,  which  it  was  urged  he  had  no  right  to  do.  The  suit  was 
brought  against  the  maker  by  a  bona  fide  holder  for  value  and  without 
notice,  claiming  under  the  cashier's  indorsement.  The  court  did  not 
pass  upon  the  cashier's  authority,  holding  that,  whether  he  had  it  or  not, 
yet  the  plaintiff  had  a  sufficient  title  to  protect  the  maker  in  paying  to 
him,  and  could  oblige  him  to  do  so.  Gillett  v.  Phillips,  3  Kern.  (N.  Y.) 
114:  transfer  by  cashier  of  notes  to  an  amoimt  in  excess  of  what  he  may 
legally  transfer  is  void,  except  as  to  bona  fide  holder  without  notice.  St. 
Louis  Perpetual  Ins.  Co.  v.  Cohen,  9  Mo.  421 :  transfer  in  bad  faith  binds 
in  favor  of  bona  fide  holder  for  value  and  without  notice. 

352 


INDORSEMENT.  —  PARTIES   WITHOUT   NOTICE,  §  158 

sion  for  collection,  he  may  indorse  both  paper  belonging  to 
the  bank  and  paper  intrusted  to  it  for  collection,  or  given  to 
it  as  collateral  security.*  If  paper  is  indorsed  by  him  for  this 
special  and  limited  purpose,  and  is  subsequently  fraudulently 
converted,  yet  if  the  indorsement  be  general,  and  the  paper 
comes  to  the  hands  of  a  bona  fide  holder  for  value  and 
without  notice,  who  presumes  and  has  a  right  to  presume 
from  the  style  of  the  indorsement  that  it  was  made  in  the  ordi- 
nary course  of  business,  and  created  a  guaranty  on  the  part 
of  the  bank,  the  bank  may  be  held  to  respond  as  an  ordinai-y 
indorser.5  The  risk  is  voluntarily  incurred  by  the  bank  in 
putting  its  indorsement  in  such  a  form  that  it  does  not  convey 
notice  of  its  true  character  when  an  attempt  is  made  to  use  it 
fraudulently.  It  has  been  specially  held  that  a  cashier  has 
power  to  indorse  over  negotiable  paper  in  payment  of  debts  of 
the  bank  ;'^  also  as  preliminary  to  demand  and  notice,  and  to 
the  institution  of  a  suit  upon  it."  But  these  limited  powers 
are  of  course  included  in  the  general  authority  which  is 
amply  supported  by  abundance  of  judicial  decisions,  and  which 
may  be  stated  in  the  broadest  terms  : 

(d^    That   the  cashier,  by  his    indorsement  of    negotiable 
paper  on  behalf  of  the  bank  will  always  bind  the  bank  to  the 
full  extent  that  any  individual  indorser  of  like  paper     General 
and  in  like  form  would  be  bound,  unless  the  holder     a'uthoritv 
for  value  of  the  indorsed  paper  took  it  with  actual     „*' '"fj^'j^ie 
notice  of  some  fact  rendering  the  indorsement  ir-     paper. 
regular  and   invalid.     Many  of  the  cases  cited  supra  in  this 
section  assert  that  the  consideration  for  the  transfer  need  not 
appear  upon   the   instrument,  but  will    be   presumed.      Tlie 
presumption  is  open  to  rebuttal   by  proof  that  no  consider- 
ation,   or   only    an   inadequate    one,    passed.     But   rebutting 
evidence  of   this  description  can   be  used   only   against  the 

*  Elliott  r.  Abbott,  12  N.  H.  5i9;  Corser  v.  Paul,  41  id.  21;  Potter  v. 
Merchants'  Bank,  28  N.  Y,  641. 

^  Robb  V.  Ross  County  Bank,  41  Barb.  (N.  Y.)  586;  First  National 
Bank  v.  Stone,  103  Mich.  367  (64  N.  W.  487). 

«  Crocket  v.  Young,  1  Sra.  &  M.  (Miss.)  241. 

''  Hartford  Bank  v.  Barry,  17  Mass.  94. 
VOL.  I.  —  23  353 


§  158  THE    CASHIER. 

original    transferee,   or    against    a   subsequent   holder   with 
notice.'" 

A  cashier  may,  in  the  regular  course  of  business,  assign  and 
indorse  notes  belonging  to  the  bank,  and  whether  negotiable 
paper  has  or  has  not  been  authorized  by  tbe  discount  com- 
mittee will  not  affect  bona  fide  indorsees  before  maturity.^ 

(^)  A  cashier  cannot  assign  discounted  bills  and  notes  to 
Power  to  pay  ^  dcpositop  in  payment  of  his  deposit.^     Assigning /, 
np-otiabie''^     mortgages,  or  disposing  of  the  bank's  property,  such '  ; 
bills  doubted,  j^g  discounted  bills,  is  a  part  of  the  management, 
and  belongs  to  the  directors. ^° 

(/)  The  cashier  has  a  general  power  to  indorse,  and  if  he 
has  procured  a  bona  fide  rediscount,  it  will  be  good 

Rediscount  .,.,..         t     ■,  ia     i  i  •      i 

held  pood.       as  witlun  his  implied  power,^"*^  but  he  cannot  bind 
^    '         his  bank  as  an  accommodation  indorser  of  his  own 

promissory  note  :  such  a  transaction  bears  on  its  face  notice 

of  possible  want  of  power.^^ 

{g)  The  cashier  of  a  bank  is  usually  intrusted  with  all  the 

funds  of  the  bank  in  cash,  notes,  bills,  and  other  choses  in 

action,  to  be  used  from  time  to  time  for  the  ordinary  and 

''"  Where  P.,  the  cashier  of  A.  bank,  got  the  M.  bank  to  discount  a 
'  note  payable  to  himself  and  indorsed  by  himself  individually,  and  by  the 
A.  bank,  by  himself,  as  cashier,  the  fact  that  he  was  the  first  indorser, 
and  that  he  personally  received  the  avails  of  the  note,  did  not  amount  to 
notice  to  the  M.  Bank.  Merchants'  National  Bank  v.  McXeir,  51  Minn. 
123  (53  N.  W.  178). 

Where  the  general  authority  of  a  cashier  of  a  bank  to  transfer  and 
indorse  negotiable  paper  held  by  the  bank  is  limited  by  a  certain  by-law, 
and  the  transferee  has  notice  of  such  by-law,  the  transfer  is  void.  In  re 
Assignment  Bank  of  Oregon,  32  Oregon,  81  (51  Pac.  87)  (1897). 

8  Blair  y.  First  National  Bank  of  Mansfield,  2  Flippin,  111  (U.  S., 
1877).  It  is  presumed  that  the  sale  of  a  note  by  the  cashier  was  author- 
ized or  ratified  by  the  board  of  directors.  Hawkins  v.  Fourth  National 
Bank,  150  Ind.  117  (49  N.  E.  957)  (1897). 

9  Lamb  v.  Cecil,  25  W.  Va.  288  (1883);  28  id.  659.  Where  a  casliier 
paid  a  depositor  by  transferring  notes  to  him  it  was  held  that  the  depos- 
itor held  the  notes  and  their  proceeds  in  trust  for  the  bank  when  garnished 
by  its  creditors.     Schneitman  v.  Noble,  75  la.  120  (39  N.  W.  221). 

10  Iloyt  V.  Thompson,  1  Seld.  (N.  Y.)  320. 
10"  Davenport  v.  Stone,  104  Mich.  521  (62  N.  W.  722). 
"  West  St.  Louis  Savings  Bank  v.  Shawnee,  95  U.  S.  557. 
354 


INDORSEMENT.  §  158 

extraordinary   exigencies   of   the   bank.     He    is   accustomed 

to  receive   directly,  or  through   the  subordinate  officers,  all 

money  and  notes  of  the  bank  ;  to  deliver  up  all  dis-   General 

power  to  dis- 
counted  notes  and  other  securities  and   pro[)erty,    cUnr^e  the 

when  payment  of  the  dues  for  which  they  are  given  gatioiiVwith 
have  been  made ;  and  to  draw  checks  from  time  to  pa^JJTaf-'^'''^ 
time  for  money,  wherever  the  bank  has  deposits  and  ^J^ned. 
pecuniary  funds.  In  short,  he  is  considered  as  the  executive 
officer  through  whom  and  by  Avhom  the  whole  moneyed  trans- 
actions of  the  bank  in  paying  or  receiving  debts,  and  dis- 
charging or  transferring  securities,  are  to  be  conducted.  It 
does  not  seem,  therefore,  too  much  to  infer,  in  the  absence  of 
all  known  and  positive  restrictions,  that  he  possesses  the  inci- 
dental authority,  and  indeed  that  it  is  his  duty,  to  apply  the 
negotiable  funds,  as  well  as  the  moneyed  capital  of  the  bank, 
to  discharge  its  debts  and  obligations.^^ 

Hence,  it  seems  to  be  a  natural  conclusion  that,  prima  facie, 
the  cashier  of  a  bank  possesses  the  incidental  authority  to  in- 
dorse the  negotiable  securities  held  by  the  bank,  in  order  to 
supply  the  wants  and  to  promote  tiie  interests  of  the  bank, 
and  any  restriction  upon  such  authority  must  be  established 
by  competent  proofs,  and  will  not  be  presumed  to  exist.^^ 

(h)  The   various  forms  of   indorsement  which  have  been 
employed  by  cashiers  have  given  rise  to  important  questions 
concerning  their  respective  validity.     The  possible   Forms  of 
divergence  seems    to  be  limited    substantially   to    '"dorsement. 

four  different  methods,  viz. :  " Bank,  by  A.  B.,  cashier"  ; 

"A.  B.,  cashier  of  the Bank";   "A.  B.,  cashier";   or, 

finally,  simply  the  name  of  "A.  B."  without  any  other  words 
whatsoever.  These  are  the  four  cardinal  forms  which  alone 
call  for  consideration.  Others  are  only  slight  modifications 
of  these,  sucli  as  "  For  the Bank,  by  A.  B.,  cashier,"  or 

12  Fleckner  v.  Bank  of  United  States,  8  Wheat.  300,  301 ;  Cochecho 
National  Bank  v.  Haskell,  51  N.  II.  110;  Merchants'  Bank  v.  State  Bank, 
10  Wall.  604. 

13  Wild  V.  Bank  of  Passamaquoddy,  3  Mason,  505.  See  also  Folger  v. 
Chase,  18  Pick.  (Mass)  63;  Spear  v.  Ladd,  11  Mass.  94;  Northampton 
Bank  v.  Pepoon,  11  Mass.  288;  Corser  v.  Paul,  41  N.  H.  24  ;  Fay  v.  Noble, 
12  Cush   (Mass.)  1;  Elliott  v.  Abbott,  12  N.  H.  549. 

355 


§  158  THE    CASHIER. 

verbal  variations  by  the  use  of  simple  abbreviations,  as 
"  Cash.,"  "  Cas.,"  or  "  Cr."  Such  will  be  easily  recognized 
as  substantially  identical  with  one  or  other  of  these  four,  and 
will  be  governed  by  the  same  rules  respectively. 

It  is  obvious  at  once  that  the  first  of  these  forms  is  the  tech- 
nically proper  one.  It  alone  accords  with  the  old  established 
The  best  ^ulc  of  the  common  law  of  agency,  that,  whore  a 
form.  contract  is  made  through  an  agent,  the  principal 

must  be  directly  named  as  the  contracting  party,  properly 
with  the  addition  of  further  words  sufficiently  indicating  that 
the  principal  in  this  particular  case  is  contracting  through 
the  instrumentality  of  A.  B.,  authorized  agent,  and  the  signa- 
ture must  be  in  like  manner  of  the  name  of  the  principal,  with 
the  additional  intimation  that  it  is  written  by  his  agent  on 
his  behalf.^*  But  though  it  is  safest  and  wisest  always  to 
indorse  in  this  manner,  and  so  to  obtain  the  full  protection  of 
the  ancient  and  general  principle,  yet  special  decisions  have 
declared  other  forms,  theoretically  less  correct,  to  be  sufficient. 
So  it  can  no  longer  be  questioned  that  the  second  and  third 
forms  will  bind  the  bank.^^  The  words  appended  in  those  to 
the  cashier's  name  certainly  signify  very  clearly  that  he  was 
indorsing  officially,  and  on  behalf  of  the  bank,  and  that  the 

"  Spear  v.  Ladd,  11  Mass.  94. 

15  State  Bank  v.  Fox,  3  Blatchf .  431 ;  Bank  of  Genesee  v.  Patchin  Bank, 
3  Kern.  (N.  Y.)  309  ;  Northampton  Bank  v.  Pepoon,  11  Mass.  288  ;  Folger 
17.  Chase,  18  Pick.  (Mass.)  63;  llobb  v.  Ross  County  Bank,  41  Barb.  (N.  Y.) 
586;  Bank  of  the  State  of  New  York  v.  Muskingum  Branch  of  Bank  of 
State  of  Ohio,  29  N.  Y".  632;  Mechanics'  Banking  Association  v.  New  York 
&  Saugerties  White  Lead  Co.,  35  N.  Y.  505;  El  well  v.  Dodge,  33  Barb. 
(N.  Y.)  336.  In  this  case  it  was  held  that  the  indorsement  of  "  A.  B., 
president,"  should  be  construed  as  the  indorsement  of  the  corporation 
upon  proof  furnished  of  the  uniform  usage  of  the  corporation  to  indorse 
thus  through  its  president.  Ordinarily,  the  president  has  no  authority  to 
indorse  on  the  corporate  behalf.  IMarine  Bank  v.  Clements,  3  Bos.  (N.  Y.) 
600.  The  principle  in  this  case  is  identical  with  that  illustrated  by  the 
other  citations.  It  has  been  held  in  Wisconsin,  that,  though  the  indorse- 
ment "  G.  B.,  Cas.,"  be  made  for  accommodation  (and  therefore  wrong- 
fully), it  will  yet  bind  the  bank  as  towards  a  bona  Jide  holder  for  value 
without  notice.  Houghton  v.  First  National  Bank  of  Elkhorn,  26  AVis. 
663. 

356 


INDORSEMENT.  §  158 

contemporaneous  intention  and  understanding  of  both  parties 
was  that  the  bank  should  be  bound  by  the  indorsement.  As  a 
matter  of  fact,  probably,  in  all  such  cases  tliat  ever  occurred, 
the  undertaking  was  really  that  of  the  bank,  and  the  law, 
with  its  usual  flexibility  in  such  circumstances,  found  little 
difficulty  both  in  sustaining  it  as  such,  and  at  the  same  time 
in  adroitly  saving  the  integrity  of  the  ancient  theory.  It  was 
declared,  as  appears  by  the  cases  cited  in  the  last  note,  that, 
since  the  intent  was  to  be  regarded  as  sufficiently  certain  upon 
the  face  of  the  instrument,  the  holder  was  authorized  to  write 

above   the   signature   the    phrase   "  For  the Bank,"   or 

"  The Bank,  by,"  &c.,  or  any  other  words  that  might 

be  necessary  fully  to  express  and  to  carry  out  the  intent ;  also, 
that  he  might  strike  out  any  superfluous  or  inconsistent  words 
originally  written.  The  authorities  which  adopt  this  theory, 
and  support  the  legality  of  indorsements  made  in  the  described 
forms,  are  ample  to  put  the  matter  beyond  the  possibility  of 
any  future  doubt.  The  only  contrary  decision  to  be  found  in 
the  reports  is  one  rendered  by  the  Supreme  Court  of  the 
State  of  New  York,  and  this  was  very  brusquely  disposed  of 
by  a  judge  upon  the  same  bench  a  short  time  after  it  had 
been  given.  His  language  was  as  follows :  "  The  decision  in 
the  Bank  of  the  State  of  New  York  v.  Farmers'  Branch  of 
the  State  Bank  of  Ohio,  36  Barb.  332,  is  not  a  controlling 
authority ;  for  I  understand  it  has  been  reversed  by  the  Court 
of  Appeals  ;  arid  we  must  presume  that  the  court,  in  giving  that 
decision,  were  not  aware  that  the  point  had  been  often  decided 
the  other  wayT  It  is  not  to  be  supposed  that  any  learned 
justice  will  ever  again  lay  himself  open  to  such  imputations 
upon  his  professional  knowledge.  It  is  going  a  good  way, 
certainly,  to  uphold  the  third  form,  wherein  the  name  of  the 
corporate  principal  does  not  appear  at  all.  The  fact  of  what 
bank  the  indorser  was  cashier,  and  consequently  what  corpo- 
ration was  bound  by  his  signature,  must  be  shown  by  extrinsic 
evidence,  and  may  well  have  been  unknown  to  some  gecond  and 
even  of  the  holders  of  the  paper,  if  it  has  been  tiiird  forms, 
widely  negotiated.  But  the  adjudicated  cases  support  both 
forms  without  partiality.     Indeed,  they  almost  uniformly  dis- 

357 


§159 


THE   CASHIER. 


CUSS  only  this  third  form.  It  seems  as  though  the  second 
form  had  always  been  tacitly  admitted  to  be  good,  and  only 
the  third  had  held  out  hopes  enough  of  invalidity  to  encourage 
litigation. 

But  far  as  the  courts  have  gone  in  declaring  the  indorsement 
in  the  third  form  to  be  binding  as  the  indorsement  of  the  cor- 
Fourth  poration,  they  have  yet  much  further  to  go  if  they 

form.  ai-e  resolved  to  sustain  the  validity  of  the  fourth 

form  as  a  corporate  undertaking.  We  find  no  adjudicated 
case  which  directly  settles  this  point.  But  Judge  Denio,  in 
the  case  above  cited,  of  Bank  of  Genesee  v.  Patchin  Bank,!^ 
declared  that  it  was  "  essential  to  the  operation  of  the  rule  " 
(to  wit,  that  the  holder  might  supply,  in  the  second  and  third 
forms,  the  name  of  the  bank  in  such  shape  as  to  make  it  a 
principal  indorser),  "  that  the  authority  of  the  indorser  to  in- 
dorse for  the  corporation  and  to  bind  it,  in  full  and  due  form, 
should  positively  appear T  By  the  rule  of  §  154  h,  it  is  enough 
if  the  facts  make  this  authority  "  appear,"  whether  tlie  docu- 
ment indicates  it  or  not. 

({)  Countersigning,  as  for  example  of  the  bills  and  notes  of 
the  bank  intended  for  circulation,  may  unquestionably  be 
properly  done  by  the  cashier  in  the  third  form.  If  the  marks 
of  an  official  character,  in  whatsoever  shape  they  may  be, 
predominate  upon  the  instrument,  as  they  must  upon  these 
bills  or  notes,  they  are  sufficient  notice  to  third  parties. 
Especially  if  the  word  "  countersigned  "  be  written  or  engraved 
in  connection  with  such  signature,  it  will  be  enough. ^^ 

§  159.  Collection  of  Debts.  —  A  cashier  has  authority  vir- 
tute  officii  to  collect  debts  due  the  bank,  and  as  incidental 
thereto  he  may  receive  payment  (though  not  in  anything 
but  money  unless  by  authority  other  than  is  inherent),  deliver 
securities,  pledges,  and  evidences  of  the  debt  paid,  or  dis- 
charge a  mortgage,  give  the  debtor  a  release  or  receipt,  in- 
dorse and  transmit  notes  to  the  place  where  they  are  payable, 
see  that  protest  is  made  if  necessary,  and  proper  notice  sent, 

16  Bank  of  Utica  v.  Magher,  IS  Johns.  (N.  Y.)  341;  citing  Mechanics' 
Bank  v.  Bank  of  Columbia,  5  Wheat.  334. 

358 


COLLECTION   OF  DEBTS.  §  159 

and  employ  an  attorney  to  sue  for  the  debt.     But  has  no  in- 
herent power  to  compromise  a  claim. 

It  is  the  duty  of  the  cashier  to  superintend  the  collection 
of  debts  owing  to  the  bank,  and  to  make  up  the  accounts  of 
the  sums  due.     Payment  of  them  is  properly  made   ^^^^     .^,^ 
to  him  in  his  official  capacity,  and  discharges  the   r.  lease, or  re- 

.  turn  security, 

debtor,  even  though  the  cashier  subsequently  mis-  o^di^cllarge 
appropriates  the  money,  and  fails  to  bring  it  to  ac-  '""'^  ^^^^* 
count  in  the  bank.  Upon  the  receipt  of  payment,  the  cashier 
may  deliver  up  the  evidences  of  indebtedness  held  by  the  bank, 
may  execute  an  acknowledgment,  release,  or  acquittance  to  the 
debtor  if  need  be,  and  may  deliver  and  transfer  back  to  him 
any  pledge  or  collateral  security  given  by  him  to  the  bank.^ 

(a)  It  has  even  been  held  that,  where  the  borrower  had 
given  a  mortgage  of  real  estate  to  the  bank,  the  cashier  might 
legally  discharge  the  same  by  virtue  of  his  ordinary  author- 
ity. Or,  if  the  bank  has  bought  the  mortgaged  property  at 
sheriff's  sale,  the  cashier  may  assign  the  certificate  of  sale. 
It  makes  no  difference  though  the  instrument  may  require  to 
be  executed  under  the  corporate  seal.  The  party  who  has 
made  the  payment  is  entitled  to  the  discharge  or  assignment. 
In  seeking  to  obtain  it,  he  is  justified  in  dealing  with  the  prin- 
cipal business  officer  of  the  bank.^  After  all,  it  is  a  mere 
formal  act,  and  though  the  corporate  seal  may  be  required, 
yet  the  ordinary  assumption  of  the  importance  and  high  char- 
acter of  sealed  instruments  can  hardly  be  said  to  attach  to 
these  proceedings.  It  was  also  suggested  in  the  Bank  of  Ver- 
o-ennes  case,  that,  if  the  directors  alone  could  act  in  the  mat- 
ter,  they  might  practically  rob  the  payer  of  his  legal  rights, 
either  by  refusing  to  meet  at  all,  or  by  neglecting  to  take  ac- 
tion in  the  premises. 

This  power  of  the  cashier  is  based  upon  the  fact  that  he  is 
the  officer  having  the  responsible  charge  and  control  of  the 

1  §  159.  Concord  v.  Concord  Bank,  16  N.  H.  26;  Badger  v.  Bank  of 
Cumberland,  26  Me.  428;  United  States  v.  City  Bank  of  Columbus,  21 
How.  (U.  S.)  356. 

2  Ryan  v.  Dunlap,  17  111.  40;  Bank  of  Vergennes  v.  Warren,  7  Hill 
(N.  Y.),  91. 

359 


§  159  THE    CASHIER. 

entire  personalty  of  the  bank  for  all  ordinary  executive  pur- 
poses ;  though  if  any  portion  of  the  personalty  has  been 
withdrawn  from  his  charge  and  control,  and  devoted  to  any 
special  use  by  the  government,  as  where  the  directors  had 
deposited  a  mortgage  in  pledge  with  the  State  authorities,  the 
power  and  responsibility  of  the  cashier  cease  in  respect  of  the 
portion  thus  appropriated  by  his  superiors  in  control.*^ 

(i)  Wliatever  preliminaries  are  necessary  to  precede  a  valid 
demand  for  payment  of  money  owing  to  the  bank  should  be 
,  ,  attended  to  and  performed  in  due  shape  and  season 

Indnrsemeiit  _  '■  .  ' 

and  trans-  by  the  cashicr.  Such  are  the  indorsement  of  notes 
nines  for  payable  to  the  order  of  the  bank,  and  the  transrais- 
pajmen  .  ^.^^  ^£  them  to  proper  agents  in  time  for  demand  if 
they  are  payable  at  any  distant  place.  The  indorsement  must 
be  made  in  form  according  to  the  orders  of  the  directors  or  the 
established  usage  of  the  bank  in  its  dealings  with  the  agent 
to  whom  the  note  is  to  be  sent.  Thus,  it  may  be  an  indorse- 
ment in  blank,  an  order  to  pay  to  the  agent,  or  to  the  agent 
or  his  order,  or  to  the  agent  for  collection,  or  to  the  agent  or 
his  order  for  collection.  If  the  cashier,  whose  duty  and  au- 
thority it  is  to  make  the  indorsement  in  a  certain  one  of  these 
forms,  makes  it  in  another,  as  between  himself  and  the  bank 
it  is  a  breach  of  his  official  duty ;  and,  if  any  injury  result 
therefrom,  he  may  be  held  liable  in  damages. 

((?)  If  the  note  is  not  promptly  paid,  so  that  the  formalities 
of  protest  become  necessary,  it  is  the  duty  of  the 

Protest. 

cashier  to  see  that  the  note  is  duly  sent  to  the 
notary  with  proper  instructions.^  The  cashier  himself  may 
act  as  notary,  and  his  authority  is  not  lessened  even  although 
he  is  the  maker  of  the  note.'^" 

(fZ)  The  cashier  may  also,  it  has  been  said,  deliver  notes  to 
an  attorney  for  collection,  authorizing  the  institution  of  suits 
Authorized  upon  them,  if  it  be  necessary.^  In  this  case  the 
suit.  court  finally  propped  the  decision,  which  it  at  first 

8  Mitchell  V.  Cook,  29  Barb.  (N.  Y.)  243. 
*  Hartford  Bank  v.  Barry,  17  IMass.  94. 
*"  Dykman  v.  Northridge,  1  N.  Y.  App.  Div.  26. 
6  Eastman  v.  Coos  Bank,  1   N.  H.  23;   Young  v.  Hudson,  99  Mo. 
360 


COLLECTION    OF   DEBTS.  §  159 

inclined  to  render  upon  general  principles,  by  stating  that 
the  particular  cashier  had  been  shown  to  have  done  the 
same  thing  before,  and  always  with  the  knowledge  and  sanc- 
tion of  the  corporation  when  it  became  notified  of  his  action. 
But  other  decisions  make  it  undoubted  law  that  a  cashier 
may  employ  an  attorney  to  collect  a  claim  without  any  reso- 
lution of  the  board,  although  that  board  has  appointed  counsel 
to  attend  to  the  bank's  legal  affairs.  The  power  and  duty  to 
collect  a  debt  necessarily  include  authority  to  set  the  legal 
machinery  in  motion  to  accomplish  that  result.  For  many 
purposes  the  officers  and  agents  of  a  bank  may  em;)loy  per- 
sons to  perform  services  for  the  bank,  in  the  sphere  of  busi- 
ness that  belongs  to  the  agent,  and  it  has  been  often  declared 
that  a  managing  officer  or  cashier  may,  without  a  vote  of  the 
directors,  employ  counsel.^ 

The  cashier  cannot  appear  and  defend  suits  on  behalf  of  the 
bank.  Though  he  is  the  financial  officer,  and  in  charge  of  the 
books,  and  so  might  be  supposed  to  have  a  peculiar  knowl- 
edge in  the  matter,  he  cannot  answer  even  where  the  bank  is 
summoned  as  garnishee.'^  The  only  case  where  he  has  been 
allowed  to  take  any  part  whatsoever  in  legal  proceedings  is 
one  which  was  decided  in  Illinois,  wherein  his  appeal  was 
allowed  to  be  good  on  behalf  of  the  bank.^  This  single  case 
is  so  utterly  at  variance  with  the  general  and  uniform  cur- 
rent of  opinions  upon  the  subject  that  it  might  very  proba- 
bly be  expected  to  be  overruled.  Yet  it  does  not  seem 
unreasonable  to  sustain  the  views  of  the  New  Hampshire 
bench.^ 

102  (12  S.  W.  632).  But  he  cannot  authorize  an  attorney  to  assign 
claims. 

6  Root  V.  Olcott,  42  Hun  (X.  Y.),  .538  (1886);  Taylor  on  Private  Cor- 
porations having  Capital  Stock,  §  202.  To  the  same  effect,  see  American 
Ins.  Co.  V.  Oakley,  9  Paige  (X.  Y.),  49:3;  Peterson  v.  The  INIayor,  17 
N.  Y.  449;  Mumford  v.  Hawkins,  5  Denio  (N.  Y.),  355,  3-59  (1848); 
Bristol  Bank  v.  Keavy,  128  ]\Iass.  298;  Frost  v.  Domestic  Sewing  Machine 
Co.,  133  Mass.  563  ;  Western  Bank  v.  Gilstrap,  45  Mo  419;  Southgate  r. 
Atlantic  &  Pacific  Railroad,  61  id.  89,  94. 

7  Branch  Bank  v.  Poe,  1  Ala.  396. 

8  Moreland  v.  State  Bank,  1  Breese  (111.),  205. 

361 


§  159  .  THE    CASHIER. 

(e)  It  has  been  said,  that,  in  the  course  of  his  fulfil- 
ment of  his  duty  in  taking  all  proper  measures  for  secur- 
,,  ingr  the   eventual    collection  of    the  debt,  he  may 

Ma_v  com-  o  '  •' 

pn.iuise  in       j^ct  about  It  bv  Way  of  comiH-omise.^    In  the  New 

collection  of  »  ^  i  .  .  - 

debt  so  far  York  casc,  wide  discretionary  power  is  restricted 
sanctions  his  by  the  addition  of  the  requisition  that  his  action 
the  powerL  should  accord  with  usage  and  the  course  of  busi- 
not inherent,  j^ggg^  Unlcss  the  sainc  restriction  is  added  in  the 
Pennsylvania  case,  it  must  be  said  that  that  case  is  at  vari- 
ance with  general  principles,  which  it  cannot  be  potent  to  alter 
so  materially.  Without  these  words  it  must  be  simply  impossi- 
ble to  reconcile  these  decisions  with  those  which  have  been 
already  cited  as  conferring  upon  the  directors  the  power  of 
comproraising  claims  of  the  bank.  Evidently  the  power  is 
discretionary,  and  one  which  in  its  exercise  may  often  call 
for  considerable  reflection  and  a  high  degree  of  judgment. 
It  is  strictly  a  sacrifice  at  least  of  nominal  property  of  the 
bank.  Clearly  it  should  be  a  function  of  tlie  board,  and  not 
of  the  executive  officer.  The  cited  decisions  must  be  con- 
strued simply  to  intend  that  this  function,  though  properly 
directorial,  is  nevertheless  not  inalienably  so,  and  may  there- 
fore be  delegated  to  the  casiiier;  and  that  such  delegation 
may  be  conclusively  presumed  as  against  the  bank,  upon  proof 
that  the  usage  and  ordinary  course  of  business  in  the  bank  is 
to  that  effect.  Strictly  speaking,  this  is  all  that  the  cases 
really  decide,  and  it  is  obvious  that  they  should  not  be  care- 
lessly stretched,  as  if  they  announced  the  general  doctrine 
that  it  is  an  inherent  element  of  the  cashier's  general  au- 
thority to  compromise  on  behalf  of  the  bank  any  of  its  debts 
or  demands. 

In  a  later  case  the  New  York  Supreme  Court  said  that  a 
cashier  has  no  inherent  power  to  compromise  or  release  a 
claim  of  the  bank ;  such  business  calls  for  the  discretion 
which  belongs  inherently  only  to  the  board  of  directors. ^^ 

9  Bridenbecker  r.  Lowell,  32  Barb.  (N.  Y.)  9;  Bank  of  Pennsylvania 
r.  Reed,  1  Watts  &  S.  (Pa.)  101. 

1°  Chemical  National  Bank  v.  Kohner,  58  How.  Pr.  R.  (N.  Y.) 
2G7. 

362 


BORROWING.  §  160 

(/)   The  cashier  has  no  authority  to  settle  an  account  by 
taking  private  notes  and  drafts,  and  giving  a  receipt  in  full. 
That  involves  a  discretion  belonging  to  the  board,  ^o  inherent 
Parties    claiming  a    discharge    otherwise    than   by  takean'ything 
payment    must    show    the    cashier's    authority    to  ^^^  money, 
settle  with  them.^^ 

(_9')  It  is  within  the  general  authority  of  the  cashier  of  a 
bank  to  sign,  in  its  behalf,  a  blank  transfer  upon 

IVfixv  transfer 

a  certificate  of  stock  in  the  name  of  the  bank,  held   stock  held  as 

by  it  as  collateral  security  for  a  loan,  and  deliver 

the  certificate  to  the  pledgor  on  payment  of  the  loan.^^ 

§  160.  Borrowing.  —  The  cashier  has  inherent  power  to 
borrow  money  in  the  regular  course  of  the  business  of  the 
bank, and  may  secure  the  loan  by  note  or  pledge  of  the  bank's 
property. 

The  cashier  may  borrow  money  on  behalf  of  the  bank,  and 
may  bind  the  bank  by  a  promissory  note  executed  therefor.^ 
Such  is  the  usage  of  the  banking  business;  though,  if  in  any 
individual  institution  any  other  officer  is  selected  for  this  duty, 
tlie  cashier  could  no  longer  bind  the  bank  to  any  lender  who 
was  aware  of  the  variation.  The  right  of  borrowing  is  a 
function  of  which  he  will  be  wholly  deprived  by  the  act  of 
tlie  directors  in  selecting  any  other  person  as  their   ifthedirec- 

tors  restrict 

general  borrowing  agent.     But  the  usage  to  allow   him,  thev 
him  to    borrow  is  so  universal,  that  notice  of  the   thrpubiicf 

^1  Sandy  River  Bank  v.  Merchants'  Bank,  1  Bissell,  146.  The  cashier 
cannot,  without  express  authority,  take,  in  payment  of  a  note  held  by  the 
bank,  a  verbal  assignment  of  an  interest  in  another  note  already  held  by 
another  bank  as  collateral  security.  Piedmont  Bank  v.  Wilson,  124  N.  C. 
.561  (32  S.  E.  889)  (1899).  Nor  can  he  accept  in  payment  of  a  debt  due 
the  bank,  certificates  of  the  capital  stock  of  an  insurance  company.  Bank 
of  Commerce  v.  Hart,  37  Neb.  197  (55  N.  W.  631)  (1893)  ;  IMerchants' 
Bank  v.  Rudolf,  5  Neb.  527. 

^'^  Matthews  v.  Massachusetts  National  Bank,  1  Holmes,  396  (1874, 
U.  S.) 

1  §  160.  Barnes  v.  Ontario  Bank,  19  N.  Y.  1.52;  Ballston  Spa  Bank  v. 
Marine  Bank,  16  Wis.  120;  Sturges  v.  Bank  of  Circleville,  11  Ohio  St. 
153;  Ridgway  v.  Farmers'  Bank,  12  Serg.  &  R.  (Pa.)  256;  City  National 
Bank  v.  Chemical  National  Bank,  80  Fed.  859  (1897). 

363 


§  161  THE    CASHIER. 

The  cashier's    deprivation  must  he  hrouqlit  home  to  any  person  who 

power  only  ,   -^  _      "^  . 

covers  loans     is  to  he  affected  hy  it.     Otherwise  the  pubUc    are 

to  his  bank  i_     ^     •        -i       ^^  •  ,^     ^   •  i  1 

in  course  of  Warranted  in  dealing  with  him  on  the  assumption 
that  he  possesses  it.  The  power  extends  only  to 
borrowing  in  the  ordinary  course  of  the  daily  business  of  the 
bank.  For  example,  if  the  bank  be  behindhand  at  the  clear- 
ing-house, the  cashier  may  properly  borrow  of  any  bank  which 
has  a  surplus,  giving  in  return  his  check  or  memorandum  for 
the  amount,  and  agreeing  to  pay  the  customary  rate  of  interest. 
But  he  cannot  borrow  simply  for  the  purpose  of  increasing  the 
available  funds  of  the  bank,  so  that  in  effect  its  disposable 
working  capital  shall  be  increased.  This  is  exercising  a  dis- 
cretionary control  over  its  affairs  which  none  but  the  directors 
possess.  Neither  in  any  case  can  he  borrow  money  to  use 
for  other  than  strictly  banking  purposes. 

(a)  A.  borrowed  money  in  the  bank's  name,  he  being  cash- 
ier, and  appropriated  it  to  his  own  use.  The  bank  denied  his 
May  borrow  authority,  and  the  holder  of  the  note  introduced 
u"a*™jusa-  evidence  of  the  custom  of  bankers  in  the  vicinity 
fiesit.  to  borrow    money  on    time,  which    was  admitted, 

thereby  bringing  the  act  within  the  cashier's  inherent  powers, 
as  being  a  part  of  the  ordinary  routine  of  business.  Evidence 
of  other  fraudulent  drafts  drawn  by  the  cashier  on  other  banks 
was  held  not  admissible,  unless  the  payee  knew  of  them  before 
making  the  loan  in  question,  as  otherwise  he  was  not  misled 
thereby  .2 

ih)  A  cashier  having  power  to  effect  a  loan  may  (in  the 
Pledge.  absence  of  statutory  restraint  and)  in  the  ordinary 

course  of  business  secure  the  loan  by  pledge  of  the 
property  or  funds  of  the  bank.^ 

§  161.  Deposits. —  The  cashier  is  the  proper  officer  to  receive 
deposits,  and  give  certihcates  of  deposit  or"  other  vouchers."  ^ 

2  Grain  v.  First  National  Bank  of  Jacksonville,  114  111.  51G  (1885). 

8  Coats  V.  Donnell,  94  X.  Y.  170. 

1  §  ICl.    ]\Ierchants'  Bank  v.  State  Bank,  10  Wall.  604  ;  I/Herbette  v. 

Pittsfield  National  Bank,  162  Mass.    1:57  (--JS  N.  E.  368)   (1891);   White 

r.  Franklin  Bank,  22  Pick.  (Mass.)   181  ;   Atlas  Rank  v.   Nahant  Bank, 

3  Met.  (Mass.)  581 ;  Dill  v.  Wareham,  7  Met.  (Mass.)  438;  Morville  v. 

361 


TRANSFER   OF   SHARES.  §  163 

And  in  him  rests  the  power  to  accept  or  refuse  the  account 
of  one  wlio  wishes  to  become  a  depositor,'^  though  his  decision 
may  be  overruled  by  action  of  the  directors. 

§  1G2.  The  Correspondence  of  the  Bank.  —  The  cashicr  has 
charge  of  the  correspondence  of  the  bank.  Letters  on  cor- 
porate business  are  properly  addressed  to  him,  and  whatever 
statements  or  information  are  contained  in  them  will,  in  law, 
affect  the  bank  with  notice.  If  the  subject  written  about  is 
one  in  which  he  lias  no  authority  to  act,  or  no  duty  to  per- 
form, it  is  nevertheless  his  duty  to  communicate  the  contents 
of  the  letter  to  the  officials  within  whose  province  the  subject 
matter  falls.  It  is  his  duty  to  see  that  the  information  con- 
tained in  the  letter  is  promptly  laid  before  the  proper  person. 
A  cashier  has  no  power  to  contract  for  the  bank,  but  if  the 
negotiations  concerning  a  proposed  contract  are  conducted  by 
letters,  he  properly  writes  and  receives  these,  and  the  assent 
of  the  third  party  to  the  propositions  of  the  bank,  expressed 
by  him  in  a  letter  written  to  the  cashier,  affects  the  bank,  and 
completes  the  legal  contract.^ 

§  163.  Transfer  of  Shares.  —  The  cashier  properly  makes  or 
superintends  the  transfer  of  shares.  Any  person  showing 
prima  facie  a  legal  right  to  demand  a  transfer  to  himself, 
may  demand  it  from  the  cashier,  or  from  any  other  principal 
officer  left  in  general  charge  and  superintendence  of  the  busi- 
ness of  the  banking-house.  Any  officer  who  can  properly 
make  the  transfer  at  all  will  be  protected  in  making  it,  with- 
out going  behind  the  apparent  legality  and  propriety  of  the 
demandant's  right,  in  order  to  determine  whether  or  not  there 
is  any  hidden  cause  for  objecting  to  it.^  A  prima  facie  title 
is  enough.  As,  if  one  who  has  bought  shares  sold  by  the 
State  assessor  for  taxes  asks  for  a  certificate  for  them,  the 

American  Tract  Society,  123  Mass.  129  ;  Davis  v.  Old  Colony  Railroad, 
131  Mass.  258  ;  Ellerbe  v.  National  Exchange  Bank,  109  IMo.  445. 

2  Thatcher  v.  Bank  of  State  of  Xew  York,  5  Sandf.  (N.  Y.)  121. 

1  §  162.  New  Hope  &  Delaware  Bridge  Co.  v.  Phoenix  Bank,  3  Comst. 
(N.  Y  )  166  ;  Branch  Bank  v.  Steele,  10  Ala.  915. 

1  §  163.  Smith  v.  Northampton  Bank,  4  Cush.  (Mass.)  1  ;  Commer- 
cial Bank  of  Buffalo  v.  Kortright,  22  Wend.  (N.  Y.)  348. 

305 


§  165  THE   CASHIER. 

cashier  is  not  only  justified  in  giving  it,  but  it  is  even  his  duty 
to  do  so,  and  the  bank  cannot  subsequently  be  held  liable  on 
the  ground  of  any  original  irregularity  which  should  have  alto- 
gether prevented  the  making  of  the  sale. 

§  164.  Government  Bonds.  —  Cashier  may  agree  for  the 
bank  to  buy  government  bonds.  In  all  transactions  in  which 
the  bank  may  lawfully  engage,  the  cashier  is  the  executive 
agent,  and  a  verbal  understanding  of  the  directors  will  not 
limit  his  authority  as  between  the  bank  and  third  persons, 
when  his  acts  over  the  counter  are  of  a  public  character,  and 
numerous  and  long  continued. 

If  the  directors,  through  inattention  or  otherwise,  suffer  the 
cashier  to  pursue  a  line  of  conduct  for  a  considerable  period 
without  objection,  the  bank  is  bound. ^ 

§  165.  Special  Authority.  —  Beyond  his  inherent  powers  the 
cashier  may  be  authorized  to  act  for  the  bank,  by  the  organic 
law,  by  action  of  the  stockholders,  by  vote  of  the  board  or 
their  verbal  order,  by  usage  and  tacit  approval,  and  by  neces- 
sity or  emergency  calling  for  action  manifestly  to  the  interest 
of  the  bank. 

The  last  section  closes  the  list  of  the  powers  and  duties 
which  the  cashier  may  exercise  simply  by  virtue  of  his  office, 
and  within  the  scope  of  which  he  may  bind  the  bank  by  reason 
of  his  being  held  out  to  the  world  as  cashier,  and  as  entitled 
to  fulfil  all  the  ordinary  and  inherent  functions  of  that  office. 
Outside  those  limits,  however,  there  are  great  numbers  of 
acts  which  are  frequently  undertaken  by  cashiers,  which  are 
strictly  consistent  with  the  nature  of  their  office,  and  w^hich 
are  properly  allotted  to  them  for  performance.  Within  this 
wide  classification  may  be  included  everything  of  an  execu- 
tive character,  and  many  matters  partially  discretionary,  or 
discretionaay  within  certain  limits,  so  that  in  delegating 
power  over  them  the  directors  do  not  in  fact  part  with  any 
governmental  authority,  or  divest  themselves  of  the  perform- 
ance of  any  inalienable  duty. 

(a)  That  corporate  agents,  especially  agents  having  such  large 

1  §  164.  Caldwell  v.  National  Mohawk  Valley  Bank,  6i  Barb.  (X.  Y.) 
333. 

366 


SPECIAL    AUTHORITY.  §  1G5 

and  important  general  powers  as  are  enjoyed  by  bank  cashiers, 
should  be  allowed  some  degree  of  latitude  of  discretion  is  in- 
evitable, and,  within  reasonable  limits,  is  desirable.^  Exercise  of 
But  the  power  to  exercise  discretion,  excej)t  in  '^'scretion. 
comparatively  unimportant  matters  of  routine,  should  be  dis- 
tinctly conferred  by  the  directors,  or  very  clearly  proved  by 
custom.  Even  if  it  be  thus  conferred  or  proved,  it  will  be  up- 
held only  upon  the  condition  that  it  is  not  a  material  encroach- 
ment or  usurpation  upon  the  governmental  province.  It  has 
already  been  seen  that  of  their  obligations  and  responsibilities 
of  this  high  nature  the  directors  cannot  strip  themselves  if 
they  would.  They  are  entitled  to  abdicate  only  by  means  of 
a  direct  and  formal  resignation. 

(6)  But  if  the  act  which  the  cashier  assumes  to  perform  is 
one  intrinsically  perfectly  proper  to  be  committed  to  his  charge, 
the  law  will  presume  in  favor  of  a  third  party  deal- 

>■  .  The  law  pre- 

ing  with  him  that  he  was  duly  autliorized  to  per-  sumes  legu- 
form  it.  The  presumption  is  not  conclusive,  and  ^"  ^' 
may  be  rebutted.  The  third  party  simply  makes  out  a  ])Tima 
facie  case,  which  the  bank  may  destroy  by  showing  that  neither 
a  directorial  resolution  nor  any  usage  had  justified  the  cashier 
in  his  assumption  of  power.^  In  fact,  the  third  party  relies  upon 
the  character  of  the  cashier,  and  trusts  that  that  officer,  doing 
an  act  which  he  may  fairly  be  supposed  to  be  enabled  to  do,  is 
in  trutli  acting  regularly  and  under  authority  of  some  suffi- 
cient description.  If  he  is  deceived  in  this  his  trust,  it  can 
only  be  said  that  he  voluntarily  ran  a  risk  in  relying  solely 
on  the  cashier's  assumption,  and  that  he  must  suffer  the 
consequences  of  having  neglected  to  assure  himself  from 
more    accurate  sources.      The  tendency  of  the  courts  is  al- 

1  §  165.    Stamford  Bank  v.  Benedict,  15  Conn.  437. 

2  State  V.  Commercial  Bank,  6  Sm.  &  M.  (Miss.)  218;  Commercial 
Bank  of  Buffalo  v.  Kortright,  22  Wend.  (X.  Y.)  318;  Lovett  v.  Steam 
Saw  Mill  Association,  6  Paige  (X.  Y.),  51;  Payne  v.  Commercial  Bank, 
6  Sm.  &  M.  (Miss.)  24  ;  Bank  of  Vergennes  v.  Warren,  7  Hill  (N.  Y.), 
91 ;  Harper  v.  Calhoun,  7  How.  (Miss.)  203.  In  fact,  it  may  be  said  that 
a  very  large  proportion  of  all  the  cases  cited  in  discussing  the  powers  and 
duties  of  cashiers  indirectly  support  this  point.  Regularity  and  legality 
are  always  assumed. 

367 


§  165  THE    CASHIER. 

ways,  where  an  innocent  party  has  been  deceived  by  a  cashier, 
to  sustain  the  favorable  presumption  of  the  law,  if  it  can 
be  done  ;  but  they  cannot  disregard  or  overrule  positive  proof 
against  it. 

(c)  Power  may  be  conferred  upon  the  cashier  by  a  resolu- 
tion, general  in  its  terms,  and  not  requiring  to  be  repeated  when 
.    ,    .  each  specific  occasion  for  the  exercise  of  the  power 

Autnontv  '  , 

by  vote,"  comcs  up.'^  But  proof  that  no  resolution  was  ever 
usase,  or  '  passcd  by  the  board  in  the  premises  docs  not  suffice 
quiescence.  ^^  rcbut  the  presumptiou  aforesaid.  Tbis  is  only 
one  of  the  props  on  which  it  is  assumed  to  rest.  Verbal 
directions  from  the  board  are  amply  sufficient.  Usage  and 
tacit  approval  still  remain  as  possible  or  probable  supports.^ 
All  these  must  be  negatively  disproved  before  the  burden  is 
shifted  upon  the  shoulders  of  the  innocent  dealer  or  contrac- 
tor.^ Neither  need  the  usage  be  specific  in  its  character,  nor 
confined  to  acts  of  precisely  the  same  description  as  the  one 
in  question.  If  the  directors  have  for  many  years  allowed 
the  cashier  to  do,  without  interference,  all  the  business  of  the 
bank,  they  are  held  thereby  to  have  conferred  upon  him 
authority  to  do  anything  and  everything  on  the  corporate  be- 
half which  the  charter  or  law  does  not  absolutely  prohibit  and 
forbid  a  cashier  to  do,  and  so  render  illegal  under  all  circum- 
stances. If  the  cashier  has  a  power  so  wide  and  liberal  as 
this,  it  is  needless  to  prove  a  usage  to  do  any  particular  act 
which  he  may  have  undertaken.  If  the  act  does  not  fall 
within  the  limits  of  unavoidable  and  inherent  illegality,  it  is 

8  Elwell  V.  Dodge,  33  Barb.  (X.  Y.)  336 ;  Ilowland  v.  Myer,  3  Comst. 
(N.  Y.)  290;  Gillett  v.  Campbell,  1  Den.  (X.  Y.)  520  ;  Bank  of  Vergeunes 
V.  AVarren,  7  Hill  (X.  Y.),  91. 

*  Caldwell  v.  National  Mohawk  Valley  Bank,  64  Barb.  (N.  Y.)  333  ; 
Whitney  v.  Foster,  117  Mich.  613  (76  X.  W.  114)  (1898).  Wliere  the 
cashier,  in  addition  to  his  usual  duties,  is,  in  the  absence  of  the  president, 
running  the  bank  under  the  advice  of  the  executive  committee,  he  has 
authority  to  bind  the  bank  by  a  contract  to  renew  notes,  in  consideration 
of  the  release,  by  the  iadorser,  of  a  lieu  on  the  maker's  property.  Bank 
of  Commerce  v.  Bright,  77  Fed.  949  (1896). 

5  Bank  of  Vergeunes  r.  Warren,  7  Hill  (X.  Y.),  91  ;  Stamford  Bank  v. 
Benedict,  15  Conn.  437. 

368 


AUTHORITY   BY   NECESSITY.  §  165 

valid,  and  binds  the  bank,  though  a  precisely  similar  act  may 
never  before  have  been  undertaken  by  the  cashier  since  the 
creation  of  the  institution.^  This  doctrine  is  certainly  a  lib- 
eral one  towards  innocent  outsiders.  One  case,  and  only  one 
case,  appears  to  have  gone  farther.  In  Pennsylvania,^  the 
court  were  discussing  the  power  of  the  cashier  in  relation  to 
the  collection  of  debts  owing  to  the  bank.  They  declared 
that  he  had  power  to  compromise,  —  a  ruling  which  has  been 
already  discussed,  and  which  certainly  was  going  pretty  far. 

((^)  They  then  laid  down  this  remarkable  position,  that  in 
particular  cases  his  authority  may  be  extended  by  the  nature 
of  his  agency  and  by  implication  arising  therefrom,  Authority  by 
according  to  the  pressure  of  circumstances  in  the  necessity, 
business  in  hand;  and,  in  reference  to  the  facts  under  consid- 
eration, they  were  of  opinion  that  the  "  necessity  "  of  doing 
the  act  conferred  upon  the  cashier  the  power  to  do  it,  which 
otherwise  he  would  not  have  possessed.  There  is  certainly 
sound  reason,  and  probably  sound  law,  in  the  doctrine  that 
stringent  necessity  growing  out  of  the  unmistakable  interests- 
of  the  bank  may  sometimes  justify  a  cashier  in  doing  on  its 
behalf  some  act  which,  in  the  absence  of  the  emergency,  he 
could  not  properly  do  ;  provided  —  and  it  is  an  essential  pro- 
viso—  the  act  be  strictly  consistent  with  "  the  nature  of  his 
agency."  If  the  language  of  the  court  is  to  be  construed  as 
advancing  only  the  principle  that  extraordinary  cases  may 
arise  in  which  the  courts  will  sustain  the  cashier  in  an  act 
dictated  by  an  obvious  and  imperative  necessity,  which  he 
could  legally  perform  under  the  authority  of  a  usage  or  a  di- 
rectorial vote,  and  which,  it  must  be  presumed,  the  directors 
would  unquestionably  have  authorized  him  to  perform  had 
they  had  warning  of  the  need,  and  therefore  had  opportunity 
to  act,  —  if  this  is  what  is  intended,  the  doctrine  is  in  the  in- 
terest of  justice  and  common  sense,  and  may  well  be  adopted 
into  the  body  of  legal  principles.  But  if  the  theory  was  ad- 
vanced that  whatever  seems  necessary,  in  the  liberal  interpre- 
tation of  that  flexible  word,  to  be  done,  may  be  legally  done 

6  City  Bank  v.  Perkins,  4  Bosw.  420 ;  29  N.  Y.  554. 
1  Bank  of  Pennsylvania  v.  Reed,  1  Watts  &  S.  (Pa.)  101. 
VOL.  I. —  24  369 


S  166  THE    CASHIER. 

by  a  cashier  simply  by  virtue  of  that  necessity,  that  the  power 
grows  out  of  the  circumstances  of  the  particular  case,  it  is 
bad  in  law  and  mischievous  in  fact.  No  decision  of  any  other 
bench,  no  language  of  any  other  judge,  recognizes  the  exist- 
ence of  any  such  shifting  and  utterly  indefinite  test  of  the 
powers  of  a  cashier.  To  admit  it  would  simply  be  to  intro- 
duce complete  uncertainty,  and  to  encourage  litigation.  Few 
men  would  abandon  without  an  effort  the  chance  of  persuad- 
ing a  jury  that  it  was  in  fact  quite  "  necessary  "  for  the  cashier 
to  deal  as  in  fact  he  had  dealt. 

"  It  is  the  practice  for  the  cashier  of  a  bank  in  pressing 
emergencies  to  rediscount  the  bills  and  notes  of  the  bank,  to 
raise  money  to  pay  depositors  and  meet  other  de- 
jf.Sedby  mands  of  the  bank.  But  this  is  only  done  on 
ilmbrf"  extraordinary  occasions,  and  when  the  require- 
^^°'^-  ments  are  such  as  do  not  admit  of  delay.     It  is  cus- 

tomary, wherever  it  can  be  done,  to  consult  the  directors,  and 
obtain  their  consent  to  make  such  rediscounts.  It  is  a  mat- 
ter wliich  does  not  come  within  the  ordinary  duties  of  the 
cashier,  and  is  not  one  of  liis  inherent  powers  ;  but  inasmuch 
as  it  is  a  power  which  is  exercised  by  him  under  some  cir- 
cumstances, a  transfer  of  such  bills  and  notes  made  by  him 
in  the  usual  course  of  the  business  of  the  bank  te  a  person 
who  has  no  right  to  doubt  the  propriety  of  the  transfer,  or  to 
question  its  good  faith,  will  be  prima  facie  valid,  and  vest  a 
good  title  in  the  transferee.  The  validity  of  the  transfer  in 
such  case  will  be  sustained  upon  the  ground  that  the  trans- 
feree had  a  right  to  presume  that  the  cashier  had,  from  the 
board  of  directors,  either  an  express  or  implied  authority  to 
make  the  transfer,  and  not  because  he  had,  by  virtue  of  his 
office,  inherent  power  to  do  so."  ^ 

§  166.  Notice  to  and  Knowledge  of  Cashier. — Notice  to  the 
cashier  that  stock  pledged  is  trust  property  is  notice  to  the 
bank.i     Where  a  loan  was  made  by  the  bank  to  a  trustee, 

8  Iloyt  V.  Thompson,  1  Seld.  (N.  Y.)  320  ;  Hartford  Bank  v.  Barry, 
17  Mass.  97;  Smith  v.  Lawsou,  18  W.  Va.  212;  Lamb  v.  Cecil,  28  W. 
Va.  659,  660. 

1  §  166.   Duncan  v.  Jaudon,  15  Wall.  165. 

370 


DECLARATIONS   AND   ADMISSIONS.  §  1^7 

who  furnished  collateral  securities  which  the  cashier  at  the 
time  Ivuew  to  belong  to  the  trust  funds,  it  was  held  that  the 
bank  was  chargeable  with  the  knowledge  of  the  cashier,  and 
was  put  upon  its  inquiry  as  to  whether  the  trustee  had  authority 
to  make  this  use  of  these  securities.^ 

Notice  received  or  knowledge  acquired  by  the  cashier  of  a 
bank  while  engaged  in  the  transaction  of  business  according 
to  the  usage  and  practice  of  banking  institutions,  is  notice  to 
and  knowledge  of  the  bank.^ 

But  the  cashier's  knowledge  of  his  own  intention  to  com- 
mit fraud  cannot  be  imputed  to  the  bank."* 

§  167.  Declarations  and  Admissions.  —  A  cashier  has  no 
power   by  his   representations   to   raise   any  obligation  that 

2  Loring  v.  Brodie,  134  Mass.  453. 

3  Birmingham  Trust  Co.  v.  Louisiana  National  Bank,  99  Ala.  379  (13 
So  112)  (1892);  Br.  Bank  v.  Steele,  10  Ala.  915;  Bank  v.  Penland,  101 
Tenn.  445  (47  S.  W.  693)  (1898)  ;  National  Bank  v.  Stever,  169  Pa.  St. 
574  (32  Atl.  603) ;  Niblack  v.  Cosier,  74  Fed.  1000  ;  Witters  v.  Sowles, 
32  Fed  762. 

Where  the  cashier  of  a  bank,  which  holds  a  note  against  third  parties, 
is  also  trustee  for  such  third  parties,  he  is  charged,  as  cashier,  with 
knowledge  of  instructions  received  by  him  as  such  trustee,  and  his  knowl- 
edge as  cashier  is  the  knowledge  of  the  bank.  Stebbins  v.  Lardner, 
2  S.  D.  127  (48  N.  W.  847)  (1891). 

AVhere  the  cashier  represents  in  a  transaction,  not  only  the  bank,  but 
a  third  party,  for  whom  he  is  agent,  the  bank  is  impressed  with  all  the 
knowledge  of  the  cashier  as  to  the  mala  fides  of  the  transaction.  Leon- 
ard V.  Latimer,  67  Mo.  App.  138. 

Where  the  cashier  has  notice  that  a  person  with  whom  the  bank  does 
business  is  incompetent,  his  knowledge  binds  the  bank  even  though  the 
notice  did  not  come  to  the  cashier  while  engaged  in  his  duties.  Brothers 
V.  Bank,  84  Wis.  381  (54  N.  W.  786)  ;  Walker  v.  Grand  Rapids  Co.,  70 
Wis.  92  (35  N.  W.  332);  Dresser  v.  Norwood,  17  C.  B.  n.  s.  466;  The 
Distilled  Spirits,  11  Wall.  356  ;  Hovey  v.  Blanchard,  13  N.  H.  145;  Pat- 
ten V.  Merchants'  Ins.  Co.,  40  N.  H.  375;  Hart  v.  Bank,  33  Vt.  252  ; 
Holden  v.  N.  Y.  Bank,  72  N.  Y.  286  ;  Fulton  Bank  v.  N.  Y.  &  S.  C.  Co., 
4  Paige,  127. 

Where  a  cashier  has  notice  that  a  check  taken  by  the  bank  has  been 
obtained  by  fraud,  the  bank  is  chargeable  with  his  knowledge.  Mer- 
chants' National  Bank  v.  Tracy,  77  Hun  (N.  Y.),  443. 

*  Indian  Head  National  Bank  v.  Clark,  166  Mass.  27  (43  N.  E.  912) 
(1896). 

371 


§  167  THE   CASHIER. 

would  amount  to  a  contract  which  it  is  beyond  his  authority 
to  make  directly  and  formally.  He  cannot  alter  the  effect 
of  an  indorsement  by  a  representation  that  the  indorser  will 
not  be  looked  to,  nor  bind  the  bank  in  any  way  by  a  decla- 
ration which  would  not  bind  him  if  he  was  the  principal 
instead  of  an  agent  in  the  matter.  Nor  can  he  establish  the 
extent  of  his  authority  to  do  business  by  his  own  represen- 
tations. 

But  so  far  as  he  is  expressly  authorized  by  the  bank  or  the 
board  to  make  representations,  and  so  far  as  his  declarations 
are  made  in  the  course  of,  and  pertain  to,  business  in  which 
his  acts  are  the  acts  of  the  bank,  so  far  his  declarations  and 
admissions  (under  the  principles  of  §  103)  are  the  acts  of  the 
bank,  and  have  the  same  effect  as  if  made  by  the  principal 
under  the  same  circumstances. 

The  cashier  can  bind  the  bank  by  his  declarations  or  admis- 
sions only  when  his  power  to  do  so  is  a  direct  and  necessary 
implication  from  the  other  powers  confided  to  him  by  the 
bank.  His  authority  to  declare  or  admit  is  strictly  incidental, 
never  original.  When,  however,  the  statements  satisfy  these 
requirements,  they  may  be  given  in  evidence  for  or  against 
the  bank  with  the  like  effect  as  the  authorized  admissions  or 
declarations  of  any  other  agent  may  be  given  for  or  against 
his  principal ;  and  they  will  be  conclusive,  or  open  to  explana- 
tion or  to  rebuttal,  according  to  the  same  general  rules.  It  is 
likewise  necessary,  not  only  that,  so  far  as  tiie  intrinsic  nature 
of  the  admission  or  declaration  is  concerned,  the  cashier 
might  bind  the  bank  by  it,  but  also  that  he  shoi_ld  make  it 
officially,  and  with  the  expressed  or  obvious  intent  actually  to 
bind  the  bank  by  it.  Thus  he  may  bind  the  bank  by  state- 
ments officially  made  in  relation  to  the  sale  of  bills  of  ex- 
change or  drafts,^  the  business  of  selling  and  negotiating 
them  being  within  his  province.  His  declaration  that  stock 
pledged  with  the  bank  is  held  in  trust  for  a  third  person  may 
be  given  in  evidence  against  the  bank  to  prove  notice  of  the 
trust ;  2  it  being  his  duty  to  take  charge  of  all  the  property  be- 

1  §  167.   Sturges  v.  Bank  of  Circleville,  11  Ohio  St.  153. 

2  Hairiaburg  Baiik  v.  Tyler,  3  Watts  &  S.  (Pa.)  373. 
372 


DECLARATIONS.  §  167 

longing  or  pledged  to  the  bank,  to  know  by  what  title  and  in 
what  capacity  the  bank  holds  the  various  items,  and  to  keep 
them  duly  ear-marked. 

On  the  other  hand,  it  can  never  be  pretended  that  he  has 
any  incidental  powers  to  bind  the  bank  by  declarations  or 
admissions  which  are  made  beyond  the  scope  of  his  duties. 
Thus,  his  statement  or  promise  given  to  a  person  who  is  about 
to  put  his  name  as  indorser  upon  a  note  which  the  bank  has 
agreed  to  discount,  to  the  effect  that  such  person  will  not  be 
held  liable,  or  sliall  not  be  looked  to  by  the  bank,  is  altogether 
inoperative  and  void  as  an  undertaking  of  the  bank.  For  so 
far  as  the  business  of  discounting  is  concerned,  the  cashier's 
sole  power  and  function  is  to  pay  over  the  money  upon  the 
discounted  notes.  Collateral  contracts  or  agreements  of  any 
nature  are  altogether  beyond  the  range  of  his  employment. 
Declarations  or  admissions  in  the  nature  of  such  contracts  are 
equally  beyond  his  province,  and  consequently  equally  value- 
less with  the  contracts  themselves.^ 

(a)  Payment  made  by  the  cashier  upon  a  check  bearing  the 
forged  name  of  a  depositor,  or  by  way  of  redeeming  bills  or 
notes  falsely  purporting  to  be  those  of  the  bank,  is  the  pay- 
ment of  the  bank.  It  is  an  act  within  the  scope  of  the  cashier's 
authority,  and  cannot   subsequently  be  either   re-   ,^       ,    . 

•'  '  .       .  No  authority 

called  or  repudiated.     He  is  intrusted  by  the  bank   to  answer 
with  the  duty  of  deciding  upon  the  genuineness  of  tothegenu- 
such  paper  when  it  is  presented  for  payment  or  re-  p"p"r^^ex- 
demption.     But  if  such  paper  is  shown  to  him,  not    ap^s^fp^v. 
for  the  purpose  of  demanding  payment  thereon,  but   mentorcer- 
simply  to  inquire  whether  or  not  it  be  genuine,  his   But  see  be- 
erroneous  answer  that  it  is  so  will  not  bind  the 
bank  as  an  admission.     For  it  is  not  his  function  to  give  such 
information.     The  bank  does  not  intend  that  he  should  do  so, 
or  hold  him  out  as  competent  to  do  so.     When  payment  is 

*  Bank  of  the  Metropolis  v.  Jones,  8  Pet.  12;  Bank  of  the  United 
States  V.  Dunn,  6  id.  51  ;  Harrisburg  Bank  v.  Tyler,  3  Watts  &  S.  (Pa.) 
373 ;  Merchants'  Bank  v.  Marine  Bank,  3  Gill  (Md),  96  ;  Cochecho 
National  Bank  v.  Haskell,  51  N.  H.  116 ;  Goodbar  v.  National  Bank,  78 
Tex.  461  (U  S.  W.  851)  (1890). 

373 


R   167  THE    CASHIER. 

demanded,  it  is  an  inevitable  necessity  that  some  officer 
should  decide  whether  or  not  the  paper  is  what  it  purports  to 
be,  and  this  necessity  the  bank  can  in  no  way  avoid,  without 
destroying  the  possibility  of  banking  business.  But  to  answer 
all  questions  which  may  be  put  concerning  the  genuineness  of 
the  paper  is  quite  another  thing.  The  same  necessity  does 
not  exist  for  this,  and  the  bank  is  accordingly  presumed  to 
refuse  altogether  to  assume  gratuitously  a  task  of  such  dan- 
gerous responsibility.  Therefore,  if  the  cashier  undertakes 
to  answer  such  interrogatories,  his  act  is  wholly  beyond  the 
scope  of  any  authority  given  him  by  the  bank,  and  ought  to 
be  known  by  all  persons  to  be  so.  The  declaration  is  impo- 
tent to  conclude  the  bank.  Practically,  if  it  were  allowed 
binding  force,  it  would  amount  to  allowing  the  cashier  to  give 
a  valid  promise  on  behalf  of  the  bank  to  pay  what  the  bank 
does  not  in  fact  owe ;  a  power  which  even  the  directors  could 
rightfully  exercise  only  in  extraordinary  cases,  if  ever.  The 
difference  between  a  payment  actually  made,  though  by  mis- 
take, and  an  executory  agreement  to  pay,  or  acknowledg- 
ment of  the  sufficiency  of  the  order  calling  for  payment,  made 
under  the  same  mistake,  is  certainly  wide  enough  to  admit  of 
this  corresponding  difference  in  the  respective  validity  of  the 

two  acts.* 

(6)  If  a  party  presents  a  check  drawn  on  a  bank  to  its 
cashier  for  information,  and  the  cashier  says  it  is 
aXasTo^'  "  good,"  the  bank  is  bouud  by  such  answer  as  to 
feid'binding  the  genuineness  of  the  drawer's  signature,  and  as 
u.  s.  s.  c.  ^^  ^^g  sufficiency  of  his  funds,  but  not  as  to  the 
genuineness  of  the  filling  in.^ 

And  it  is  bound  in  spite  of  the  fact  that  the  cashier  knew 
there  were  no  funds,  if  the  party  to  whom  he  makes  the  asser- 
tion has  no  notice  of  its  falsity .«     It  is  part  of  the  cashier's 

*  Bank  of  the  United  States  v.  Bank  of  Georgia,  10  Wheat.  333 ; 
Salem  Bank  v.  Gloucester  Bank,  17  Mass.  1 ;  Merchants'  Bank  r.  Marine 
Bank,  3  Gill  (Md.),  96;  Farmers  &  Mechanics'  Bank  v.  Troy  City  Bank, 
1  Dougl.  (Mich.)  457. 

6  Ep.sy  V.  Bank  of  Cincinnati,  18  Wall.  604  (U.  S.) 

6  Farmers  &  Mechanics'  Bank  v.  Butchers  &  Drovers'  Bank,  16  N.  Y. 
125;  Credit  Co.  v.  Howe  Co.,  54  Conu.  357  (1887). 
374 


DECLARATIONS.  §  167 

business  to  give  information  to  checkholders  as  to  the  funds 
of  the  drawer.  And  the  admission  by  a  cashier  that  there  are 
funds  in  the  bank  sufhcient  to  pay  a  check  is  binding  on  the 
bank  .6" 

(<?)  In  the  case  of  Franldin  Bank  v.  Stewart,"  an  interesting 
point  in  this  subject  is  discussed,  which  cannot  be  better  eluci- 
dated than  by  presenting  a  brief  summary  of  the    statements 

.  ■   1  SS  to  3.  p3.St 

remarks  of   the  court.      Statements,  it  was  said,   transactioa 

,    ,  . .  .  1  are  mere 

concerning  a  past  transaction  are  given  purely  as  a  courtesies. 

matter  of  courtesy.     No  one  has  a  legal  right  to  belr'on  a^'"" 

demand  them.     Consequently,  a  cashier  in  making  [^^^^e  deai- 

them  does  not  make  them  in  an  official  character,  or  ins  '"  which 

1  •      T  •     1         1  ^^^  bank  is 

as  an  agent  of  the  bank  authorized  to  bind  it  by  them,  a  factor. 
The  most  that  can  be  said  is  that  the  bank  does  not  forbid 
him  to  do  an  act  of  ordinary  courtesy ;  but  it  is  equally  far 
from  empowering  him  to  impress  upon  that  act  any  other  and 
more  serious  character.  In  Bank  of  Monroe  v.  Field,^  admis- 
sions as  to  the  fact  of  payment  having  been  made  upon  a 
note,  were  held  admissible  as  constituting  a  part  of  the  res 
gestce,  but  upon  the  express  ground  that  they  were  shown  to 
have  been  made  upon,  and  as  the  result  of,  a  contempora- 
neous examination  of  the  books  of  the  bank  undertaken  for 
this  very  purpose.  But  if  the  statement,  tliough  it  concern  a 
past  transaction,  is  connected  with  a  present  dealing,  the 
reason  of  the  rule  fails,  and  the  rule  itself  shifts  to  the  oppo- 
site doctrine.  The  test  is  well  given  in  the  following  remark 
of  Sir  William  Grant,  in  the  cause  of  Fairlie  v.  Hastings :  ^ 
"  Unless  the  agent's  statements  constitute  the  actual  agree- 
ment of  the  principal,  or  are  the  foundation  of  or  inducement 

6"  Simmons  v.  Bank,  41  S.  C.  177  (19  S.  E.  502)  (1893). 

But  where  the  cashier  states  it  as  his  opinion  that  the  bank  will 
honor  a  check,  drawn  by  one  who  in  fact  has  no  funds  in  the  bank,  it 
is  not  such  an  unconditional  promise  as  to  lead  one  to  accept  the  check 
from  the  maker.  And,  the  maker  havinf^  no  funds  in  the  bank,  it  is  a 
promise  to  pay  the  debt  of  another,  which,  being  oral,  is  void  within  the 
Statute  of  Frauds.     Nichols  v.  Bank,  55  Mo.  App.  81. 

7  37  Me.  519.  «  2  Hill  (N.  Y.),  445. 

9  10  Ves.  123.  To  the  same  point,  see  Lime  Rock  Bank  v.  Hewett, 
52  Me.  531. 

375 


§  167  THE    CASHIER. 

to  that  agreement,  they  are  mere  naked  assertions,  not  proofs, 
of  the  fact ;  and  heing  such,  they  amount  to  nothing."  The 
facts  of  Franklin  Bank  v.  Stewart  were  these  :  A  messenger 
was  sent  to  the  bank  to  inquire  whether  a  certain  note  had 
been  paid.  He  did  not  tell  the  cashier  that  he  was  asking  on 
behalf  of  any  party  to  the  note ;  it  did  not  appear  that  the 
cashier  examined  the  file  of  notes,  or  any  of  the  books  of  the 
bank.  But  he  answered  that  it  had  been  paid.  In  truth  it 
had  never  been  paid,  and  at  that  moment  still  lay  among  the 
uncancelled  notes  of  the  bank.  Upon  the  strength  of  the 
principles  above  propounded,  the  court  held  that  the  bank 
was  not  bound  by  this  statement  of  its  cashier,  and  this  even 
though  it  was  shown  that  a  surety  on  the  note,  relying  on 
that  statement,  had  given  up  security  which  he  held  from  the 
principal  promisor.  The  surety  had  taken  imperfect  means 
to  acquire  the  knowledge  he  desired,  and  his  loss  was  only  a 
natural  result  of  his  insufficient  thoroughness  in  the  transac- 
tion. The  opinion  delivered  by  Shepley,  C.  J.,  is  learned  and 
able,  but  two  members  of  the  bench  found  reasons  for  dissent- 
ing from  the  decision  of  their  comrades. 

In  any  suit  between  the  bank  and  that  surety  on  that  note, 
the  plain  principles  of  justice  would  estop  the  bank,  and  make 
it  responsible  for  all  loss  occasioned  to  the  surety  by  such  a 
representation.  The  cashier  has  charge  of  the  collection  of 
notes ;  he  receives  payments ;  and  on  what  could  the  surety 
rely,  or  any  person  having  dealings  with  a  bank,  if  not  on 
such  a  declaration  as  this  ?  The  following  cases  seem  far 
nearer  the  true  doctrine.     See  also  Certification. 

In  Nebraska  it  has  been  held  that,  where  a  surety  on  a  note 
is  erroneously  told  by  the  cashier  at  the  bank  that  the  note 
has  been  paid,  and  upon  the  strength  of  this  statement  be- 
comes surety  upon  another  note  of  the  same  maker,  the  bank 
will  not  be  able  to  recover  on  this  second  note.  It  does  not 
appear  in  this  case  that  the  cashier  knew  the  precise  object 
with  which  the  inquiries  were  made ;  but  he  obviously  had 
reason  to  suppose  that  they  were  not  made  altogether  idly,  or 
without  purpose.i^ 

"  Merchants'  Bank  v.  Rudolf,  5  Xeb.  527. 
376 


DECLARATIONS.  §  167 

(d)  The  bank  must  answer  for  loss  resulting  from  declara- 
tions of  its  cashier  to  an  indorsee  as  to  payment  of  a  note  held 
by  the  bank,  and  the  fact  that  the  cashier  was  also    Kepresenta- 

•'  '  ,  tionastopay- 

an  indorser  docs  not  alter  the  case.     The  cashier's  Qient  of  note 

declarations  ni  the  business  of  the  bank  and  perti-  bank,  even 

nent  to  it  are    admissible    against    it.     The    bank  ofi'i'ce^rhLun 

claimed  that,  as  the  cashier  was  an  indorser,  his  in-  ej'^f^i,'"/'^' 

terest  was  adverse  to  that  of  the  bank,  and  therefore  ""kimwii  to 

the  third 

his  representations  did  not  bind  it ;  but  the  court  party. 
said  that  releasing  an  indorser  by  his  statement  was  exactly 
contrary  to  his  own  interest  as  an  indorser,  as  it  destroyed  his 
right  of  contribution  from  such  person,  and,  even  if  his  in- 
terest were  antagonistic  to  that  of  the  bank  in  the  matter, 
the  bank  would  still  have  been  liable ;  for  the  directors  knew, 
or  were  bound  to  know,  who  were  the  parties  on  the  note,  and 
if  they  allowed  the  cashier  to  stand  where  he  had  an  interest 
to,  and  where  he  could  and  did,  cause  loss  by  false  statements 
about  the  note,  it  would  seem  no  reason  to  throw  the  loss  on 
the  innocent  misled  indorser.^^ 

(/)  The  cashier  wrote  to  the  Secretary  of  the  Treasury  that 
the  bearer  was  authorized  to  contract  for  the  transfer  of  money ; 
such  a  contract  was  beyond  the  scope  of  a  cashier's    Representa- 
office,  and  therefore  his  representations    did   not   fj-'o",^  ^hl  * 
bind  the  bank,  and  it  did  not  have  to  make  good   ^^opTo? 
the  money  advanced  to  the  "  bearer."  ^^  duty. 

A.,  the  cashier  of  a  bank,  was  asked  by  C.  about  the  sol- 
vency of  a  certain  firm,  F. ;  he  replied  favorably.  C.  bought 
large  amounts  of  the  bills  and  acceptances  of  F.  F.  failed, 
and  C.  sued  A.  and  the  bank.  The  court  said  that  the  bank 
could  not  be  held,  for  it  was  no  part  of  the  cashier's  business 
to  give  such  information  ;  and  the  cashier  was  not  liable,  for  it 
was  only  the  statement  of  honest  opinion,  and  not  a  guaranty  .^^ 

"  Grant  v.  Cropsey,  8  Neb.  205  (1879). 

12  U.  S.  V.  City  Bank,  21  How.  356. 

"  Horrigan  v.  First  National  Bank,  10  Chic.  Leg.  News,  112  (Tenn.); 
Crawford  v.  Boston  Store  Mercantile  Co.,  67  Mo.  App.  39;  Hadden  v. 
Dooley,  92  Fed.  274  (1899) ;  First  National  Bank  v.  Marshall  Bank,  82 
Fed.  725  (1897). 

377 


§  168  THE    CASHIER. 

§168.  Of  Limitations  of  Time  and  Place  upon  the  Cashier's 
Powers.  —  The  place  where  and  the  time  when  a  cashier  is 
called  upon  to  do,  or  undertakes  to  do,  acts  on  behalf  of  the 
bank,  are  often  circumstances  materially  affecting  his  powers 
in  the  premises.  For  some  purposes  he  is  clothed  with  his 
ofiicial  character  only  at  the  banking-house  and  in  banking 
hours ;  for  other  purposes  he  remains  clothed  with  it  at  all 
times  and  places.  No  better  rule  for  discriminating  between 
these  two  classes  presents  itself  than  to  say,  that,  as  there  are 
some  acts  which  can  only  be  properly  performed  at  the  office 
of  the  corporation  and  during  the  hours  ordinarily  devoted 
to  public  business,  so  there  are  other  matters  which  may  be 
transacted  equally  well  at  all  times  and  places.  The  distinc- 
tion is  a  purely  practical  one,  arising  from  the  intrinsic  char- 
acter of  the  transaction  itself  regarded  from  a  business  point 
of  view. 

(a)  A  test,  which  is  perhaps  as  accurate  as  any  that  could 

be  suggested,  is  furnished  by  the  question  whether  for  the  due 

performance  of  the  business  there  are  requisite  any 

The  test.  .  . 

knowledge  or  appliances  which  can  only  be  satisfac- 
torily and  fully  possessed  by  the  cashier  when  he  is  at  the  bank- 
ing-rooms. It  is  easy  to  point  this  rule  with  examples  which 
will  be  serviceable  in  illustrating  its  precise  significance. 

(5)  Thus  it  cannot  be  pretended  that  any  sound  reason  could 
restrict  the  power  of  the  cashier  to  draw  checks  to  a  power 

to  draw  and  sign  them  only  in  the  office  of  his  own 

Mav  draw  ,         ,  t    ■        ,\  t  i        •  i  -ri 

checks  away  bank  and  m  the  ordmary  busniess  hours.  Ji<ven 
from  bank.  pi-u^jgncc  might  somctimcs  induce  him  to  draw 
them  elsewhere,  as  at  the  rooms  of  the  drawee  bank,  to 
avoid  danger  of  loss  or  fraud. 

(c)  So  an  indorsement  may  be  made  away  from  the  bank. 
Irwin,  cashier  of  a  bank,  was  asked  to  discount  a  draft  pay- 
indorsement  able  to  his  bank.  He  could  not,  so  M.,  the  cashier 
S  held"  ^^  another  bank,  at  the  request  of  Irwin,  discounted 
e^"*!-  the  bill  on  the  street,  Irwin  indorsing  it.     Irwin's 

bank  was  held  by  the  indorsement.^ 

So,  if  any  person  wishes  to  impart  information  so  as    to 
1  §  168.    Bissell  v.  First  National  Bank  of  Franklin,  69  Pa.  St.  415. 
378 


ACTS   AWAY   FROM    BANK.  §  168 

warn  the  bank  or  to  affect  it  with  notice,  it  would  be  absurd 
to  say  that  he  could  do  so  effectually  only  if  he 
should    make    his    communication    to   the    cashier   rcceiiJe  n™Uce 
actually  within  the  walls  of  the  banking-house,  and    ^a,'t'/i[u[" 
before  it  was  closed  to   the  public  for  the  day.    g|,^^' /'"fo^ma- 
There  would  be  no  reason  in  such  restrictions,  and   tion,a.saruie, 

r         p  elsewhere. 

there  is  no  law  in  their  support.     But  if  informa- 
tion be  sought  from  the  cashier,  it  should  be  sought  at  the 
banking-rooms,  where  he  can  have  access  to  the  books,  papers, 
and  records.^ 

(d)  But,  on  the  other  hand,  it  is  obvious  that  a  cashier  ought 
not  to  make  a  payment  upon,  or  to  certify  or  accept,  a  check 
or  draft  when  he  is  away  from  the  bank.     He  may 

•'  _  "^  May  pay 

have  been  absent  from  the  bank  but  very  few  min-  or  certify 
utes,  and  it  may  be  that  the  check,  if  presented 
when  he  left,  would  have  been  properly  paid  or  certified  or  ac- 
cepted. Still,  even  in  that  short  interval,  the  drawer's  account 
may  have  undergone  so  material  a  change  by  reason  of  pay- 
ments made  or  drafts  accepted  on  his  account,  or  perhaps  by 
force  of  garnishee  process  served  upon  his  funds  in  the  bank, 
that  his  checks  could  no  longer  be  honored.  In  that  case  the 
payment,  certification,  or  acceptance  having  been  wrongfully 
made  by  the  cashier,  would  become  his  own  individual  loss,  and 
he  would  be  obliged  to  reimburse  the  amount  to  the  bank,  if 
the  bank  should  see  fit  to  accept  and  ratify,  instead  of  repudi- 
ating, the  proceeding.  Clearly  the  same  must  also  be  the  case 
if  later  in  actual  time  than  the  payment,  certification,  or  ac- 
ceptance by  the  cashier,  but  still  prior  to  his  return  to  the 
bank  and  entering  or  noting  the  transaction  to  the  debit  of 
the  drawer,  or  informing  the  proper  officers  of  its  having  been 
made,  any  other  disposition  had  been  legally  made  of,  or  any 
other  valid  lien  had  attached  upon,  the  drawer's  funds  or 
credit.  Otherwise  a  loss  would  be  inflicted  upon  the  bank 
solely  and  wholly  by  reason  of  improper  conduct  on  the  part 
of  its  officer.  In  fact,  it  may  fairly  be  argued  that,  in  the 
supposed  case  of  the  payment  made  in  this  manner,  the  cash- 
ier practically  renders  himself  the  agent  of  the  drawer  for 

2  Merchants'  Bank  v.  Rudolf,  5  Neb.  527. 

379 


§  168  THE    CASHIER. 

the  presentment  and  collection  of  the  check  ;  and,  in  expecta- 
tion that  when  he  can  arrive  at  the  bank  and  present  it  there 
will  be  no  obstacle  to  its  full  payment,  he  ventures  to  ad- 
vance upon  it  to  the  drawer  its  full  face  value.  The  risk  of 
intermediate  transactions  diminishing  or  destroying  the  se- 
curity is  his  own  private  risk ;  the  loss,  if  any,  is  his  own 
private  loss.  The  same  reasons  might  make  the  certifica- 
tion or  acceptance  binding  against  him  personally.  His  ac- 
ceptance thus  made  on  behalf  of  the  bank  can  be  repudiated 
■absolutely  by  the  bank,  if  events  transpiring  before  his  return 
to  the  office  and  entry  or  report  of  the  transaction  would 
render  the  making  of  the  acceptance  at  the  time  of  the  return 
and  entry  or  report  improper.  This  would  at  least  be  the 
case  so  long  as  the  acceptance  remained  in  the  hands  of  the 
party  obtaining  it,  or  of  any  other  party  having  notice  of  the 
circumstances  attendant  upon  its  making,  for  these  persons 
would  be  affected  with  a  presumed  knowledge  of  the  rule  of 
law  rendering  this  undertaking  of  the  cashier  irregular.^ 

(e)  But  since  the  instrument  would  probably  be  perfectly 
regular  on  its  face  as  the  acceptance  of  the  bank,  and  would  in 
Bonn  fide  fact  have  been  executed  and  issued  solely  through 
hoiTthr"  ^^''G  improper  exercise  of  a  power  really  lodged  in 
bank.    See     ^\-^q  officer  of  the  bank,  a  ho7ia  Me  holder  for  value 

Ultra  vires,  '  -^ 

§  722.  and  without  notice  would  be  allowed  to  enforce  it 

against  the  corporation.  Whether  the  bank  could  be  held 
by  the  acceptance,  if  the  cashier  on  his  return  failed  to  re- 
port it,  the  drawer  having  then  funds  enough,  is  a  difficult 
question.  It  cannot  be  said,  that,  in  making  the  acceptance, 
as  in  making  the  payment,  the  cashier  assumed  a  position 
in  any  degree  resembling  that  of  an  agent  for  the  holder. 
On  the  contrary,  his  act  assumed  to  be  and  could  be  through- 
out only  purely  official.  Upon  his  return  to  the  bank  it 
was  his  duty  to  report  it  and  have  it  duly  entered.  This 
must  perhaps  be  regarded  as  his  official  duty.  Accordingly,  it 
may  be  argued  that  his  neglect  of  it  would  leave  the  bank  still 

8  BuUard  v.  Randall,  1  Gray  (Mass.),  603.  The  opinion  in  this  case 
■was  delivered  by  Chief  Justice  Shaw,  and  has  always  been  relied  upon  as 
a  thoroughly  satisfactory  and  conclusive  authority. 

380 


ACTS   AWAY   FROM   BANK.  §  168 

bound  to  the  third  party,  though  entitled  to  hold  the  cashier 
liable  to  make  good  any  damage  to  itself.  On  the  other  hand, 
this  position  can  be  assailed  by  urging  that  the  transaction 
was  from  the  outset  void  as  an  undertaking  of  the  bank,  or,  if 
not  actually  void,  yet  so  far  irregular  and  invalid  as  against 
the  bank  that  it  can  be  made  good  against  it  only  by  a  thorough 
reperformance  in  full  of  all  essential  acts.  The  party  dealing 
with  the  cashier  may  well  be  held  to  take  the  risk  of  the  cash- 
ier's faithful  conduct  in  these  particulars  ;  which  the  bank 
cannot  possibly  be  regarded  as  warranting,  since  the  whole 
proceeding,  ab  initio,  was  directly  in  contravention  of  the 
principles  of  the  agency  which  it  had  established. 

(/)  An  interesting  and  important  question,  similar,  but 
not  quite  identical,  is  raised  where  the  cashier  receives  pay- 
ments of  money  for  credit  on  an  ordinary  deposit  Deposits 
account,  when  he  is  away  from  the  bank.  This  lim-  "elved  It^^ 
itation  is  annexed  to  the  simple  word  "  payment,"  ^^^  ^^n"^- 
because  perhaps  the  case  of  receiving  payment  of  a  debt 
due  to  the  bank  might  be  different.  In  many  cases  the 
law  requires  the  creditor  to  make  demand  upon  his  debtor. 
And  unquestionably  a  cashier  may  follow  up  a  delinquent  or 
doubtful  debtor  of  the  bank,  and  exact  payment  from  him  at 
any  time  and  place  when  and  where  he  may  be  able  to  do  so. 
But  where  money  is  offered  for  credit  on  a  deposit  account  it  is 
clear  that  it  should  not  be  accepted  away  from  the  bank.  The 
bank  does  not  contemplate  any  such  method  of  receiving  de- 
posits, but  has  provided  an  entirely  different  system.  Clearly, 
therefore,  it  does  not  empower  its  cashier  thus  to  receive  them. 
He  cannot  bring  them  instantly  to  account  in  the  bank,  nor 
secure  them  with  the  safeguards  always  provided  in  banks  for 
the  preservation  of  their  funds.     But  if  he  does  so   tt  .m    . 

^  Until  actu- 

receive  them,  and  then  loses  or  misapplies  them   ally  put  in 

blank's  pos- 

before  he  has  actually  transferred  them  into  the   session,  the 
corporate  possession,  the  question  arises.  Can  the   agent^ofthe 
payer  hold  the  bank  to  make  good  the    amount?   '^'^'P"^'''""- 
Clearly,  we  say,  he  cannot.     Even  though  the  cashier  may 
have  had  the  identical  money  in  his  pocket  at  and  after  the 
time  of  his  return  to  the  bank,  nothing  short  of  his  actual 

381 


§  168  THE   CASHIER. 

transfer  over  and  bringing  it  to  account  in  the  bank  can  make 
the  bank  liable.  The  transaction,  even  in  this  form,  differs 
materially  from  the  case  of  an  acceptance  or  certification 
previously  supposed.  In  that  case  the  cashier  was  acting 
strictly  as  an  agent  of  the  bank.  He  could  possibly  do  the 
act  in  no  other  capacity.  Whereas  in  taking  the  money  it 
must  be  held  that  he  was  acting  as  agent  for  the  party  paying 
it ;  the  trust  and  object  of  his  agency  being  that  he  should 
make  the  payment  into  the  bank  to  the  credit  of  the  payer's 
deposit  account.  He  was  the  agent  of  the  payer  for  this  pur- 
pose, selected  as  a  convenient  agent  because  he  was  also  an 
agent  of  the  bank.  The  money  was  paid  to  him  doubtless 
because  he  was  cashier,  but  it  was  not  paid  to  him  as  cashier. 
The  latter  character  could  not  be  given  to  the  transaction,  even 
if  both  parties  sought  to  do  so  ;  for  they  must  both  be  affected 
with  knowledge  of  the  rule  of  law  which  renders  a  payment 
made  under  such  circumstances  irregular  and  improper,  and 
so  invalid  as  against  the  bank.  It  is  fair  then  to  say  that  in 
no  part  of  the  transaction  can  it  be  admitted  that  the  cashier 
was  acting  officially,  even  though  irregularly  so.  His  act 
should  be  regarded,  not  as  irregularly  official,  but  as  abso- 
lutely unofficial.  Therefore  the  obligation  which  he  owed  to 
pay  the  money  into  the  bank  ran  to  the  party  paying  it  to  him 
for  that  purpose,  not  to  the  bank  ;  his  breach  of  it  would  make 
him  liable  to  that  party,  not  to  the  bank ;  the  loss  arising 
from  the  breach  must  be  borne  by  that  party,  who  was  in 
fact  his  principal  in  the  agency,  not  by  the  bank,  which  was 
known  to  all  concerned  to  have  strictly  excluded  any  such 
function  from  the  scope  of  his  official  agency. 

The  three  instances  adduced  differ  very  considerably  in  the 
force  of  the  arguments  which  can  be  brought  to  make  them 
respectively  acts  upon  which  a  liability  of  the  bank  can  be 
based.  But  it  seem.s  that  in  all  alike  the  non-liability  of  the 
bank  is  undeniable.  Though  tlie  cashier  ought  on  his  return 
to  the  bank  to  report  the  acceptance  he  has  made  on  its  behalf, 
or  to  pay  over  the  money  he  has  received  on  its  bohalf,  and 
though,  if  he  should  then  promptly  report  and  enter  tlie  accept- 
ance, the  drawer's  account  might  make  it  good ;  or  though  he 
382 


ACTS    AWAY   FROM   BANK.  §  168 

may  have  the  identical  funds  paid  over  to  him  still  in  his 
pocket ;  yet  in  both  cases  it  is  clear  that  the  person  dealing  with 
him  knew,  or  was  at  law  bound  to  know,  that  the  dealing  was, 
under  the  circumstances,  irregular,  improper,  and  beyond  the 
scope  of  the  cashier's  agency.  The  transaction  might  be  capa- 
ble of  being  made  right  in  the  future,  when  the  cashier  should 
return  to  the  bank.  But  until  that  time,  and  until,  as  a  matter 
of  strict  fact,  it  had  actually  been  so  made  right,  it  must  be 
invalid  as  against  the  bank.  That  it  should  not  be  made  right 
at  all  is  a  chance  which  may  come  to  pass,  either  through  the 
mistake,  the  negligence,  the  innocent  loss,  or  the  fraud  of 
the  cashier.  Now  clearly  the  third  party  takes  the  chance  of 
the  mistake  or  the  loss,  and  why  not  equally  of  the  negligence 
and  the  fraud  ?  He  trusts  that  everything  will  go  right,  that 
the  cashier  will  be  careful  and  honest.  But  the  sufficiency  of 
both  the  care  and  the  honesty  is  his  own  risk ;  for  he  has  con- 
fided in  them  of  his  own  independent  motion,  not  under  the 
invitation  or  holding  out  of  the  bank,  but  in  fact  with  the 
express  knowledge,  either  actual  or  conclusively  inferred  at 
law,  that  the  bank  warrants  neither  when  they  are  relied  upon 
under  such  circumstances. 

{g)   The  decision  in  Pendleton  v.  The  Bank  of  Kentucky  * 
does  not  at  all  interfere  with  the  above  doctrine.     The  court 
certainly  remark  in  that  case  that  the  cashier  holds    ^^^^  ^ 
his  office  at  every  time  and  place.     But  the  point   ?dopt  cash- 

^  ''  '  ^     ^  ler  s  act 

of  view  from  which  they  make  that  remark  explains  away  from 
its  intended  significance.  They  were  discussing  the 
question  of  whether  the  cashier's  conversion  of  money  improp- 
erly received  by  him  when  away  from  the  bank  was  a  default 
which  would  sustain  a  suit  upon  his  official  bond,  and  it 
was  in  the  course  of  declaring  that  it  would,  that  they  made 
the  above  remark.  It  cannot  be  questioned  that,  if  the  bank 
has  waived  the  irregularity,  and  adopted  or  ratified  the  im- 
proper act,  if  it  has  fulfilled  the  obligation  which  its  agent 
attempted  to  impose  upon  it,  it  has  done  simply  what  it  had  a 
right  to  do,  and  what  neither  the  officer  nor  his  sureties  can 
object  to.     There  is  nothing  originally  void  about  the  act,  noth- 

4  1  T.  B.  Monr.  (Ky.)  171. 

383 


§  169  THE    CASHIER. 

iiig  which  prevents  the  bank  from  subsequently  accepting  and 
ratifying  it.  It  is  unauthorized  and  therefore  voidable,  but  it 
is  no  more  than  this.  On  the  other  hand,  if  tlie  bank  exer- 
cises its  privilege  of  repudiating  the  transaction,  the  right  of 
action  against  its  cashier  cannot  accrue  to  it,  for  it  cannot  be 
allowed  to  take  the  two  inconsistent  positions  of  repudiating 
the  responsibility,  and  yet  claiming  damages  for  a  loss  which 
it  could  only  suffer  if  it  were  responsible. 

(h)  Where  a  cashier  had  wrongfully  indorsed  a  note  "  G.  B., 
Cas.,"  and  inquiry  was  made  from  him  at  a  distance  from  the 
A  represen-  ^^^nk  Concerning  the  note,  and  he  replied  that  it 
tation  away     ^^^  u  r^\\  right,"  the  court  said  that  the  force  and 

from  bank  °       ' 

may  bind.  effect  of  this  Statement,  as  against  the  bank,  were 
no  wise  affected  by  the  consideration  of  the  place  where  the 
conversation  took  place.^  The  element  of  place  was  evidently, 
under  the  especial  circumstances,  of  no  consequence  what- 
soever. An  inquiry  and  reply  as  to  any  other  note,  where 
i\yd  cashier  might  be  supposed  to  speak  from  memory  and 
without  access  to  the  books,  papers,  and  memoranda  of  the 
bank,  might  not  improbably  be  differently  regarded, 

§  169.  No  Power.  —  Though  the  cashier  may  dispose  of  the 
Cannot  pledge  bank's  negotiable  securities  in  the  regular  course  of 
ertv''fo/ame'-  busiucss,  he  cannot  pledge  its  assets  for  the  pay- 
cedent  debt,     ^leut  of  an  antecedent  debt.i 

Nor  has  the  cashier  power  to  bind  the  bank  to  pay  a  draft, 
to  be  drawn  on  a  future  day  by  a  third  person  on  one  of  its 
customers,  even  where  the  bank  expects  to  have  a  deposit 
from  the  customer  sufficient  to  cover  the  draft,^" 

Where  a  claim  of  the  bank  has  been  pushed  to  judgment 

and  execution,  the  cashier  delivering  the  execution  to  the 

sheriff  to  levy  has  not  authority  to  bind  the  bank 

Agreement  .      -  -"c       ,\  ca  tt* 

to  indemnify  by  any  undertaking  to  mdemnity  the  omcer.  His 
siienff.  agreement  to  this  effect,  though  purporting  to  be 

made   by   him   in   his   official    capacity    will    be    invalid    as 

6  Houghton  V.  First  National  Bank  of  Elkhorn,  26  Wis.  663.  See 
Kennedy  v.  Otoe  County  National  Bank,  7  Neb.  59. 

1  §  169.    State  of  Tennessee  v.  Davis,  50  How.  (N.  Y.)  447. 
1"  Flannagan  v.  California  National  Bank,  56  Fed.  959. 
384 


ACTING   WITHOUT   AUTHORITY.  §  1G9 

against  the  bank,  though    it   may  operate  to  hold  him  per- 
sonally.2 

It  has  been  said  that  the  cashier  has  charge  of  all  promis- 
sory notes  due  to  the  bank.  But  though  he  thus  has  actual 
manual  possession  and  control  of  them,  yet  he  has  not  that 
legal  possession  which  will  enable  him  to  bring  a  suit  upon 
them  in  his  own  name.  His  possession  is  in  fact  only  custody 
which  the  court  will  not  recognize  as  an  absolute,  but  only  as 
a  qualified  possession,  not  carrying  with  it  the  presumption  of 
title  or  the  right  to  sue.^ 

A  cashier  cannot  virtute  officii  release  a  surety  upon  a  note 
held  by  the  bank,  even  though  the  bank  holds  other  security 
to  which  it  might  resort.  Special  authority  is  necessary  to 
justify  such  release.* 

A  purchase  of  boots  and  shoes  in  the  name  of  a  bank,  by 
its  cashier  and  general  manager  for  the  benefit  of  a  third  per- 
son, will  not  make  the  bank  liable  for  the  amount  of  the  pur- 
chase, in  the  absence  of  its  knowledge,  at  the  time  of  purchase 
or  subsequent  ratification.*" 

(a)  A  bank  is  not  bound  by  the  cashier's  contract  with  a 
broker  for  sale  or  purchase  of  real  estate,  unless    no  inherent 
previous  authority  be  shown,  or  unless  estopped  by   ^rTeil  reaUy 
a  line  of  conduct  recognizing  such  acts.^  ^°'  ^^''^■ 

The  cashier  of  a  bank  is  not,  by  reason  of  his  official  posi- 
tion, presumed  to  have  the  power  to  bind  it  as  an  accommoda- 

2  Watson  I'.  Bennett,  12  Barb.  (N.  Y.)  19G. 

8  Olcott  V.  Rathbone,  5  Wend.  (N.  Y.)  490. 

*  Merchants'  Bank  v.  Rudolf,  5  Neb.  527  ;  Cocheco  National  Bank 
V.  Haskell,  51  N.  H.  116 ;  Daviess  County  Savings  Ass.  v.  Sailor,  63  Mo. 
24  (1876)  ;  Gray  v.  Farmers'  Bank,  81  Md.  631  (32  Atl.  518). 

The  cashier  of  a  national  bank  which  holds  the  paper  of  a  firm  of 
which  the  cashier  is  a  member,  has  no  power  to  bind  the  bank  by  an 
agreement  that  there  shall  be  no  liability  upon  an  accommodation  note 
procured  by  him  to  be  substituted,  for  a  special  purpose,  for  the  indebted- 
ness of  his  firm.     Allen  v.  First  National  Bank,  127  Pa.  St.  51  (17  Atl. 


*«  U.  S.  Boot  and  Shoe  Co.  v.  Stebbins,  2  S.  D.  74  (48  S.  W.  833) 
(1891). 

6  Winsor  v.  Layfayette  County  Bank,  18  Mo.  App.  665. 
VOL.  I.  —  25  385 


I  170  THE    CASHIER. 

tion  indorser  on  his  individual  note  ;  and  the  payee  who  fails 
No  power  to  provc  that  the  casliier,  as  such,  had  authority  to 
to  indorse        make  the  indorsement,  cannot  recover  against  the 

Dmiic  s  iiaiiic 

on  his  own      bank.     The  very  form  of  the  paper  carries  notice 
to  a  purchaser  of  a  possible  want  of  authority  to 
make  the  indorsement,  sufficient  to  put  him  on  his  inquiry.*' 

A  cashier  has  no  right  or  authority  as  such  to  loan  to  him- 
self as  an  individual,  or  to  use  in  any  manner  for  himself  the 
funds  of  the  bank.  Such  a  loan  can  only  be  sustained  by 
showing  express  authority  or  ratification." 

§  169.  Where  the  cashier,  acting  for  the  bank,  discounts  an 
accommodation  note  he  has  no  authority  to  induce  the  payee 
to  apply  the  proceeds  of  the  note  to  the  payment  of  premiums 
in  a  certain  insurance  company  in  which  the  cashier  has  an 
interest,  and  such  act  of  the  cashier  is  no  defence  to  the  note 
in  the  hands  of  the  bank.^ 

S  170.  Instruments  executed  in  Form  to  the  Cashier.  —  The 
converse  of  those  cases  in  which  third  parties  seek  to  hold  the 
bank  upon  the  signature  of  the  cashier  is  to  be  found  in  those 
cases  in  which  the  bank  seeks  to  hold  third  parties  liable  to 
itself  upon  instruments  running  nominally  to  the  cashier. 
Here  the  general  rule  is  simple  enough.  If,  in  fact, 
Jhe'partfes  the  contcmporancous  intent  and  understanding  at 
governs.  ^-^^  ^-^^  ^^  entering  into  the  contract  or  obligation 
was  that  it  ran  from  the  third  person  to  the  bank,  or  to  the 
cashier  on  behalf  of  the  bank,  or  to  him  in  his  official  char- 
acter, then  the  bank  is  entitled  to  the  performance  and  benefit 
thereof,  and  may  enforce  this  right  at  law  precisely  as  if  it 
were  corporately  named  as  the  party  in  the  transaction,  in- 
stead of  only  its  cashier.  That  words  are  added  to  the  name 
-of  the  cashier,  more  or  less  fully  descriptive  of  his  office,  is  a 

6  West  St.  Louis  Savings  Bank  v.  Shawnee  Co.  Bank,  95  U.  S.  557 
(1877);  State  National  Bank  v.  Newton  National  Bank,  66  Fed.  691. 

T  Iowa  State  Bank  v.  Black,  91  Iowa,  490  (59  N.  W,  283);  Wallace 
V.  Lincoln  Savings  Bank,  89  Tenn.  646  (15  S.  W.  448)  (1890)  ;  Barth  v. 
Koetting,  99  Wis.  242  (75  N.  W.  395)  (1898). 

8  Moreland's    Assignee  v.  Citizens'    Savings  Bank,  97  Ky.  211  (30 
S.  W.  637)  (1895). 
386 


CONTRACTS   RUNNING   TO   CASHIER.  §  170 

circumstance  which  is  properly  adduced  in  evidence  to  prove 
the  fact  of  intent  and  understanding;  and  though  it  cannot 
perhaps  be  said  that  the  addition  of  such  words  is  absolutely 
conclusive  of  the  corporate  character  of  the  transaction,  since 
a  cashier  might  be  described  as  such  for  purposes  of  identifi- 
cation, yet  it  is  clearly  very  strong  evidence  to  this  effect,  and 
might  perhaps,  if  nothing  repugnant  appeared  in  the  rest  of 
the  transaction,  be  regarded  as  making  out  a  prima  facie  case 
of  a  corporate  dealing.  Thus,  a  bill  or  note  indorsed  over  to, 
or  made  payable  to,  "  A..  B.,  Cashier,"  may  be  sued  upon  by 
the  bank  in  its  corporate  name  and  capacity,  and  the  defect 
in  the  description  in  failing  to  name  the  bank  of  which  he  is 
cashier  may  be  supplied  by  parol  evidence  of  that  fact.^ 

A  bank  ordered  goods  for  C,  who  was  unable  to  pay   at 
the  time  ;  the  cashier  took  C.'s  paper  and  sent  the  vendor  a 
certificate  of  deposit  signed  in  his  own  name  alone,   contract  in 
and    not  as  cashier.     Held,  that  this   was  in  the   name^bank 
ordinary  course  of  business  ;  the  cashier  did  not   ^^^''• 
exceed  his  authority  and  the  bank  was  liable.^ 

1  §  170.  Stamford  Bank  v.  Ferris,  17  Conn.  259;  Barney  v.  Newcomb, 
9  Cush.  (Mass.)  46  ;  Wright  v.  Boyd,  3  Barb.  (X.  Y.)  523;  Johnson  i\ 
Catlin,  1  Williams  (Vt.),  87;  Erwin  v.  Branch  Bank  at  Mobile,  14  Ala. 
307  ;  Baldwin  v.  Bank  of  Newbury,  1  Wall.  234.  We  cannot  do  better 
than  refer  the  reader  especially  to  the  opinion  in  the  last-named  case.  It 
is  conclusive  of  the  whole  question  ;  and  its  array  and  discussion  of  the 
authorities  are  exhaustive.  See  also  Nave  i'.  Hadley,  74  Ind.  155  (1881)  ; 
Darby  i^.  Berney  National  Bank.  97  Ala.  643  (11  So.  881)  (1892)  ;  Alston 
V.  Heartman,  2  Ala.  699;  Hazard  v.  Planters  and  Merchants'  Bank 
2  Ala.  299  ;  Hobbs  v.  Chemical  National  Bank,  97  Ga.  524  (25  S.  E.  348) 
(1895). 

A  note  payable  to  "  Wes.  Lane,  Cashier  First  National  Bank  of  Leb- 
anon," is  payable  to  the  bank,  and  the  bank  can  maintain  suit  thereon 
in  its  own  name  without  indorsement.  Nave  o.  First  National  Bank  of 
Lebanon,  87  Ind.  204  (1882). 

2  Crystal  Plate  Glass  Co.  t;.  First  National  Bank,  12  Pac.  678  ;  6 
Mont.  303. 

Whether  evidence  can  be  introduced  to  show  a  usage  to  transfer  to  the 
cashier  with  the  design  that  the  transfer  shall  operate  in  fact  as  a  transfer 
for  the  use  of  the  bank,  must  be  regarded  as  still  unsettled.  If  intro- 
duced, it  would  be  for  the  purpose  not  of  varying  the  contract,  but  of 
interpreting  it :  not  of  controlling  any  rule  of  law,  but  of  explaining  the 

387 


§171 


THE   CASHIER. 


A  bond  of  a  bank  as  depositary  of  county  funds,  in  which 
"  H.,  cashier  of  M.  Bank,"  is  named  as  principal,  which  is 
signed  "  H.,  cashier,"  and  in  which  the  bank  is  referred  to  as 
the  "  above  bounden,  the  M.  Bank,"  is  the  bond  of  the  bank 
as  principal.^ 

§  171.  When  the  Cashier  binds  the  Bank.  —  We  speak  here 
only  of  obligations  in  the  nature  of  contract. 

(a)  Those  acts  which  constitute  the  ordinary  and  custom- 
ary functions  of  cashiers,  and  which  he  has  inherent  power 
to  do,  bind  the  bank  as  its  own  acts  in  favor  of  any  person 
dealing  with  the  bank  and  having  no  notice  of  any  restriction 
upon  the  cashier. 

(b)  Acts  beyond  this  line  of  inherent  power  are  the  acts 
of  the  bank  only  by  reason  of  express  authority  given  by  the 
organic  law,  the  stockholders,  or  the  board  of  directors,  or  bi/ 
reason  of  the  conduct  of  the  bank  or  its  management,  in  allow- 
ing the  cashier  to  continue  an  open  course  of  conduct  without 
objection,  or  receiving  the  benefits  of  his  act  with  knowledge 
of  the  facts,  or  otherwise  ratifying  his  doings. 

This  distinction  should  be  kept  ever  in  mind  ;  it  is  not  the 
act  of  the  agent  that  can  give  him  authority,  it  must  arise  by 
actual  gift  of  his  principal,  or  the  conduct  of  the  principal 
must  be  such  as  to  base  a  proper  inference,  such  as  a  pru- 
dent business  man  would  draw,  that  the  agent  acts  with  the 
approval  of  the  bank. 

(c)  But  when  upon  this  principle  it  is  decided  that,  as  be- 
tween the  bank  and  the  third  party,  C,  the  act  is  that  of  the 
bank,  and  not  the  cashier's  individual  act,  the  further  question 
arises,  Is  the  bank  bound?  It  does  not  follow,  because  an 
act  is  that  of  the  bank,  that  it  is  necessarily  bound  by  it,  for, 
like  an  infant,  a  bank  is  incompetent  to  do  some  acts,  and 

intention  of  the  parties.  On  this  ground  it  has  been  held  admissible  in 
Connecticut,  but  by  a  divided  court.  Stamford  Bank  v.  Ferris,  17  Conn. 
259.  In  Massachusetts  a  contrary  opinion  was  intimated,  though  not 
directly  laid  down.  New  England  Mar,  Ins.  Co.  v.  Chandler,  16  Mass. 
275,  278  (per  Parker,  C.  J.). 

*  Board  of  County  Commissioners  v.  Manufacturers'  Bank,  69  Minn. 
421  (72  N.  W.  701)  (1897). 
388 


WHEN    THE    CASHIER   BINDS   THE    BANK.  §  171 

some  contracts  are  utterly  void,  no  matter  who  makes  them, 
as  those  that  are  immoral  or  against  public  policy. 

If  the  act  is  that  of  the  bank  and  intra  vires,  i.  e.  such 
as  the  bank  has  power  to  do,  and  is  in  proper  form,  it  is 
binding. 

But  if  the  transaction,  though  that  of  the  bank  under  the 
above  principles,  is  informal,  or  is  ultra  vires,  i.  e.  an  act  be- 
yond its  charter  powers  and  their  incidents,  the  bank  may  or 
may  not  be  bound.     See  §  722. 

If  the  act  is  not  that  of  the  bank,  and  is  not  ratified  or 
adopted  by  the  bank,  it  is  not  bound.  For  example,  if  a  loan 
is  contracted  by  the  cashier  in  such  a  manner  that  it  does  not 
bind  the  bank,  it  cannot  be  considered  that  the  mere  circum- 
stance of  his  turning  the  money  into  the  mass  of  the  bank 
funds,  and  allowing  it  to  remain  there,  and  to  be  used  as  part 
of  the  floating  assets,  will  suffice  to  render  the  bank  liable 
upon  it  as  a  corporate  debt.  The  fact  and  nature  of  the 
transaction  must  in  some  way  be  brought  sufficiently  home  to 
the  official  knowledge  of  the  directors,  so  that  their  failure 
to  repudiate  and  undo  it  must  be  construed  to  amount  to 
an  acceptance  and  ratification  of  it  on  behalf  of  the  corpo- 
ration.i     We  will  now  notice  the  cases  on  these  points. 

(f?)  Tiiere  are  certain  functions  which  it  is  the  duty  of  a 
cashier  to  perform,  and  certain  acts  which  he  has  the  right 
to  do  on  behalf  of  the  bank,  simply  by  virtue  of  his  (.^^j^;^  j,,^g. 
induction  into  the  office.     They  are  inherent  in  it,    rent  powers 

and  duties. 

and  taken  together  they  constitute  the  component 
parts  which  go  to  make  it  up.  Others  may  be  added,  but  these 
are  essential.  Publicly  to  call  a  person  by  the  title  of  cashier 
is  to  invest  him  with  the  power,  as  towards  the  public,  of 
binding  tlie  bank  by  his  action  in  pursuance  or  fulfilment  of 
any  and  all  these  inherent  powers  and  duties.  It  is  in  fact  a 
declaration  of  his  agency.  If  the  bank  nominates  and  holds 
out  A.  B.  as  its  "  cashier,"  it  in  effect  says  to  the  world  that 
A.  B.  is  duly  authorized  to  transact  on  its  belialf  all  business 
which  judicial  decisions  or  banking  usages  have  rendered  in- 
herent functions  of  the  office  designated  by  this  name.     Any 

1  §  171.  Ballston  Spa  Bank  v.  Marine  Bank,  16  Wis.  120. 

389 


§  171  THE   CASHIER. 

act  done  by  him  within  this  scope  and  on  behalf  of  the  bank 
is  the  act  of  the  bank.^ 

It  would  seem  almost  a  work  of  supererogation  to  make  this 
statement,  but  we  have  been  led  to  do  so  by  noticing  in  the 
argument  made  lately  by  very  eminent  counsel  in  an  important 
case,  that  where  the  bank  charter  or  the  general  banking  act 
under  which  tlie  corporation  was  established  gave  to  the  di- 
rectors the  power  to  define  or  limit  or  prescribe  the  powers 
and  duties  of  the  cashier,  their  neglect  so  to  do  left  the  cash- 
ier without  either  powers  or  duties.  The  position  is  novel, 
perhaps  ingenious,  but  certainly  utterly  untenable,  and  has 
since  been  so  held  by  the  court;^  Tiie  conference  upon  any 
person  of  the  name  and  official  position  of  cashier  carries 
with  it,  by  a  necessary  and  a  strictly  legal  implication,  certain 
duties  and  certain  powers,  towards  both  the  bank  and  the 
public,  of  the  nature  above  described.  Again  and  again  has 
this  fact  been  recognized  in  judicial  decisions,  equally  where 
the  directors  were  and  where  they  were  not  endowed  by  the 
law  originating  the  corporate  being  with  authority  to  define 
or  prescribe  the  powers  and  duties  of  the  officers ;  equally 
where  they  had  and  where  they  had  not  undertaken  to  exer- 
cise this  authority.  These  are  the  functions  ordinarily  ap- 
purtenant to  the  office  itself.  They  in  no  case  require  to 
have  their  existence  affirmatively  established,  but,  on  the 
other  hand,  demand  strong  negative  testimony  to  controvert 
the  legal  presumption  of  their  universal  force.  The  great 
bulk  of  the  cases  which  will  be  cited  in  illustration  of  the 
present  topic  proceed  upon  the  tacit  recognition  of  this  doc- 
trine ;  but  in  the  foot-note  are  cited  a  few  of  those  wherein 
the  language  more  distinctly  asserts  it.*  In  the  case  of  The 
United    States  v.  The  City  Bank  of  Columbus,  Mr.  Justice 

2  Burnham  v.  Webster,  19  Me.  232. 

s  Merchants'  Bank  v.  State  Bank,  10  Wall.  604. 

*  Sturges  I'.  Bank  of  Circleville,  11  Ohio  St.  153;  Minor  v.  Mechan- 
ics' Bank  of  Alexandria,  1  Pet.  46 ;  Wild  v.  Bank  of  Passamaquoddy, 
3  Mason,  505;  Bank  of  Pennsylvania  ?'.  Reed,  1  Watts. &  S.  (Pa.)  101  ; 
Baldwin  v.  Bank  of  Newbury,  1  Wall.  234;  United  States  v.  City  Bank 
of  Columbus,  21  How.  356  ;  Badger  v.  Bank  of  Cumberland,  26  Me. 
428. 

390 


WHEN   THE   CASHIER   BINDS   THE   BANK.  §  l"! 

Wayne  said  that,  "  though  the  directors  had  power  under 
the  act  of  incorporation  to  fix  the  duties  of  the  cashier,  and 
though  whether  they  had  done  so  or  not  did  not  appear," 
yet  "  the  acts  of  the  cashier  done  in  the  ordinary  course  of 
the  business  actually  confided  to  such  an  officer  may  well  be 
deemed  prima  facie  evidence  that  they  fell  within  the  scope 
of  his  duty."  As  a  matter  of  fact,  directors  seem  seldom  to 
have  cared  to  draw  up  regulations  for  the  government  of  their 
cashiers,  and  when  they  have  done  so  their  regulations  have 
been  so  general  in  phraseology,  or  have  so  accurately  followed 
the  principles  which  the  law  itself  lays  down  in  the  absence 
of  such  directorial  action,  that  they  appear  seldom,  if  ever, 
to  have  affected  the  decision  in  any  reported  cause.  That  the 
power  given  to  directors  to  define,  &c.  the  powers  and  duties 
of  a  cashier,  does  not  enable  them  to  deprive  him  of  ordinary 
powers  which  by  virtue  either  of  judicial  decisions  or  of  bank- 
ing usages  the  public  are  entitled  to  regard  as  inherent  in  his 
office,  or  at  least  that  their  action  to  this  effect  would  not  be 
binding  as  towards  any  third  party  who  had  not  been  ex- 
pressly notified  of  it,  is  a  principle  which  has  been  discussed 
in  a  general  form  ^  in  Chapter  VIII.,  and  which  needs  no 
special  elucidation  with  respect  to  cashiers  as  a  class,  in  dis- 
tinction from  other  ofiicers. 

If  a  cashier  negotiates  a  loan  for  other  than  banking  pur- 
poses, any  person  lending  to  him  with  a  knowledge  that  the 
loan  is  to  be  thus  improperly  used  will  not  create  a  valid 
obligation  upon  the  bank.  But  in  the  absence  of  such  actual 
knowledge,  the  presumption  of  regularity  will  bind  the  bank 
to  a  bona  fide  lender,  however  wrongful  and  unauthorized  the 
conduct  of  the  cashier  in  the  transaction  may  in  fact  have 
been.  So,  if  special  instructions  and  authority  are  given  to  a 
cashier  for  obtaining  a  loan  or  discount,  whether  the  same 
are  to  govern  him  generally  in  all  such  dealings,  or  only  in  a 
particular  instance,  all  persons  having  notice  of  this  special 
delegation  of  power  will  hold  the  bank  only  upon  contracts 

5  Also  see,  especially.  Bank  of  Vergennes  v.  Warren,  7  Hill  (N.  Y.), 
91;  Commercial  Bank  of  Buffalo  v.  Kortright,  22  Wend.  (N.  Y.)  348; 
Sturges  V.  Bank  of  Circleville,  11  Ohio  St.  153. 

391 


§171 


THE   CASHIER. 


made  within  its  limits.  So  far  as  they  are  concerned,  it  is  a 
valid  restriction  of  the  cashier's  power  to  deal  with  them. 
But  contracts  with  persons  without  notice  will  bind  the  bank, 
if  within  the  ordinary  business  of  borrowing.  It  is  not  un- 
common to  empower  the  president  and  cashier  to  effect  a  loan 
or  discount ;  in  such  case  they  must  agree  upon  the  contract 
jointly,  and  the  cashier  alone  could  bind  the  bank  only  to 
persons  who  believed  him  to  be  acting  in  pursuance  of  his 
general  authority,  and  were  ignorant  of  this  special  delega- 
tion to  the  two  jointly. 

(c)  The  cashier  is  simply  an  agent  of  the  bank,  and  he  is 
bound  to  act  in  good  faith  in  the  transaction  of  the  business 
of  the  bank ;  and  those  who  deal  with  him  are  affected  by 
any  bad  faith  or  want  of  authority  of  which  they  have  knowl- 
edge. If  the  transaction  itself  is  not  in  the  usual  course  of 
business,  or  is  one  which  requires  specific  authority  on  the  part 
of  the  cashier  to  perform  it,  the  person  dealing  with  him  will 
be  required  to  show  that  he  in  fact  had  authority  to  do  the 
act,  otherwise  it  will  be  held  to  have  been  done  without  au- 
thority. If  the  cashier  transfers  the  notes  of  the  bank  to 
pay  his  private  debt,  the  transaction  will  be  invalid.  No  at- 
tempted transfer  by  the  cashier  of  the  bills,  notes,  or  other 
securities  of  the  bank  will  be  valid,  when  it  appears,  either 
from  the  nature  of  the  transaction,  or  the  facts  and  circum- 
stances existing  at  the  time  and  known  to  the  transferee,  that 
the  transfer  was  made  in  prejudice  of  the  rights  and  interests 
of  the  bank.^ 

(/)  A  bona  fide  holder  of  paper  is  not  affected  by  fraud  of 
the  cashier.^  But  if  the  cashier's  employment  does  not  com- 
prehend the  drawing  or  indorsing  of  checks,  he  cannot  bind 
the  bank  by  his  fraud  in  so  doing.^" 

An  overdraft  by  an  agent  of  his  principal's  account,  with 
the  knowledge  of  the  cashier  of  the  bank,  is  a  simple  loan 

6  Everett  v.  United  States,  6  Port.  (Ala.)  166  ;  Barnes  v.  Bank,  19 
N.  Y.  152;  Smith  v.  Lawson,  18  W.  Va.  212. 

'  National  Pahquioque  Bank  v.  Bethel  Bank,  36  Conn.  325;  Phillips 
V.  Mercantile  National  Bank,  140  N.  Y.  556  (35  N.  E.  982). 

"»  Shipman  v.  Bank,  126  N.  Y.  318  (27  N.  E.  371). 
392 


ACTS   THAT   BIND.  §  171 

of  money  by  accommodation,  and  the  authority  of  the  cashier 
cannot  be  questioned  in  a  suit  by  the  bank  to  recover  the 
money  .^ 

{(j)  Where  for  nearly  a  year  a  cashier  had  under  his  written 
agreement  as  cashier  constantly  pledged  negotiable  securities, 
with   another   bank    for  advances,  his    own  bank    „,,. 

Holding  out 

was    bound  by    his   act,  as   his  previous  conduct   by  failure 
had  been  so  open  and  long  continued  that  it  must 
have   come   to   the  knowledge   of  any    ordinary  vigilant  di- 
rectory.^ 

Evidence  of  powers  habitually  exercised  by  a  cashier  with 
the  knowledge  and  acquiescence  of  the  bank,  defines  his  pow- 
ers as  to  the  public,  if  they  are  such  as  the  directors  have 
authority  to  confer  on  him.^° 

A  bank  for  several  years  permitted  its  cashier  to  cancel 
trust  deeds  given  to  secure  money  loaned,  and  was  thereby 
estopped  to  deny  his  power  to  cancel.^^ 

A  banking  corporation  may  be  represented  by  its  cashier, 
where  its  charter  does  not  otherwise  provide,  in  transactions 
outside  of  his  ordinary  duties,  and  this  without  his  authority 
to  do  so  being  in  writing  or  appearing  upon  the  records  of 
the  proceedings  of  the  directors.  His  authority  may  be  by 
parol,  and  collected  from  circumstances,  or  inferred,  or  im- 
plied from  the  general  manner  and  settled  course  of  the 
business,  which  he  has  been  allowed  to  conduct  without 
interference,  and  from  the  conduct  or  acquiescence  of  the 
corporation,  as  represented  by  the  board  of  directors,  whose 
duty  it  is  to  use  ordinary  diligence  in  ascertaining  the  con- 
dition of  its  business,  and  to  exercise  reasonable  control  and 
supervision  of  its  officers. ^^'' 

(Ji)  If  a  cashier  of  a  bank  should  pay  to  a  bona  fide  holder 

8  Union,  &c.  v.  Rocky,  2  Col.  248. 

8  Mercantile  Bank  v.  McCarthy,  7  Mo.  App.  318  (1879). 

10  Merchants'  Bank  v.  State  Bank,  10  Wall.  604. 

"  Martin  v.  Webb,  110  U.  S.  7  (1883). 

ii^Carpyr.  Dowdell,  115  Cal.  677  (47  Pac.  695);  Wing  v.  Savings 
Bank,  103  Mich.  565  (61  N.  W.  1009)  ;  La  Banque  D'Espargues  v.  La 
Banque,  2  Montreal  L.  R.  (Q.  B.)  64  ;  Williams  v.  Dorrier,  135  Pa.  St. 
445  (19  Atl.  1024). 

393 


§  171  THE    CASHIER. 

a  forged  check  drawn  upon  the  bank,  the  paj-ment  could 
not  be  recalled,  but  would  be  obligatory ;  for 
payment  of  it  is  withiu  the  duty  of  the  cashier  to  answer 
bh'idrthe^^'^  drafts  drawn  on  the  bank  ;  and  the  bank  intrusts 
bank.  -j^j^^  ^j^j^    ^^    implied    authority  to    decide  upon 

the  genuineness  of  the    handwriting   of  the    drawer  of    the 
check  when  presented  for  payraent.^^     See  contra,  §  461. 

The  same  rule  will  apply  to  the  payment  of  forged  bank 
bills  of  a  bank  by  the  cashier,  upon  presentment  by  a  bona  fide 
holder.  The  payment  cannot  be  recalled,  for  the  cashier  is 
bound  to  know  the  genuine  paper  of  the  bank.^^  But  see 
§  633. 

{i)  Implications  and  Inferences  arising  from  Acts  of  the 
Cashier. — The  bank  is  bound  by  all  the  legal  implications  or 
influences  which  must,  as  matter  of  law,  grow  out  of  those 
acts  of  the  cashier  which  he  does  in  the  prosecution  of  any 
of  the  functions  included  in  his  agency.  Indirectly  these  acts 
often  closely  resemble  declarations  or  admissions.  But  they 
may  bind  where  a  declaration  or  admission  might  not  bind, 
as  has  been  already  seen  in  the  cases  of  forged  paper  used  in 
illustration  above.  He  has  power  to  collect  ^'"'  and  to  give  re- 
ceipts for  the  sums  collected,  in  behalf  of  the  bank  ;  he  has 
power  to  make,  or  to  direct  his  subordinates  to  make,  the 
entries  in  the  books  of  the  bank.  These  receipts  and  entries 
are  admissible  in  evidence  as  the  acts  of  the  bank  itself,  and 
if  the  mere  making  them  or  the  peculiar  form  of  expression 
used  in  them,  have  any  technical  legal  force  or  effect,  the 
bank  will  be  concluded  thereby  as  by  the  Accessary  legal 
sequence  of  its  own  doings.  In  Badger  v.  The  Bank  of  Cum- 
berland,^*  a  suit  was  brought  to  hold  the  defendant  corpora- 
tion as  owner  of  a  one-third  interest  in  a  vessel.  It  appeared 
that  a  debtor  of  the  bank  originally  owning  this  one-third  had 

12  Levy  V.  Bank  of  United  States,  1  Binn.  (Pa.)  27;  Bank  of  United 
States  V.  Bank  of  Georgia,  10  Wheat.  333. 

13  Bank  of  United  States  v.  Bank  of  Georgia,  10  Wheat.  333;  Salem 
Bank  v.  Gloucester  Bank,  17  Mass.  1,  28. 

13"  McLennan  v.  Bank,  87  Cal.  569  (25  Pac.  760). 
"  Badger  v.  Bank  of  Cumberland,  26  Me.  428. 

394 


ULTRA    VIRES    ACTS.  §  171 

bonded  it  to  the  bank  to  secure  his  debt;  that  afterward  he 
had  stated  himself  unable  to  pay,  and  had  abandoned  his  in- 
terest to  the  bank  ;  that  thereafter  an  account  had  been  set- 
tled between  the  owner  of  the  remaining  two-thirds,  being 
also  the  ship's  husband,  and  the  cashier  of  the  bank  ;  that 
the  cashier,  acting  in  his  official  capacity,  had  thereupon  re- 
ceipted for  what  appeared  by  the  account  to  be  the  bank's 
proportion  of  the  net  earnings  ;  that  the  president  had  re- 
quested the  rendering  of  the  account,  and  had  insured  one- 
third  of  the  Tessel's  value  for  the  benefit  of  the  bank.  It  was 
held  that  the  cashier's  receipt  and  his  entry  of  the  transac- 
tion on  the  books  were  acts  within  the  scope  of  his  agency, 
and  that  their  legal  effect  and  significance,  as  proof  of  part 
ownership  by  the  bank,  could  not  be  controverted  by  the  bank. 
Also,  that  the  items  of  his  entries  in  the  books  were  conclu- 
sive proof  of  an  adoption  and  recognition  by  the  corporation 
of  the  president's  acts  in  effecting  the  insurance. 

(y)  Cashier's  Ultra  Vires  Acts.  —  We  may  briefly  glance 
at  a  matter  which  will  be  fully  elucidated  hereafter.  The 
general  rule  in  regard  to  ultra  vires  acts  is  substantially  that 
executory  ultra  vires  contracts  will  not  be  enforced  ;  but  when 
acts  of  the  cashier  are  acts  of  the  bank  under  the  principles 
of  this  section,  and  they  raise  liability  in  tort,  this  is  not  to 
be  escaped  by  the  plea  of  ultra  vires,  nor  will  it  avail  in  case 
of  an  executed  contract  where  the  legislature  has  clearly  in- 
dicated an  intent  that  it  should  not  be  void,  nor  in  favor  of 
a  party  who  has  received  and  retained  benefit  under  it,  nor 
against  a  party  who  has  acquired  just  rights  by  expenditure  or 
parting  with  value  on  account  of  the  transaction  not  know- 
ing it  was  ultra  vires  (tliat  fact  being  not  ascertainable  as 
matter  of  law  on  the  facts  actually  or  constructively  known 
to  such  person),  keeping  in  mind,  of  course,  that  contracts 
expressly  void,  or  immoral,  or  against  public  policy,  will  not 
be  enforced,  for  the  maxims  in  pari  and  ex  turpi  causa  are 
supreme. 

In  L'Herbette  v.  Pittsfield  National  Bank  ^^^  the  cashier 
made  invalid  agreements  at  the  time  of  receiving  deposits,  for 

1*"  162  Mass.  137  (;38  X.  E.  368). 

395 


§172 


THE   CASHIER. 


example,  to  invest  the  money  for  the  depositors  in  stocks  and 
bonds,  paying  interest  on  the  money  in  the  meantime.  No 
investment  of  the  money  being  in  fact  made,  the  bank  was  not 
entitled  to  retain  the  funds  nor  was  the  depositor  debarred 
from  recovering  them.  There  was  nothing  criminal  or  im- 
moral about  such  an  agreement  and,  the  fact  of  its  being 
ultra  vires  or  unauthorized  did  not  prevent  recovery  of  the 
money. 

In  a  Pennsylvania  case^^  the  bank  received  the  benefit, 
namely,  a  deposit  of  13,000  on  an  ultra  vires  contract,  and 
it  was  held  that  in  a  suit  to  recover  the  deposit  ultra  vires 
was  no  answer.  The  court  said  that  acts  done  by  the  cashier 
in  pursuance  of  the  orders  of  the  directors,  as  in  this  case, 
might  bind  the  bank,  though  in  contravention  of  the  charter, 
or  of  the  provisions  of  the  organic  law,  and  are  therefore  acts 
which  in  fact  the  directors  have  no  power  to  authorize. 

The  case  of  The  Salem  Bank  v.  The  Gloucester  Bank  ^^ 
asserts  generally  that  the  bank  is  not  liable  for  the  act  of  the 
cashier  done  under  the  authority  of  the  directors,  if  they  have 
no  power  to  confer  that  authority.  The  general  rule  must 
be  admitted  to  be  thus.  But  in  this  Massachusetts  case  no 
strong  equity  tempted  the  court  to  consider  the  possibility  of 
admitting  a  limited  exception  to  the  broad  principle. 

§  172.  Liability  of  the  Cashier  to  the  Bank.  —  The  cashier 
contracts  for  reasonable  skill  and  care,°  and  for  integrity  and 
obedience  to  the  law,  and  the  proper,  i.  e.  lawful,  directions  of 
his  superiors.  He  is  responsible  for  all  loss  resulting  directly 
from  his  failure  in  any  respect  in  his  official  duty,  and  it  will 
not  avail  him  that  he  acted  by  order  of  the  directors,  if  the 
facts  of  which  he  had  notice  made  such  order  wrongful  as 
matter  of  law.  If  so  far  as  any  facts  he  knew  or  had  con- 
structive notice  of  could  throw  light  on  the  matter  the  order 

1^  Hagerstown  Bank  v.  Loudou  Savings  Fund  Soc,  3  Grant  (Pa.),  135. 

16  17  Mass.  1. 

0  §  172.  Pryse  v.  Farmers'  Bank,  33  S.  W.  532  (1895)  ;  Vance  r. 
Mottley,  92  Tenn.  310  (21  S.  W.  593)  (1893)  ;  Wallace  v.  Bank,  89  Tenn. 
630  (15  S.  W.  448) ;  Exchange  Bank  v.  Gardner,  104  Iowa,  176  (73  N.  W. 
591)  (1897). 

396 


LIABILITY   TO   BANK.  §  172 

was  lawful,  the  bank  cannot  hold  him,  for  it  is  not  his  busi- 
ness to  supervise  the  board,  and  it  is  his  business  to  obey 
them.  Such  is  the  law  of  this  topic,  as  clearly  appears  from 
the  following  cases. 

(a)  The  cashier  is,  of  course,  liable  to  the  bank  in  an  action 
of  damages,  to  make  good  any  and  all  injury  arising  from  his 
fraudulent  or  wrongful  acts  of  an  official  nature,  from  his  un- 
authorized assumption  of  power,  or  from  his  breach  of  the 
directions  imposed  upon  him  to  govern  his  conduct  in  his 
agency. 1  How  far  he  is  responsible  for  innocent  errors  and 
mistakes  has  been  considered  under  the  topic  of  "  Official 
Bonds."  The  tellers,  book-keepers,  &c.  are  his  subordinates 
and  sub-agents.  But  he  is  not  answerable,  like  an  ordinary 
principal,  for  their  defaults,  whether  intentional  or  innocent, 
unless  perhaps  in  those  cases  in  which  it  can  be  ^^^  onsibii- 
shown    satisfactorily  that   the    default   was    occa-   ityforsubor- 

-  dinates. 

sioned,  or  opportunity  or  temptation  thereto  was 
furnished,  by  his  improper  or  negligent  performance  of  his 
duty  of  general  superintendence.  This  rule  is  supported  by 
the  necessity  of  the  business.  It  is  impossible  for  him  to  be 
omnipresent  and  omniscient  among  all  his  servants  in  the  in- 
stitution, and  he  is  not  liable  for  his  failure  to  perform  this  im- 
possibility. He  is  required  only  to  direct  them  properly  in  the 
performance  of  their  several  functions,  and  to  exercise  the  most 
thorough  supervision  which  is  practicable  in  view  of  the  amount 
of  daily  business  and  the  method  of  conducting  the  routine  of 
daily  affairs.  The  sub-officers  and  their  respective  provinces 
are  usually  well  known.  But  if  tlie  duties  which  are  ordina- 
rily done  solely  by  the  cashier  become  too  onerous  to  be  exe- 
cuted by  one  man,  any  arrangement  for  a  partial  sub-delegation 
which  circumstances  authorize  the  cashier  in  assuming  to  be 
satisfactory  to  and  ratified  by  the  directors,  will  be  valid,  and 
will  thereafter  save  the  cashier  from  liability  for  frauds  or 
errors  committed  in  the  delegated  department. ^  A  cashier  is 
not  bound  to  examine  every  entry  made  by  his  subordinates, 
but  must  exercise   such  care  and  supervision  as  a  man  of 

1  Austin  V.  Daniels,  4  Den.  (N.  Y.)  299. 

2  Bank  of  the  State  v.  Comegys,  12  Ala.  772. 

397 


§  172  THE    CASHIER. 

ordinary  prudence  would  in  his  own  affairs.^  If  he  emploj's 
an  assistant  without  authority  or  necessity,  the  casliier  is 
liable  for  money  of  the  banlv  fraudulently  embezzled  by  such 
assistant  while  thus  employed.^" 

Besides  the  right  to  a  suit  in  damages  which  grows  out  of  a 
cashier's  malversation  in  office,  specific  statutory  penalties  are 
often  affixed  to  specific  acts  of  wrongdoing.  Whether  the 
bank  by  suing  to  enforce  the  penalty  deprives  itself  of  the  right 
also  to  sue  in  damages,  must  be  decided  by  a  consideration  of 
the  nature  of  the  penalty.  It  is  a  fundamental  truth  that  the 
bank  has  a  right  to  be  reimbursed  in  money  for  all  its  losses 
directly  caused  by  the  wrongful  conduct  of  its  agent.  If  the 
provisions  establishing  tlie  penalty  make  any  satisfactory  ar- 
rangement for  this  reimbursement,  then  the  proceeding  for 
tlie  penalty  must  be  taken  as  clearly  intended  to  supersede 
the  proceeding  for  damages.  But  if  it  is  not  so  provided  in  the 
statute,  it  must  be  assumed  that  it  was  intended  that  the  two 
actions  might  be  prosecuted  independently  of  each  other.  The 
awarding  of  the  suit  for  the  penalty  is  akin  to  authorizing  the 
recovery  of  vindictive  damages,  in  addition  to  the  simple  dam- 
ages which  may  still  be  demanded  in  the  other  suit.  The  only 
decision  of  interest  occurring  under  penal  statutory  provisions 
is  one  which  declared  that  a  penalty  set  upon  the  cashier's 
conversion  of  any  "  money,  bank-bill,  or  note  "  could  not  be 
applied  to  his  conversion  either  of  promissory  notes,  not 
being  bank-notes  ordinarily  so  called  and  intended  for  circu- 
lation as  currency,  or  of  any  other  species  of  commercial 
paper.'* 

(6)  Where  the  directors  authorize  the  act  which  has  caused 
loss,  if  there  is  any  intrinsic  illegality  or  impropriety  in  the 
Director's  or-  act  itsclf,  the  cashicr  cannot  plead  either  the  for- 
der  will  not     j^j^j  ^.^^^  |.|jg  ratification,  or  the  connivance  of  the 

excuse  an  '  ' 

illegal  act.  government  of  the  bank.  The  directors  can  by  no 
possibility  authorize  him  to  commit  a  fraud,  to  misapply  funds 
of  the  bank,  to  subject  them  to  improper  risks,  to  make  private 

s  Batchelor  v.  Planters'  National  Bank,  10  Rep.  16  (Ky.,  1880). 

8"  Vance  v.  Mottley,  92  Tenn.  310  (21  S.  W.  593)  (1893).     See  §  174. 

*  State  V.  Stimson,  4  Zabr.  (N.  J.)  9. 

398 


AND  HIS    OWN    DEALINGS    WITH    THE   BANK.  §  173 

profits  bj  the  use  of  them.  lie  can  by  no  possibility  believe 
that  the  directors  can  thus  authorize  him.  The  question  is  not 
who  is  to  reap  the  fruits  of  the  malfeasance.  The  cashier  is 
responsible  for  obeying  an  order  which  he  knows  to  be  illegal, 
and  to  be  given  for  an  immoral  purpose,  equally  whether  lie 
is  or  is  not  to  participate  in  the  illicit  gains.  The  empty 
semblance  of  obedience  to  superiors  cannot  take  away  the 
genuine  character  of  connivance  in  a  wrongful  proceeding,  and 
would  be  "  void  to  protect  the  cashier  in  his  wrongful  com- 
pliance." ^  In  the  cited  case  it  was  held  that  the  cashier  could 
not  be  protected  from  liability  to  reimburse  a  loss  arising 
from  his  having  allowed  a  customer  to  overdraw,  by  showing 
that  the  directors  had  been  wont  to  countenance  him  in  a 
custom  to  allow  good  depositors  to  overdraw  without  taking 
security  from  them.  For  here,  it  was  said,  the  act  was  in- 
trinsically wrongful.  It  was  a  dishonest  use  of  the  corpo- 
rators' funds.  Being  thus  in  itself  inexcusable,  it  could  not 
be  excused  by  a  mere  show  of  authority. 

((?)  An  action  founded  on  the  negligence  of  the  cashier  in 
the  performance  of  his  duty  does  not  survive  his  death  and  is 
not  provable  against  his  estate.^ 

§  173.  Cashier  as  a  Trustee.  —  It  has  never  been  held  that 
the  position  of  cashier  was  precisely  that  of  a  legal  trustee. 
Yet  the  qualities  of  a  trust  can  never  be  wholly  wanting  where 
an  agent  has  committed  to  him  the  care  and  management  of 
the  property  of  other  persons  for  certain  definite  purposes. 
To  say  that  he  cannot  either  directly  or  indirectly  use  his  in- 
fluence, or  any  of  his  powers,  to  secure  advantages  to  himself, 
is  only  to  assert  what  has  never  been  called  in  question  ;  and 
it  makes  no  difference  that  his  conduct  was  not,  or  was  not 
intended  to  be,  hurtful  to  the  bank.  If  he  wishes  any  species 
of  accommodation  from  the  bank,  even  though  he  might  have 
power  to  grant  the  same  to  any  other  person,  he  will  not  be 
safe  in  granting  it  to  himself,  without  express  permission  from 
the  board  of  directors.     The  familiar  rule  of  agency,  that  one 

6  Minor  v.  Mechanics'  Bank  of  Alexandria,  1  Pet.  46  ;  Austin  v. 
Daniels,  4  Den.  (N.  Y.)  299. 

"  Brandon  Bank  v.  Brigg's  Estate,  70  Vt.  599  (41  Atl.  586)  (1898). 

399 


§  173  THE  CASHIER. 

shall  not  be  agent  for  any  other  party  in  a  contract  in  which 
he  is  himself  interested,  or  a  fortiori  in  which  he  is  a  principal 
on  the  other  side,  suffices  to  prohibit  this.  But  further  than 
this,  in  his  own  dealings  with  the  bank  he  is  held,  like  a 
trustee,  to  exercise  a  much  greater  degree  of  scrupulosity  and 
thoroughness  of  regard  for  the  interests  of  the  bank  than  in 
the  conduct  of  like  dealings  had  by  other  people  with  it. 
Thus,  if  he  has  a  loan  from  it  and  gives  to  it  his  promissory 
note  for  the  amount,  if  he  does  not  pay  the  note  promptly  upon 
its  maturity,  it  will  not  be  enough  that  he  treats  it  precisely 
in  the  same  manner  in  which  he  is  wont  to  treat  other  un- 
paid notes  belonging  to  the  bank.  He  has  an  extraordinary 
duty  to  perform  in  regard  to  it,  and  must  bring  the  facts  of  its 
being  overdue  and  unpaid  distinctly  before  the  directors  in 
their  official  capacity.  If  the  period  of  the  Statute  of  Limita- 
tions has  elapsed  since  the  date  of  the  note,  he  will  not  be 
allowed  to  take  advantage  of  it  simply  because  he  has  left  the 
note  in  the  bundle  of  unpaid  notes,  which  from  time  to  time 
was  examined  by  the  directors  for  the  purpose  of  putting  in 
suit  such  of  the  notes  contained  in  it  as  they  might  see  fit. 
The  statute  will  begin  to  run  only  from  that  date  upon  which 
the  cashier  can  establish  by  affirmative  proof  his  express  noti- 
fication of  the  whole  matter  to  the  directors.^ 

(a)  But  if  the  cashier  embezzles  funds  of  the  bank  and  in- 
vests them,  a  court  of  chancery  has  no  power  to  fasten  a  trust 
upon  the  investment,  and  to  declare  the  cashier  to  be  a  trus- 
tee, holding  what  he  has  purchased  in  trust  for  the  bank. 
„     .  The  mere  fact  that  the  cashier  obtained  the  means 

Property 

bought  with     of  purchasing  by  a  theft  from  the  corporate  funds, 

stolen  funds.  •  ^      ->    ,^  ^  ^^  ii  •        y    • 

provided  that  he  actually  made  the  purchase  m  his 
Own  name  and  on  his  own  account,  docs  not  create  such  a  case 
of  implied  or  resulting  trust  as  to  give  jurisdiction  to  a  court 
of  equity  for  the  purpose  of  taking  possession  of  the  purchased 
property  and  ordering  that  indemnification  be  made  from  it 
to  the  bank.2 

1  §  173.  Harrisburg  Bank  v.  Forster,  8  Watts  (Pa.),  12.  See  also 
Conyngham's  Appeal,  57  Pa.  St.  474. 

2  Pascoag  Bank  v.  Hunt,  3  Edw.  Ch.  (N.  Y.)  583.  , 

400 


AND    HIS   SUDORDINATES.  §  174 

But  in  Tecumseh  National  Bank  v.  Russell  2*  the  above 
statement  is  disputed,  and  the  court  holds  that  where  a  cashier 
unlawfully  used  the  funds  for  the  purchase  of  stock  in  another 
bank,  in  his  own  name,  a  court  of  equity  will  charge  the  stock 
with  a  trust  in  favor  of  the  bank  owniug  the  funds. 

(5)  The  relation  of  trust  between  the  bank  and  cashier 
gives    equity  jurisdiction   to  compel    an    account        . 
for   money    misappropriated    or   other   breach   of   compel  cash- 

,  o  ier  to  account. 

trust.^ 

In  the  second  case  quoted,  it  was  held  that  the  failure  of 
the  managers  to  repudiate  the  bond  and  mortgage  (given  by 
one  who  was  treasurer  and  one  of  the  managers  of  a  savings 
bank  as  security,  the  land  not  being  worth  double  the  mort- 
gage as  required  by  the  bank's  charter)  for  six  years  was  no 
defence,  whether  the  breach  of  duty  was  known  or  not  to  the 
other  managers.  The  fault  of  other  officers  could  not  take 
away  the  remedy  due  the  stockholders  against  this  one. 

Profits  derived  from  the  sale  of  lands  by  a  cashier,  in  his 
capacity  as  such  and  while  in  discharge  of  his  duties,  belong 
to  the  bank.* 

§  174.  The  Cashier's  Subordinates.  —  Of  course,  even  in  a 
small  corporation,  it  will  be  impossible  for  the  cashier  person- 
ally to  do  all  the  business  included  in  these  general  functions. 
He  must  have  his  subordinates,  whose  offices  will  be  offshoots 
of  his  own.  "  They  are  under  his  direction,  and  are,  as  it 
were,  the  arms  by  which  designated  portions  of  his  various 
functions  are  performed."  ^  But  he  will  not  be  liable  for  the 
default  of  any  of  these  subordinates,  unless  his  own  laches  or 
collusion  has  caused  or  aided  it,  or  unless  he  himself  has  em- 
ployed them  without  authority  or  necessity.^"  The  paying  and 
receiving  tellers  are  in  fact  only  officers  detailed  to  take  charge, 
each  of  a  special  duty,  falling  within  the  general  range  of  the, 

2«  50  Neb.  277  (69  N.  W.  763)  (1897). 

3  Merchants'  Bank  of  Charleston  v.  Jeffries,  21  W.  Va.  504  (1883) ; 
Williams  v.  Riley,  34  N.  J.  Eq.  398  (1881). 

4  Mt.  Vernon  Bank  v.  Porter,  148  Mo.  176  (49  S.  W.  982)  (1898). 
1  §  174.    Merchants'  Bank  v.  State  Bank,  10  Wall.  604. 

i«  Vance  v.  Mottley,  92  Tean.  310  (21  S.  W.  593)  (1893). 
VOL.  I.  — 26  401 


§  174  THE    CASHIER. 

cashier's  position.^  A  paying  teller  can  only  pay  out  money, 
and  a  receiving  teller  can  only  receive  it,  on  behalf  of  the  bank. 
^,  „   ,  But  though  there  be  incumbents  actino;  in  each  of 

Tellers  .  ,  ° 

power  not        thcsc  respective  offices,  there  is  judicial  authority 

cxclusi V6  of 

cashier,  but      for  Saying  that  the  cashier,  by  his  general  and  higher 

concurrent.  •  ••  ^ 

power,  may  at  any  time  make  or  receive  a  payment 
on  behalf  of  the  bank.  Perhaps  on  any  particular  occasion 
his  doing  so  might  be  such  a  foolish  interference  in  a  business 
of  which  he  did  not  know  all  the  details  from  hour  to  hour, 
that  he  could  be  held  liable  to  the  bank  for  negligence  or  an 
improper  performance,  if  he  should  pay  out  money  when  he 
ought  not.  But  this  would  be  only  a  question  of  liability 
arising  wholly  between  the  principal  and  the  agent.  The  act 
itself  would  be  within  the  scope  of  a  cashier's  authority,  and 
would  bind  the  bank  in  favor  of  any  innocent  third  party .^ 
Tills  does  not  necessarily  conflict  with  the  rule  that,  if  the  bank 
nominates  a  certain  person  to  receive  money,  it  will  be  bound 
only  by  payments  made  to  him.  For,  though  the  bank  may 
nominate  a  receiving  teller,  yet  the  cashier  has  a  co-ordinate 
power  with  him  in  this  respect  by  virtue  of  the  general  scope 
of  his  agency.  The  bank  simply  has  two  officers  competent 
^     .      ,        to  receive,  instead  of  only  one.     But,  thousch  the 

Justice  of  _  '  •'  ... 

the  ruling  citcd  casc  secms  to  go  the  length  of  sustaining  this 
doctrine,  the  opinion  embodying  the  views  of  the 
court  is  far  from  carrying  perfect  conviction  with  it.  Practi- 
cally, the  confusion  incident  to  conducting  business  in  accord- 
ance with  the  rule  would  breed  endless  mischief.  As  matter 
of  strict  law,  it  is  certainly  fair  to  argue  that  the  especial  action 
of  the  bank  in  giving  to  another  the  charge  of  a  function  which 
otherwise  would  belong  to  the  cashier,  is  equivalent  to  a  public 
taking  away  of  that  function  altogether  from  the  cashier.  Sub- 
stantially it  is  expressio  unius,  exclusio  alterius.  The  teller  is 
the  cashier's  subordinate,  and  must  take  orders  from  him.  But 
the  precise  act  of  receiving  or  paying  cash  over  the  counter 
may  be  regarded  as  exclusively  within  the  teller's  province  by 

2  Farmers  &  Mechanics'  Bank  v.  Butchers  &  Drovers'  Bank,  16  N.  Y. 
125. 

*  State  Bank  v.  Kain,  1  Breese  (111),  45. 

402 


AND  HIS   SUBORDINATES.  §  175 

virtue  of  the  supremo  order  of  the  board  of  directors,  with 
which  even  the  cashier  cannot  interfere. 

(a)  Teller.  —  The  office  of  teller  is  a  narrow  one,  strictly 
limited  to  the  specific  function  of  receiving  or  paying  out  funds. 
If  there  be  two  tellers,  one  delegated  to  receive,  the  other 
delegated  to  pay  out  moneys,  neither  can  properly  discharge 
the  duty  of  the  other.  A  person  wishing  to  make  a  deposit  is 
bound  to  make  it  with  the  receiving  teller.  If  he  hands  the 
money  to  the  paying  teller,  he  does  not  thereby  accomplish 
his  deposit,  but  only  makes  that  teller  his  own  agent  to  trans- 
fer the  money  to  the  receiving  teller  or  to  the  bank ;  and  the 
bank  will  be  liable  for  the  amount  only  if  the  paying  teller 
fulfils  this  undertaking,  and  pays  in  the  money  to  the  proper 
officer  or  to  the  funds  of  the  bank.* 

§  175.  Temporary  Substitute.  —  A  clerk  who  in  the  tempo- 
rary absence  of  the  cashier  is  charged  with  the  performance 
of  the  duties  of  that  office,  does  not  succeed  to  the  cashier's 
full  powers,  unless  by  virtue  of  a  special  vote  and  instructions 
from  the  board  of  directors.  Otherwise  the  cashier  can  clothe 
him  with  no  greater  power  than  simply  such  as  is  necessary 
for  carrying  on  the  usual  and  ordinary  business  of  the  bank, 
such  as  the  payment  of  checks,  the  receipt  of  payment  upon 
notes  held  by  the  bank,  and  the  delivery  up  of  the  paid  notes. 
But  the  delegate  has  no  authority  to  transfer  or  pass  title  in 
any  paper  of  the  bank.  Paper  held  by  the  bank  in  its  own 
right,  or  for  collection  for  other  persons,  and  payable  else- 
where, he  may  transmit  to  the  agents  of  the  bank  for  col- 
lection ;  and  if  it  requires  indorsement  as  a  preliminary  to 
collection,  he  may  indorse,  but  only  in  such  limited  form  as 
is  strictly  indispensable  for  enabling  the  collection  to  be 
made,  and  not  so  as  to  vest  any  other  or  higher  title  in 
the  indorsee.  Where  he  so  sends  forward  notes  for  collec- 
tion, whether  bearing  his  indorsement  on  behalf  of  the  bank 
or  not,  the  agents  receiving  them  will  acquire  no  title  in  them 
and  no  lien  of  any  description  upon  them  for  any  balance  due 
'from  the  transmitting  bank.^ 

<  Tliatcher  v.  Bank  of  State  of  New  York,  5  Sandf.  (N.  Y.)  121. 
1  §  175.    Potter  v.  Merchants'  Bank,  28  N.  Y.  Gil. 

403 


§  176  THE   CASHIER. 

Where  a  statute  allows  the  cashier  to  make  affidavits  of 
demand  on  promissory  notes,  an  acting  cashier  may  make 
such  affidavit.2 

§  17G.  Cashier  after  the  Expiration  of  the  Franchise.  —  Where 
by  the  charter  itself  or  act  of  legislature  a  bank  is  continued 
in  existence  as  a  corporation  after  the  lapse  or  surrender 
of  its  franchise,  for  a  limited  time  and  for  the  purpose  of 
closing  its  affairs,  the  directors  may  legally  appoint  a  cashier 
to  act  during  such  period.  Any  irregularity  attendant  upon 
the  choice  or  process  of  qualification  of  these  directors  will  not 
affect  the  validity  of  the  acts  of  the  cashier  chosen  by  them, 
provided  they  are  de  facto  directors,  assuming  to  be  such  under 
a  shadow  of  title,  and  acting  as  such  at  the  time  of  making 
the  appointment.^ 

(a)  Estoppel.  —  A  cashier,  by  performing  in  his  official 
capacity  acts  and  duties  which  are  not  inconsistent  with  the 
nature  of  his  office  and  functions,  may  be  held  to  be  thereby 
estopped  in  a  suit  against  himself  to  deny  that  their  perform- 
ance was  ordered  by  the  board  of  directors.^ 

He  is  also  estopped  from  denying  his  agency  for  the 
bank  where  he  transacts  business  for  it  officially  and  at 
its  instigation.^ 

2  Philadelphia  National  Bank  v.  Morgan,  1  Marvel  (Del.),  265  (40 
Atl.  1113). 

1  §  176.   Cooper  v.  Curtis,  30  Me.  488. 

2  Durkin  v.  Exchange  Bank,  2  P.  &  H.  (Va.)  277. 

3  Mount  Vernon  Bank  v.  Porter,  52  Mo.  App.  244. 


404 


CHAPTER  XII. 

RECEIVING   DEPOSITS. 

§  177.    Analysis. 

Choice.    Cashier's  authority.    §  161. 

§  178.  A  bank  may,  at  common  law,  choose  from  whom  it  will  receive 

deposits,  and  how  long  it  will  continue  to  do  business  witli  any 
customer.  The  relation  may  be  broken  by  either  party  at  any 
time,  saving  the  existing  liens  and  contract  rights  of  both  parties. 

§  178.    (a)    Statute  law  sometimes  provides  against   receiving  deposits  from 
certain  persons,  as,  e.  g.,  those  reasonably  known  by  the  bank 
to  be  unsafe. 
Care 

§  179.  Should  be  exercised  by  the  depositor  to  make  delivery  to  the  proper 

officer  and  at  the  bank.     §§  98  j,  174  a. 

§  181.  And  by  the  bank  to  give  credit  to  the  proper  party.     (See  case  of 

deaf  depositor.) 
The  Receiving  Officer.     §  161. 

§  179.  The  cashier  or  teller  may  receive  deposits,  or  any  other  officer  actu- 

ally authorized  by  the  board,  or  who  has  habitually  received  them 
without  objection  from  the  bank. 

§  179.  No  officer   has  inherent  right  to  receive  deposits  away  from  the 

bank,  though  in  tliis  matter  also  the  bank  may  be  bound  by  a 
long-continued  course  of  conduct  without  objection  from  the 
directors. 

§  180.  If  the  same  officer  acts  for  two  banks  doing  business  over  the  same 

counter,  the  question  as  to  which  bank  is  the  recipient  of  a  given 
deposit  depends,  (1)  as  to  the  depositor,  on  his  understanding 
with  the  officer ;  (2)  as  to  the  banks,  upon  the  agreement  between 
them  under  which  the  officer  acts. 

§  180  A.   Appropriation  of  Deposits.     §§  323,  327  d,  556. 

§   178.    The  Relation  is  at  the  "Will  of   the  Parties. — Prom 
whom  Deposits  may  be  received.  —  It  is  of  the  essence  of  the 
business  of  banking  that  the  bank  or  banker  should    ^^^  ^^^^ 
receive  on  deposit  the  money  and  funds  of  other   may  choose 

'^  •'  ,  for  whom  it 

persons.  In  receivinpr  deposits  and  opening  accounts   win  receive 

,  ,  .,        -n  ,  or  hold  de- 

the  bank  is  free  to  choose  whom  it  will  as  custom-  posits,  except 
ers  from  among  those  that, offer.  No  duty  exists  hlbtted  1?"^°" 
on  the  part  of  the  bank  towards  the  public  akin  to   8^^"'^. 

405 


S  179  RECEIVING    DEPOSITS. 

that  which  binds  common  carriers  to  take  every  person  who 
requests  them  to  do  so,  and  who  is  in  a  fit  condition  to  be 
taken,  or  that  which  obliges  hotel-keepers  to  admit  any  proper 
applicant  as  a  guest.  The  bank  may  select  arbitrarily,  and 
cannot  be  held  accountable  to  any  person  for  the  propriety  of 
its  action  in  this  matter.^  The  receiving  a  deposit  from  a 
person,  without  explanation  or  understanding  to  the  contrary, 
at  once  and  without  more  makes  that  person  a  customer  of 
the  bank.  But  no  implied  undertaking  to  allow  him  to  con- 
tinue so  for  any  length  of  time  exists.  Neither  is  he  under 
any  obligation  to  continue  so.  The  relationship  may  be  dis- 
solved at  any  time  by  either  party,  saving  the  then  existing 
liens  and  rights  of  each.^ 

(a)  In  Wisconsin,  banks  are  prohibited  from  receiving  a 
deposit  from  any  one  whom  they  have  reason  to  know  is  un- 
safe or  insolvent,  and  this  is  held  not  to  contravene  the  Con- 
stitution of  the  United  States  or  of  Wisconsin.  It  is  not  a 
denial  of  the  equal  protection  of  the  laws  to  all  persons. 
U.  S.  Const.,  Amend.  XIV.3 

S  179.  Depositors  should  be  careful  to  deliver  their  Deposits 
to  one  authorized  to  receive  them. — It  is  essential  that  the  de- 
positor should  deliver  his  money  to  an  officer  of  the  bank  who 
may  properly  receive  it  on  behalf  of  the  bank ;  otherwise  the 
bank  will  not  be  liable  for  it,  if  it  should  be  lost  or  embezzled, 
or  should  become  worthless  during  the  course  of  its  transit 
into  the  hands  of  such  proper  officer.^  Ordinarily  banks  in 
the  United  States  have  a  "  receiving  teller,"  so  called,  whose 
special  function  it  is  to  receive  funds  for  deposit.  If  there  is 
such  an  officer,  a  depositor  who  makes  his  payment  into  the 
hands  of  any  other  officer  simply  makes  that  recipient  his 
own  agent  on  this  occasion  for  the  purpose  of  transferring  the 

1  §  178.  Thatcher  v.  Bank  of  State  of  Xew  York,  5  Sandf.  (X.  Y.) 
121. 

•^  Chicago  Marine  &  Fire  Ins.  Co.  v.  Stanford,  28  111.  168. 

8  Baker  v.  State,  54  Wis.  368  (1882). 

0  §  179.   Van   Wagenen   v.    Genesee    Falls    Savings   Association,   88 
Hun  (N.  Y.),  43;  Bickley  v.  Bank,  39  S.  C.  281  (17  S.  E.  977)   (1892)  ; 
Jumper  v.  Bank,  39  S.  C.  296  (17  S.  E.  980)  (1892)  ;  Aeverell  v.  Second 
National  Bank,  19  D.  C.  216  (1890). 
406 


RECEIVING   DEPOSITS.  §  179 

funds  to  the  bank,  or  to  the  receiving  teller.     If  the  officer 
fulfils  his   agency,  and  the  funds,  undiminished   in  amount, 
come   into  the  possession  of   the  bank,  or  reach  the  hands 
of  the  receiving  teller,  then  the   debt  of  the  bank  accrues. 
Otherwise  the  deposit  is  not  completed,  and  the  bank  is  not 
liable,  although  the  fault  be  wholly  that  of  its  officer  to  whom 
the  payment  was  originally  made.     The  corporation  has  not 
delegated  to  him  that  duty,  and  is  not  responsible  for  his  per- 
formance of  it.     Very  often  the  receiving  officer  has  his  pecu- 
liar and  customary  stand  at  the  bank  counter,  made  known  to 
the  public  by  a  sign  bearing  the  words  "  Receiving  Teller." 
In  such  case,  it  would  seem  that  the  payment  should  be  made 
to  him  at  this  stand.     Certainly  it  must  be  made  to  him  within 
the   banking-rooms.     Otherwise,   until   he    has    brought   the 
money  into  the  banking-rooms,  its  safety  is  still  at  the  risk  of 
the  payer.     Neither  will  it  suffice  for  a  depositor,  seeking  to 
evade  the  consequences  of  these  rules  of  law,  to  show  isolated 
cases  of  a  contrary  practice  by  his  bank.     Solitary  instances 
of  payments  of  funds  to  another  officer  than  the  receiving 
teller  are  impotent  to  alter  established  principles.     So  long 
as  such  an  office  exists,  and  the  incumbent  continues  '^   ^ 
exercise  his  functions,  the  money  fo''  '^: 
manner  to  ' 
ing  to  it" 
institv 
and 
diF 


§  181  RECEIVING   DEPOSITS. 

■without  objection  from  anj  officer,  to  receive  money  from  the 
express  company  at  the  bank,  clearing-house,  or  the  express 
office,  a  delivery  to  him  at  the  express  office  was  held 
good.^ 

§  180.  Two  Banks  receiving  Deposits  by  same  Officer.  —  B. 
was  treasurer  of  a  savings  institute  and  cashier  of  a  bank, 
both  of  which  corporations  did  business  over  the  same  counter. 
The  institute  was  by  agreement  to  receive  no  money,  but  all 
its  funds  were  to  be  deposited  in  the  bank.  B.  received  from 
C.  at  the  counter  certain  money  which  she  wished  to  deposit 
in  the  institute  ;  but  B.  embezzled  it  and  did  not  credit  it  to 
the  institute  nor  upon  the  cash-book  of  the  bank.  It  was 
held  that,  as  between  C.  and  the  institute,  B.  received  the 
money  as  its  treasurer ;  yet  as  between  the  bank  and  the 
institute,  under  the  agreement,  it  was  received  by  him  as 
money  of  the  bank,  and  the  bank  was  liable  to  the  institute 
therefor.^ 

So  where  a  check  payable  to  B.  as  treasurer  was  received 
by  him  to  pay  money  due  the  institute,  and  was  indorsed  by 
him  as  treasurer  and  then  as  cashier,  and  remitted  for  col- 
lection, though  no  credit  was  given  the  institute  therefor  on 
^  bank,  the  check  had  become  the  property  of 

'^or  may 

"•hoose 

^be- 

'on 

^f 


RECEIVING   DEPOSITS.  §  181 

in  the  money  and  B.  saying  it  was  to  be  put  to  his  credit, 
which  the  bank  did ;  it  was  held  that  the  bank  was  neg- 
ligent, the  fact  being  that  A.  was  deaf  and  did  not  hear  B.'s 
order.i 

1  §  181.   Winter  v.  Bank  of  New  York,  2  Caiues  ( N.  Y.),  337.     See 
Jackson  Ins.  Co.  r.  Cross,  9  Heisk.  (Tenn.)  283. 


409 


CHAPTER  XIII. 

KINDS     OF     DEPOSIT. 

§  182.   Analysis. 

Special.     §§  189,  565,  567.     See  §§  209,  567  c. 
§  183.  For  safe  keeping  ;  identical  thing  to  be  restored  ;  created  by  express 

contract,  or  implied  from  circumstances,  as  tlie  fact  tliat  money 
is  sealed  up,  or  tiie  deposit  is  not  of  a  nature  that  can  be  credited 
on  general  account  as  cash. 
§  184.  Coin  may  be  a  special  deposit,  by  usage. 

The  presumption  is  in  favor  of  general  deposit  in  case  of  United 
States  coin,  and  in  favor  of  special  deposit  in  case  of  foreign 
coin. 
Specific.     §§  206,  213,  565,  567,  569  et  seq. 
§  185.  Any  deposit  for  a  purpose  other  than  mere  safe  keeping  and  return, 

§  187.  or  credit  on  general  account,  is  a  specific  deposit,  as  collaterals,  or 

money  to  transmit,  or  to  pay  a  note. 
General.     §§  288,  565. 
§  186.  A  deposit  made  with  intent  to  pass  the  property  to  the  bank,  to  be 

§  187.  credited  on  general  account,  is  a  general  deposit,  and  the  presump- 

tion  in  case  of  the  deposit  of  loose  money,  or  of  paper  or  coin 
credited  as  cash,  is  that  such  a  deposit  is  intended,  unless  there  be 
a  contract  or  usage  contra. 
§  186.  (a)   The  addition  of  such  titles  as  "  Clerk,"  "  Treas.,"  &c.  to  the  depos- 
itor's name  does  not  affect  the  nature  of  the  deposit. 
§  186.  (6)    If  checks  or  money  are  sent  with  an  order  to  credit  on  account,  and 
this  is  done,  the  deposit  is  general,  even  though  a  second  clause  in 
the  order  provides  for  paying  a  specific  note. 
Change  of  a  Deposit  from  one  Form  to  Another. 
§  187.  May  be  accomplished  by  an  agreement,  or  order  acted  upon,  or  by 

the  bank's  crediting  generally  a  specific  deposit,  or  the  proceeds 
of  one,  and  the  best  opinion  is,  that  when  this  is  done,  and  the 
specific  funds  mingled  indistinguishably  with  the  general  funds 
of  the  bank,  whether  rightfully  or  not,  the  depositor  can  only 
claim  equally  with  the  general  depositors  and  creditors. 
A  bank  may  put  up  the  amount  due  a  depositor  in  a  package,  and 
tender  it  to  him,  and  if  he  refuses  it,  the  bank  will  thereafter  be 
liable  only  as  a  gratuitous  bailee. 

§  183.  A  Special  Deposit  is  where  the  whole  contract  is 
that  the  thing  deposited  shall  be  safely  kept,  and  that  identi- 
cal thing  returned  to  the  depositor. ^ 

1  §  183.    State  v.  Clark,  4  Ind.  316;  Keene  v.  Collier,  12  Met.  (Ky.)  417  ; 
M.  A.  Association  v.  Jacobs,  13  111.  App.  340. 
410 


COIN.  §  184 

And  this  contract  may  arise  by  express  agreement,  or  by 
the  nature  of  the  deposit;  as  if  it  were  gold  plate,  or  money, 
or  securities  locked  in  a  box,  or  sealed  up  in  a  bag  or  pack- 
age.    (§  102  e,  h.} 

In  such  cases  the  presumption  is  that  the  deposit  is  special, 
though  in  case  of  the  deposit  of  loose  money  the  presumption 
is  the  opposite.^ 

§  184.    When  Deposit  in  Coin  is  Special.  —  In  Maryland  where 
gold  coin  was  deposited  and  an  entry  "  Cash,  (coin)  $3,000," 
was  made  in  the  depositor's  bank-book,  it  was  held  usage  as 
that,  if  the  depositor  could  show  that  this  entry  by  ^^fi'e"o/J' 
usage  or  by  special  circumstances,  imported   an  deposit. 
agreement  to  repay  the  amount  in   coin,  it  could  between 
only  be  so  repaid,  and  that  an  offer  of  legal  tender  gj^^g^g  ^nd 
notes  would  not  discharge  the  bank.     Nor  was  the  foreign  com. 
contract  to  return  in  specie  varied  by  showing  that  the  de- 
positor had  subsequently  drawn  checks  which  had  been  paid 
in  legal  tender  notes,  it  also  appearing  that  he  had  never, 
since  making  the  deposit,  had  a  less  balance    than  $3,000 
to  his  credit  in  the  bank.^     But  the  purport  of  Thompson  v. 
Riggs^  seems  to  be  contrary  to  this.     The  court  there  regard 
the  entry  of  the  word  "  Coin  "  as  a  mere  memorandum,  and 
decline  to  admit  evidence  of  a  usage  of  bankers  to  regard 
it  as  constituting  a  contract  to  repay  in  coin.     The  opinion 
is  unfortunately   obscure,  but  such  seems  to  be  its  import. 
These  cases  do  not  turn  so  much  upon  the  point  of  special 
deposit  as  of  a  coin  contract,  so  called. 

On  principle,  it  would  seem  that  it  would  be  always  proper 
and  legitimate  to  draw  a  distinction,  for  various  purposes,  be- 
tween coin  of  the  United  States  and  coin  of  a  foreign  coun- 
try, which  has  not  been  adopted  into  ordinary  daily  currency 
among  the  people  of  the  United  States.  If  a  deposit  of  the 
former  be  made  in  ordinary  times,  when  coin  is  at  par,  it  must 
be  taken  as  a  general  deposit  unless  otherwise  explained.  But 
if  a  deposit  of  the  latter  be  made,  it  should  be  taken  as  a  spe- 

2  Dawson  v.  Real  Estate  Bank,  5  Ark.  299. 

1  §  184.   Chesapeake  Bank  v.  Swain,  29  Md.  483. 

2  5  Wall.  663. 

411 


§  185  KINDS   OF   DEPOSIT. 

cial  deposit,  in  the  absence  of  express  understanding.  For  it 
is  not  properly  a  payment.  Payment,  except  by  agreement  of 
parties,  could  not  be  made  in  such  material.  The  bank  cannot, 
practically  at  least,  pay  it  out  again  to  its  customers ;  it  can- 
not use  it  for  meeting  the  checks  of  depositors,  not  even  of  the 
very  party  depositing  it,  if  it  be  in  fact  a  general  deposit.  In 
short,  foreign  coin  is,  in  the  United  States,  so  far  in  the  nature 
of  a  commodity  that  it  cannot  pass  either  to  or  from  a  banker 
as  money  unless  by  force  of  an  agreement  between  the  parties, 
either  express  or  to  be  implied  from  their  usual  course  of  deal- 
ing together.  So  if  it  should  be  the  case  that  the  present  or 
any  future  Legal  Tender  Act  should  make  it  sufficient  for  a 
bank  to  return  in  treasury  notes  the  nominal  sum  which  it 
has  received  in  gold  coin  of  the  United  States,  it  yet  would  not 
follow  that  a  similar  return  of  the  nominal  value  of  foreign 
coin  would  be,  as  a  matter  of  logical  necessity,  equally  legiti- 
mate. The  coin  and  the  notes  of  the  United  States  are  both 
currency  of  the  United  States,  and  the  law  simply  refuses  to 
recognize  any  distinction  or  difference  between  them.  But  the 
foreign  coin  is  different  from  both  these  kinds  of  currency  ; 
even  if  it  were  to  be  replaced  by  gold  coin  of  the  United  States, 
still  its  value,  in  the  shape  of  exchange,  would  be  credited  or 
debited  in  making  up  the  judgment.  None  the  less  should  its 
value  be  estimated  in  the  usual  currency  of  the  country,  which 
is  legal  tender,  and  is  the  only  money  practically  in  use.  Fur- 
ther, it  certainly  seems  to  us  that  both  law  and  justice  would 
sustain  the  rule,  that  where  gold  is  practically  a  commodity 
even  when  in  the  shape  of  coin,  when  it  has  ceased  to  circu- 
late and  to  be  transferred  from  man  to  man  as  current  money, 
then  a  deposit  in  it  sliould  no  longer  be  regarded  as  presum- 
ably a  deposit  of  so  many  dollars,  returnable  in  paper  of 
much  less  real  value,  but  should  be  considered  prima  facie 
a  special  deposit,  a  much  as  gold  dust  or  jewels  in  ordinary 
times. 

§  185.   Specific  Deposit.  —  "When  money  is  deposited  to  pay 

a  specified  check  drawn  or  to  be  drawn,  or  for  any  purpose 

other  than  mere  safe  keeping,  or  entry  on  general  account, 

it  is  a  specific  deposit,  and  the  title  remains  in  the  depositor 

412 


SPECIFIC   DEPOSIT.  §  186 

until  the  bank  pays  the  person  for  whom  it  is  intended,  or 
promises  to  pay  it  to  him.^ 

A  deposit  of  money  to  pay  a  specified  note,  or  of  a  bill  to 
be  collected,  or  of  paper  or  goods  as  collateral  security,  or  of 
bonds  in  order  that  the  bank  may  act  as  agent  to  collect  the 
interest  for  the  owner,  is  a  specific  deposit. 

Where  a  check  on  a  bank  is  deposited  with  the  cashier,  for 
which  he  gives  a  certificate  of  the  receipt  with  the  understand- 
ing that  the  amount,  in  money,  is  to  be  delivered  to  a  third 
person  when  certain  abstracts  of  title  are  received  by  the 
cashier  from  such  third  person,  the  deposit  is  specific  and  the 
bank  is  bound  to  pay  in  money  although  no  actual  money  is 
deposited.^ 

When  a  collection  has  been  made,  the  proceeds  may  be 
credited  on  general  account  and  so  become  a  general  deposit, 
or  may  be  kept  separate  as  a  special  deposit,  at  the  pmceeds  of 
option  of  the  bank ;  except  in  Wisconsin  and  Mis-  Collection, 
souri,^  where  a  bank  is  held  to  have  no  right  to  treat  the 
proceeds  of  a  collection  as  its  own  money,  but  must  treat  it 
as  trust  money  in  all  cases ;  and  except  where  the  person  for 
whom  the  collection  was  made  ordered  the  bank  "  to  collect 
and  remit,''^  this  direction  negativing  the  right  to  credit  the 
proceeds  on  general  account. 

§  186.  A  Deposit  is  presumed  to  be  General.  —  "A  deposit  is 
general  unless  expressly  made  special "  or  specific.^ 

Or  the  circumstances  are  such  as  to  imply  that  the  deposit 
is  not  meant  to  be  general,  as  where  money  is  deposited  en- 
closed in  a  box  or  bag,  or  sealed  up.^ 

1  §  185.  Mayei-  v.  Chattahoochee  National  Bank,  51  Ga.  325  ;  Wharton 
V.  Walker,  4  Barn.  &  C.  163;  Cobb  v.  Becke,   6  Q.   B.  930. 

2  American  National  Bank  v.  Presnall,  58  Kan.  69  (48  Pac.  556) 
(1897). 

8  Butler  County  v.  Boatmen's  Bank,  143  Mo.  13  (44  S.  W.  1047)  (1897). 

1  §  186.  Ward  v.  Johnson,  95  111.  215 ;  2  111.  App.  261 ;  Brahm  v. 
Adkins,  77  111.  263;  Neely  v.  Rood,  54  Mich.  134;  Ruffin  v.  Commis- 
sioners, 69  N.  C.  498 ;  In  re  Franklin  Bank,  1  Paige  (N.  Y.),  249  ;  Nichols 
V.  State,  46  Neb.  715  (65  N.  W.  704)  (1894) ;  Alston  v.  State,  92  Ala.  124 
(9  So.  732)  (1890). 

2  Dawson  v.  Real  Estate  Bank,  5  Ark.  297. 

413 


§186  KINDS   OF   DEPOSIT. 

Wherever  the  bank  has  a  right  to  mingle  the  funds  depos- 
ited with  its  own  and  treat  them  as  a  debt  due  from  it,  even 
though  the  money  may  be  trust  property  given  to 
Trust  money.  ^^^  ^^^^^^  ^^  condition  that  it  would  pay  a  certain 

sura  to  the  cestui  during  life,  the  deposit  is  general.^  In  the 
absence  of  evidence  to  show  that  it  is  the  bank's  duty,  by 
agreement  express  or  clearly  implied,  to  keep  the  funds  and 
their  investment  separate,   it   must  be  treated  as  a  general 

deposit. 

(«)  The  addition  of  the  word  "  clerk  "  to  the  name  of  the 
depositor  does  not  change  it  from  a  general  to  a 
special  deposit,  or  alter  the  liability  of  the  bank.* 

A  deposit  by  a  clerk  of  a  court  under  its  order,  and  not  kept 
Public  de-  separate  from  the  other  funds  of  the  bank,  is  gen- 
P°''*-  eral,  and  the  clerk  is  not  preferred  to  other  creditors 

of  the  bank  in  case  of  its  failure.^ 

So  where  the  deposit  is  by  a  judge  of  probate,  although  the 
latter  is  responsible  if  loss  occurs  by  reason  of  the  general 
deposit.^" 

A  general  deposit  of  school  district  funds  by  its  treasurer 
is  not  within  his  power  and  the  deposit  does  not  become 
general.^* 

Where  a  clerk  of  the  U.  S.  District  Court  deposited,  as  a 
unit,  moneys  received  by  assignees  in  bankruptcy,  to  be 
drawn  on  checks  of  the  court,  he  failed  to  deposit  all  the 
money  received  by  him.  The  bank  was  not  bound  to  open  a 
separate  account  for  each  assignee  and  was  not  liable  for 
unpaid  cliecks  after  the  fund  was  exhausted.^'^ 

(b)  Where  F.  sent  a  check  with  the  instruction,  "Credit 
our  account,  and  charge  us  our  note  due  the  4th  inst.,"  and  the 
check  was  collected,  credited,  and  a  matured  note  of  F.'s 
payable  at  the  bank  was  paid  on  the  3d,  leaving  insufficient 

8  Vail  V.  Newark  Savings  Inst.,  32  N.  J.  Eq.  627  (1880). 

4  McLain  v.  Wallace,  103  Ind.  562  (1885). 

6  Otis  V.  Gross,  96  111.  612  (1880). 

6«  Alston  V.  State,  92  Ala.  124  (9  So.  732)  (1890). 

C!'  State  V.  Midland  State  Bank,  52  Neb.  1  (71  N.  W.  1011)  (1897). 

f"^  State  National  Bank  v.  Reilly,   124  111.  464  (14  N.  E.  657). 

414 


DEPOSIT   OF   PAPER.  §  187 

funds  to  pay  the  one  presented  on  the  4th,  it  was  held  that 
this  was  not  a  specific  deposit.  The  direction  to  "  Credit  our 
account"  made  it  a  general  deposit  (and  tlie  sec-  Notaspecific 
ond  clause  was  supererogation,  as  the  banlv  would  be  Credited*' 
have  authority  to  pay  the  note  of  the  4th  anyway),  counMhougU 
and  the  bank  from  the  time  of  crediting  the  sum   *  specific  di- 

°  rection  be 

on   general   account  held  it  subject  to  checks  or   added, 
notes  in  the  order  of  presentment.^ 

Perhaps  the  decision  was  very  just  under  all  the  circum- 
stances, but  if  the  substance  is  to  be  looked  to  rather  than 
hair-line  distinctions,  it  would  seem  that  the  language  used 
by  the  depositor  as  clearly  indicated  his  intent  to  apply  the 
money  sent  toward  payment  of  the  note  of  the  4th,  as  though 
he  had  said,  "  We  send  this  check  to  pay  our  note  of  the  4th 
inst.,"  in  which  case  there  would  have  been  no  doubt  that  the 
bank  could  use  the  money  for  that  purpose  only.  It  has  often 
been  lield  that  any  specific  directions  regarding  the  payment 
of  a  note,  or  appropriation  of  a  deposit,  must  be  regarded." 

§  187.  Deposit  of  Paper.  —  Wlien  checks,  notes,  or  other 
negotiable  paper  are  deposited,  the  question  wliether  they  con- 
stitute a  general  deposit  or  a  specific  deposit  for  collection  is 
one  of  some  difficulty.  The  best  opinion  is,  that  checks  on 
the  depositary  credited  as  cash  form  a  general  deposit,  in  the 
absence  of  agreement  or  usage  to  the  contrary,  and  that  other 
paper  credited  as  cash  is  also  received  on  general  deposit,  sub- 
ject to  the  right  of  the  bank  to  cancel  the  credit  if  the  paper 
is  dishonored  without  its  fault  (there  is  disagreement  on  this 
point).  If  paper  is  credited  as  paper,  it  is  received  as  a  spe- 
cific deposit  for  collection.  This  subject  is  discussed  under 
the  head  of  "  Title  to  Deposits,"  §  565.  If  the  title  passes 
to  the  bank,  a  general  deposit  arises ;  if  not,  a  specific  or  spe- 
cial one,  according  as  the  bank  is  merely  to  keej)  and  return 
the  identical  paper,  or  is  to  do  some  further  act  in  respect 
to  it. 

«  Etna  National  Bank  v.  Fourth  National  Bank,  46  N.  Y.  82. 

'  Judy  V.  Farmers  &  Traders'  Bank,  81  Mo.  404;  Wilson  v.  Dawson, 
52  Ind.  513;  Egerton  v.  Fulton  National  Bank,  43  How.  Pr.  (N.  Y.)  216; 
Wetherell  v.  O'Brien,  140  111.  146  (29  N.  E.  904). 

415 


§  188  KINDS   OF   DEPOSIT. 

§   188.    Change  of  Deposit  from  One  Kind  to  Another.  —  By 

agreement  or  order,  a  special  deposit  may  be  changed  into  a 
general  or  specific  deposit,  or  a  general  into  a  specific  or  spe- 
cial ;  or  a  specific  deposit  may  become  a  special  or  a  general 
deposit,  as  when  paper  is  collected,  and  the  bank  credits  the 
proceeds  to  the  depositor  on  general  account.^ 

Where  a  bank  paid  money  for  C.  under  agreement  that  C. 
would  apply  his  balance  on  the  consequent  debt  to  the  bank, 
and  give  his  note,  which  he  did,  it  was  held  that  this  appro- 
priation of  the  deposit  put  it  out  of  the  reach  of  C.  by  check- 
ing, or  of  his  creditors  by  attachment,  and  on  failure  of  the 
bank  it  should  be  deducted  from  the  amount  of  the  claim  on 
the  note  against  C.^ 

So  when  a  depositor  (D.)  orders  his  bank  (A.)  to  remit 
money  for  him  to  another  bank  (B.),  A.  acts  as  agent  in  trans- 
mitting; and  as  soon  as  the  money  on  deposit  in  A.  is  appro- 
priated by  it  on  the  order,  it  becomes  a  specific  deposit  as  to 
A.,  the  title  being  in  D.,  and  although  A.  deposits  the  money 
in  B.  to  its  own  credit,  the  fund  may  be  claimed  by  D.  against 
the  creditors  of  A.  upon  its  insolvency.^ 

Where  B.  drew  part  of  an  existing  deposit,  taking  a  certifi- 
cate for  the  remainder,  and  asking  that  said  remainder  be 
put  in  a  separate  envelope  and  held  as  a  special  deposit,  the 
promise  of  the  bank  to  do  this  will  not  change  the  fund  from 
general  to  special  unless  the  separation  is  actually  made.* 

^  §  188.  Howard  v.  Roeben,  33  Cal.  399  (special  to  general)  ;  Com. 
National  Bank  v.  Henninger,  105  Pa.  St.  500  (general  to  special  or  spe- 
cific), Chiles  V.  Garrison,  32  Mo.  475. 

2  Chase  v.  Petroleum  Bank,  66  Pa.  St.  169. 

8  St.  Louis  V.  Johnson,  5  Dill.  241 ;  Farley  v.  Turner,  26  L.  J.  Ch.  x.  s. 
710. 

*  Bayor  v.  American  Trust  and  Savings  Bank,  157  111.  62  (41  N.  E. 
622). 


416 


CHAPTER  XIV. 

SPECIAL    DEPOSIT. 

§  189.  Analysis. 

§  190.  Definition.     §§  182,  183. 

§  182.  How  distinguished  from  general  and  specific  deposits. 

§  191.  Power.    §  48. 

Bank  has  inherent  power  to  receive.     (Doubted  in  New 
York.) 
§  192.  Anything  may  be  deposited  specially  that  the  bank  chooses  to 

receive,  and  the  identical  tiling  deposited,  together  with 
§  193.  its  accumulations,  and  all  profits  arising  from  it,  must  be 

§  204.  returned  to  the  depositor,  or  to  one  properlj'  authorized 

§  194.  to  receive    it,  and   if  the  bank  is   lacking  in  due  care 

§  202.  whereby  the  deposit  is  lost,  damaged,  or  delivered  to  an 

§  204.  improper  person,  it  is  liable  to  the  depositor.     §§  184,  565, 

567,  568  b. 
§  194.  The  Measure  of  Care  a  bank  must  bestow  in  case  of  a  special 

deposit  is  the  subject  of  conflict. 
§§  194,  195.  The  best  rule  is  that  a  bank  is  bound  to  ordinary  care,  and 

no  more. 
§§  198, 199.  Sometimes  it  is  said  that  only  gross  negligence  equivalent 

§  196.  to  fraud  will  make  tlie  bank  liable,  and  that  if  it  gives 

the  same  care  as  to  its  own  bank  property  no  fault  can 

be  imputed. 
§  194.  Sometimes  gross  negligence  is  taken  as  the  standard,  and 

(2)  defined  as  the  lack  of  even  so  much  care  as  the  most 

inattentive  person  of  common  sense  exercises  in  his  own 

affairs. 
§  197.  And,  again,  gross  negligence  is  nominally  accepted  as  the 

test,  but  the  court  defines  it  as  lack  of  ordinary  care. 
§§  195,  199.        Some  Things  seem  Certain  amid  the  confusion. 

(a)  A  bank  is  not  liable  for  a  special  deposit  stolen  without  its 

fault. 
§§  201, 202, 204.  (6)  Nor  for  a  loss  by  the  wilful  act  of  an  officer  beyond  the 

sphere  of  duty.     §  102  e,  h. 
§  196  et  seq.  Bad  faith,  or  less  care  than   the  bank  takes  of  its  own  like 

property  will  everywhere  make  it  liable. 
§  200.  No  more  than  ordinary  care  is  ever  required  unless  a 

§  203.  Special  Agreement  is  entered  into  by  the  bank,  which  may 

enlarge  its  contract. 

VOL.  r.— 27  417 


§  191  SPECIAL   DEPOSIT. 

S  203.  Unauthorized  representations  of  an  officer,  unknown  to  the 

directors,  cannot  enlarge  the  contract. 
§  205.  Interest  on  Special  Deposit. 

§  190.  Definition.  —  A  special  deposit,  SO  called,  is  the  plac- 
ing of  something  in  the  charge  or  custody  of  the  bank,  of 
which  specitic  thing  restitution  must  be  made.^  Or  the 
phrase  may  be  applied  to  the  thing  deposited. 

§  191.  Power.  (See  §  48.)  — It  has  generally  been  consid- 
ered that  taking  a  special  deposit  falls  within  tlie  general  scope 
of  the  banking  business,  although  no  express  power  is  con- 
ferred by  the  charter  of  the  bank,  or  by  the  organic  law,  so  to 
do.  It  has  been  regarded  as  an  incident  to  the  general  func- 
tion of  the  institution.! 

But  the  power  of  the  bank  to  make  contracts  of  bailment  of 
this  nature  has  been  questioned  in  some  cases.  Whether  the 
receipt  of  goods  and  securities  on  deposit  for  safe  keeping  is 
within  the  implied  powers  of  national  banks  organized  under 
the  Act  of  Congress  of  1861,  c.  106,  is  a  qucere  by  the  New 
York  Court  of  Appeals.  But  it  is  said  to  be  certain  that 
such  a  function  is  not  ordinarily  or  necessarily  appurtenant 
to  or  a  part  of  the  general  banking  business  which  such  asso- 
ciations are  authorized  by  their  organic  law  to  conduct;  that 
accordingly  the  cashier  has  no  power  to  enter  into  such  a 
contract  of  bailment  with  any  person  on  behalf  of  the  bank 
without  some  special  authority  ;  that  in  the  absence  of  proof 
that  the  cashier  had  received  such  authority  from  the  di- 
rectors, or  that  they  had  ever  sanctioned  or  had  knowledge 
of  such  contract,  or  that  it  was  the  habit  of  the  bank  to  enter 
into  such  undertakings,  or  that  other  national  banks  were 
accustomed  to  receive  deposits  of  like  character  under  like 
circumstances,  it  was  unquestionable  that  the  authority  so  to 

1  §  190.  Dawson  v.  Real  Estate  Bank,  5  Pike,  283  ;  Story  on  Bail- 
ments, §  88 ;  Keene  v.  Collier,  1  Met.  (Ky.)  417  ;  State  v.  Clarke,  4  Ind. 
316 ;  Alston  v.  State,  92  Ala.  124  (2  So.  732)  (1890). 

1  §  191.    Foster  v.  Essex  Bank,  17  Mass.  479;  Marine  Bank  of  Chicago 
V.  Chandler,  27  111.  525;  Scott  v.  National  Bank  of    Chester  Valley,  72 
Pa.  St.  471;  Lancaster  Bank  v.  Smith,  12  P.   F.   Smith  (Pa.),  54;  Cald. 
•well  V.  National  Mohawk  Valley  Bank,  64  Barb.  (N.  Y.)  333. 
418 


WHAT   MAY    BE    DEPOSITED    SPECIALLY.  §  192 

contract  did  not  reside  in  the  cashier,  and  such  a  contract, 
made  by  him,  was  ultra  vires?  The  bank  receiving  such  an 
unauthorized  baihnent,  being  at  best  a  mere  gratuitous  bailee, 
is  liable  only  for  gross  negligence.^ 

It  has  been  said  that,  though  the  act  of  the  cashier  in  re- 
ceiving special  deposits  cannot  alone  bind  the  bank,  yet  if  the 
directors  have  knowledge  of  his  action  in  this  respect,  and  do 
not  interfere  or  object  to  it  or,  if  it  is  the  established  custom 
of  the  bank,  then  the  bank  will  be  bound  by  the  cashier's 
receipt  of  the  property.* 

§  192.  What  may  be  deposited  Specially.  —  Anything  what- 
ever, which  the  bank  may  consent  to  receive  in  charge,  may 
be  the  subject  of  a  special  deposit.  Ordinarily,  a  deposit  of 
money,  at  least  if  it  be  the  current  money  of  the  country  or 
State  where  the  deposit  is  made,  will  be  assumed  to  be  a  gen- 
eral deposit,  unless  the  contrary  is  at  the  time  directly  noti- 
fied, or  in  some  shape  distinctly  implied,  so  that  the  bank 
could  not  reasonably  misunderstand  the  depositor's  intent. 
Thus,  if  a  "sealed  packet,  bag,  box,  or  chest"  be  deposited, 
though  it  contain  ordinary  current  money,  yet  the  manner 
and  condition  of  the  delivery  shall  suffice  to  inform  the  bank 
that  the  deposit  is  designed  to  be  special,  and  not  general. 
Neither  does  it  matter  what  may  be  the  actual  value  of  the 
property  deposited,  or  what  that  value  may  become  during 
the  period  of  deposit. 

If  bills  or  notes  be  deposited  which  are  partially  depre- 
ciated, and  which  continue  to  depreciate  even  to  the  point 
of  worthlessness,  yet  the  bank  is  still  bound  to  restore  them 
specifically  to  the  depositor,  whose  rights  of  ownership  are 
not  affected  by  the  value  of  the  property .^     These  cases  show 

2  First  National  Bank  v.  Ocean  National  Bank,  60  N.  Y.  278;  Wiley 
V.  First  National  Bank  of  Brattleboro,  47  Vt.  546  :  Lloyd  v.  West  Branch 
Bank,  15  Pa.  St.  172.  But  see  Turner  v.  First  National  Bank  of  Keokuk, 
26  Iowa,  562,  which,  by  implication,  would  sustain  a  contrary  view,  since 
it  seems  to  recognize  a  claim  for  a  special  deposit  as  a  debt  of  the  bank. 

8  First  National  Bank  v.  Ocean  National  Bank,  60  N.  Y.  278. 

<  First  National  Bank  v.  Graham,  79  Pa.  St.  106. 

1  §  192.  Dawson  v.  Real  Estate  Bank,  5  Pike,  283-,  Green  v.  Sizer,  40 
Miss.  530.     And  see  Maynand  v.  Newman,  1  Nev.  271. 

419 


§  193  SPECIAL  DEPOSIT. 

that  it  has  been  thus  held,  even  where  the  deposit  was  of 
"  Confederate  money,"  and  of  the  so-called  "  Cotton  money," 
current  in  the  revolted  States  during  our  last  war.  The  ille- 
gality and  wrongfulness  attendant  upon  the  original  issue 
and  subsequent  using  of  such  money  was  not  sufficient  ex- 
cuse to  exonerate  the  bank  from  returning  a  special  deposit 
of  it  in  specie.  But  other  cases  are  to  a  contrary  purport 
upon  this  precise  point.^ 

§  193.  The  very  Thing  and  its  Accumulations  or  Profits  must 
be  returned. — After  the  passage  of  the  Legal  Tender  Acts, 
so  called,  it  was  held,  in  Pennsylvania  and  Louisiana,  that  a 
deposit  of  so  much  gold  coin,  for  which  a  certificate  of  deposit 
was  returned,  could  yet  be  repaid  in  treasury  notes.^  It  was 
regarded  as  a  general  deposit  of  money,  not  as  a  special  de- 
posit of  specific  coins.  In  Wisconsin  it  was  less  justifiably 
held  that  a  deposit  of  coin  as  collateral  for  a  loan  —  which 
is,  in  fact,  at  least  for  the  purposes  involved  in  this  discus- 
sion, a  special  deposit  of  that  coin  —  could  be  discharged 
by  the  return  of  the  same  nominal  amount  in  the  legal 
tender  treasury  notes  of  the  United  States.^  In  Indiana  it 
was  properly  held,  on  the  contrary,  that  where  a  special 
deposit  of  gold  coin,  partly  of  the  United  States  and  partly 
foreign,  had  been  converted  by  the  bailee,  the  bailor  should 
be  allowed  to  recover  the  real  value  of  the  amount  in  the 
treasury  notes,  as  contradistinguished  from  the  nominally 
equivalent  sum.^  The  bailee  must  deliver  to  the  bailor  the 
profit  accruing  from  the  special  deposit.*  No  difference  is 
recognized  between  a  bank  note  and  gold  coin  in  payment  of 
a  debt,  but  when  a  bailee  of  specific  coin  has,  in  violation 
of  his  duty,  sold  it  for  a  premium,  he  cannot  hold  the  profit 
and  pay  the  bailor  in  bank  notes  equal  nominally  to  the 
coin.     No  one  has  a  right  to  make  a  profit   by  violation  of 

^  See,  contra,  Nelligan  v.  Citizens'  Bank  of  Louisiana,  21  La.  An.  332 ; 
Foster  v.  Bank  of  N(3w  Orleans,  id.  33S. 

1  §  193.  Sandford  v.  Hays,  52  Pa.  St.  26 ;  Gumbel  v.  Abrams,  20 
La.  An.  568 ;  and  see  Thompson  v.  Riggs,  5  Wall.  663. 

2  Warner  v.  Sauk  County  Bank,  20  AVis.  492. 

3  Bank  of  the  State  v.  Burton,  27  Ind.  426. 
*  Story  on  Bailment,  §§  122,  123,  269. 

420 


LIABILITY   OF    BANK.  §  194 

his  legal  duty,  and   the  law  will  not  allow  him   to  retain  it 
if  he  has.^ 

§  194.  Liability  of  the  Bank  for  a  Special  Deposit.  —  General 
Review  of  the  Subject.  —  As  to  the  measure  of  res'ponsibility 
of  the  bank  in  the  case  of  a  special  deposit,  a  decision  may  be 
found  for  any  desired  standard. 

(1)  Some  cases  say  that  the  bank  as  a  gratuitous  bailee  is 
only  bound  to  such  care  as  is  consistent  with  good  faith,  hold- 
in<'"  that  cross  neo:li<!;ence  and  fraud  are  one  and   Great  negii- 

°  n>    .  T      1       1      -1  gence  held  to 

the  same,  and  that  it  is  sumcient  if  the  bailee  ex-   be  fiaud. 
ercises  the  same  care  of  the  deposit  as  of  his  own  like  goods.^ 
The  vast  weight  of  authority  is  against  this.^ 

(2)  Other  cases  hold  tliat  gross  negligence  is  the  test,  and 
that  there  is  a  shade  of  difference  between  gross  negligence 
and  fraud:  a  man  might  leave  a  purse  of  gold  on    Gross  negii- 

'^  1  o  gence  lack  of 

the  table  of  a  hotel,  and  although  it  would  be  gross  slight  care. 
carelessness  it  would  not  be  fraud.  These  cases  define  gross 
negligence  to  be  lack  of  such  care  as  the  least  attentive  per- 
sons of  common  sense  take  of  their  own  affairs.^  Tlie  bank, 
as  a  gratuitous  bailee,  is  liable  only  for  gross  negligence,  and 
for  the  lack  of  that  "  care  which  the  most  inattentive  persons 
take."  4 

(3)  Again  it  is  held  that  a  bank  is  only  responsible  as  gra- 
tuitous bailee  for  gross  negligence,  but  that  gross  negligence 
is  lack  of  ordinary  care.^  Such  a  ruling,  though  Gross  negii- 
doing  justice  between  the  parties,  introduces  confu-  fa"k  o/ordi- 
sion  into  the  standards  of  the  law  by  confounding  "'^'"^  ^^'■^• 
negligence  and  gross  negligence.  There  are  three  degrees  of 
diligence,  —  great,  ordinary,  and  slight;  —  and  three  corre- 
sponding degrees  of  negligence, —  slight  negligence,  or  lack 
only  of  great  care  ;  simple  negligence,  or  lack  of  ordinary  care  ; 
but  above  slight  care ;  and  gross  negligence,  or  lack  even  of 

8  Bank  of  the  State  v.  Burton,  27  Ind.  426. 

1  §  194.    Essex  Bank  case  below,  and  Jones  on  Bailment,  10,  46,  119. 
'■^  Story  on  Bailment,  §  22. 

8  Vaughan  v.  Menlove,  3  Bing.  N.  C.  468 ;  Tooipkins  v.  Saltmarsh,  14 
Serg.  &  R.  Pa.  275. 

^  De  Haven  v.  Kensington  National  Bank,  81  Pa.  St.  95. 

5  First  National  Bank  v.  Ocean  National  Bank,  60  N.  Y.  295. 

421 


§  194  SPECIAL  DEPOSIT. 

slight  care,  or  such  as  persons  of  common  sense,  but  very 
little  prudence,  take  of  their  own  concerns. 

(4)  The  true  rule  seems  to  be  that  in  the  absence  of  special 
The  true         agreement  the  bank  is  bound  to  exercise  ordinary 

rule,  ordi-  ^  •' 

nary  care.       carc,  and  uo  more,  in  keeping  a  special  deposit.^ 

Loss  caused  by  the  negligence  of  A.  should  be  borne  by  A. ; 
the  development  of  prudence  and  the  repression  of  negligence 
is  consciously  or  unconsciously  one  of  the  great  objects  of  the 
law ;  and  whether  for  reward  or  not  one  undertakes  to  do  a 
certain  thing,  he  should  be  held  to  ordinary  care  in  doing  it, 
except  in  special  cases,  just  as  every  man  is  held  responsible  to 
others  for  loss  caused  to  them  hy  lack  of  ordinary  care  on  his 
part  in  the  conduct  of  his  own  affairs,  even  where  there  is  no 
relation  of  contract  at  all ;  otherwise  the  risk  would  be  run  of 
throwing  loss  upon  prudence  rather  than  imprudence,  and  de- 
veloping and  sending  down  to  future  generations  qualities 
detrimental  to  social  life,  thus  failing  to  carry  out  the  mis- 
sion of  the  law,  the  purifying  of  the  blood  of  society. 

It  is  a  question  of  negligence  between  the  bailor  and  bailee. 
If  the  bailor  knows  the  character  of  a  man,  and  gets  him  as  a 
favor  to  keep  goods  for  the  bailor,  the  latter  may  well  be  held 
to  be  entitled  to  expect  only  such  care  as  he  knows  the  bailee 
is  in  the  habit  of  giving  to  his  own  affairs.  Or  if  A.  urges  B. 
to  act  as  a  gratuituous  bailee,  B.  not  holding  himself  out  in 
such  a  character,  it  might  be  argued  that  A.  should  be  held  to 
adopt  B.  as  he  is,  much  as  he  would  adopt  a  shovel  or  a  steam- 
engine,  within  the  limits  of  good  faith,  though  it  is  by  no 
means  certain  that  in  any  case  where  B.  consents  to  act  and 
A.  is  ignorant  of  his  character  there  should  be  any  yielding 
of  the  rule  requiring  ordinary  care.  But  when  B.  holds  him- 
self out  as  willing  to  keep  deposits,  and  as  having  facilities  for 
that  purpose,  surely  A  cannot  be  negligent  in  taking  advan- 
tage of  the  offer  ;  and  if  B.  should  be  negligent  and  loss  follow, 
the  detrimental  conduct  from  which  such  loss  flows  is  clearly 
B.'s  alone,  and  he  should  suffer.  Even  if  the  question  of  con- 
sideration is  considered  of  importance,  it  cannot  be  doubted 
that  an  institution  whose  avowed   object  is  money   making 

6  First  National  Bank  v.  Zent,  39  Ohio  St.  105. 
422 


LIABILITY   OF   BANK.  §  195 

would  never  pursue  the  business  of  receiving  deposits  if  it  did 
not  consider  such  dealings  advantageous  to  itself.  The  draw- 
ing of  paying  business  by  this  sort  of  accommodation  is  as 
solid  a  reason  for  receiving  deposits  as  a  direct  reward ; 
moreover  the  mere  entering  upon  any  trust  is  deemed  in  the 
law  a  sufficient  consideration  for  the  contract  to  perform  the 
duties  of  the  trust  in  a  proper  manner.     See  §  215. 

(5)  On  the  cases  only  two  things  seem  to  be  certain  in  this 
matter.  1st.  The  bank  will  be  everywhere  held  liable  for  loss 
arising  from  bad  faith  of  its  officers  in  the  sphere  . 

o  '  Two  things 

of  their  duties.     2d.  A  bank  will  nowhere  be  held   certain  on  the 

,.,.  .  ,      ,  cases. 

to    more  than  ordniary  diligence   in  respect   to  a 

special  deposit,  nor  for  a  theft  or  other  wilful  act  of  an  officer 

out  of  the  line  of  his  employment. 

These  are  the  limits.  Within  them  the  States  range  in 
procession. 

§  195.  Cases  upon  the  Bank's  Liability  for  Special  De- 
posits.—  A  recent  New  York  case  contains  a  very  elaborate 
discussion  concerning  the  liability  of  banks  for  special  depos- 
its which  are  stolen  while  in  their  custody.     The    ^     .  ,  , 

•'  Special  de- 

deposit  in  this  instance   consisted   of   a  parcel  of    posit  stolen. 

,  11  mi  J    •    i      ii         Bank  liable 

bonds,  left  with  the  teller.  They  were  put  into  the  for  its  gross 
safe  where  the  bank's  own  securities  were  kept ;  "^^  'S^nce. 
but  the  safe  was  accessible  to  any  person  entering  the  bank ; 
the  safe  door  was  sometimes  left  open;  and  the  interior  of 
the  safe  was  not  always  within  view  of  any  officer  of  the  bank. 
There  was  evidence  to  show  that  the  theft  probably  took 
place  in  the  daytime  by  some  one  coming  in  from  the  street. 
The  evidence  justified  the  finding  of  gross  negligence.  Prop- 
erty of  the  bank  also  was  stolen  at  the  same  time.  But  the 
court  said  that  this  was  not  conclusive  that  the  bank  was  not 
guilty  of  gross  negligence,  and  consequently  liable.^ 

Where  the  cashier  places  his  indorsed  note  in  the  private 
envelope  of  a  depositor,  in  the  vault  of  the  bank,  as  collateral 
security  for  his  individual  note  to  the  depositor,  the  bank  is 
not  liable  for  failure  to  present  the  note  for  payment  and  to 
notify  the  indorser  of  non-payment.     The  note  being  merely 

1  §  195.    Pattison  v.  Syracuse  National  Bank,  80  N.  Y.  94. 

423 


§  196  SPECIAL   DEPOSIT. 

a  special  deposit  with  the  bank  it  is  constructively  in  the  de- 
positor's possession.^ 

§  196.  Banks  frequently  receive  special  deposits  from  their 
customers  gratuitously,  accepting  no  pay  and  deriving  no  bene- 
fit from  the  act,  which  is  doue  solely  for  the  depositor's  ac- 
commodation. Assuming  that  tlie  bank  has  authority  to  enter 
into  such  an  undertaking,  it  is  at  best  a  naked  bailment,  and 
the  bank  is  bound  only  to  keep  the  property  with  the  same 
care  with  which  it  keeps  its  own  property  of  the  like  descrip- 
tion. It  is  responsible  only  for  gross  negligence,  like  any 
other  bailee  without  reward.^  It  need  keep  no  further  super- 
vision over  the  officers  who  have  direct  charge  and  control  of 
it  than  it  keeps  over  the  same  officers  having  the  same  charge 
and  control  of  its  own  property  of  the  same  kind.^  So  if  the 
property  be  placed  in  the  vaults  of  the  bank,  together  with  its 
own  similar  property,  and  be  thence  stolen  by  the  officer  who 
has  charge  of  the  vaults,  the  bank  is  not  liable  to  the  depos- 
itor. "  The  bailee  will  be  answerable  only  for  gross  tiegligenee, 
wJiich  is  considered  equivalent  to  a  breach  of  faith ;  as  every 
one  who  receives  the  goods  of  another  in  deposit 

Gross  ne-  ,  ,  ,  -n    ■    i  i 

g;ect  meas-  impliedly  stipulates  that  he  will  take  some  degree 
ca^ethede^-  of  carc  of  them.  The  degree  of  care  which  is  neces- 
Elkes^o^his  ^ary  to  avoid  the  imputation  of  had  faith  is  meas- 
own goods.  ^^g^  j^  ^;^g  carefulness  which  the  depositary  uses 
toward  his  own  property  of  a  similar  kind.  For  although  that 
may  be  so  slight  as  to  amount  even  to  carelessness  in  another, 
yet  the  depositor  has  no  reason  to  expect  a  change  of  char- 
acter in  favor  of  his  particular  interest;  and  it  is  his  own 
folly  to  trust  one  who  is  not  able  or  willing  to  superintend 
with  diligence  his  own  concerns."  In  this  case  the  special 
deposit  was  a  cask  containing  gold  coin,  which  was 
posit'act  out-  fraudulently  taken  by  the  cashier  and  clerk  of  the 
side  of  duty.  ^^^^^^  rpi^g  bank  was  declared  not  liable,  because 
the  theft  was  a  private  act.  "  If  the  cashier  had  any  official 
duty  to  perform  relating .  to  the  subject,"  said  the  court,  "  it 

2  Bohl  V.  Carson,  63  Fed.  26. 

1  §  196.    Chattahoochee  National  Bank  v.  Schley,  58  Ga.  369. 

2  First  National  Bank  v.  Ocean  National  Bank,  60  N.  Y.  278. 

42i 


LIABILITY   OP   BANK.  —  ORDINARY    CASE.  §   197 

was  merely  to  close  the  doors  of  the  vault  when  banking  hours 
were  over,  that  this,  together  with  other  property  there  should 
be  secure  from  theft.  He  cannot,  therefore,  be  considered  in 
any  view  as  acting  within  the  scope  of  his  employment  when 
he  committed  the  villany ;  and  the  bank  is  no  more  answer- 
able for  this  act  of  his  than  it  would  be  if  he  had  stolen  the 
pocket-book  of  any  person  who  might  have  laid  it  upon  the 
desk  while  he  was  transacting  some  business  at  the  bank."^ 

§  197.  Gross  Negligence  "  is  incapable  of  precise  defini- 
tion, and  its  application  and  use  may  lead,  in  some  cases,  to 
results  unsatisfactory;  but  that  comes  as  directly  from  the 
nature   and   extent  of   the  duty  in  the   particular    _,  ,   , 

•;  '  Gross  neglect 

case,  as  from  the  phrase  by  which  a  breach  of  the   as  to  special 

•  1        iTri  -1  T      deposit  is  the 

duty  IS  expressed.  VV  liat  constitutes  gross  ncgh-  lacic  of  ordi- 
gence,  that  is,  such  want  of  care  as  would  charge  a  "^'"^  ^^^^' 
bailee  for  loss,  must  depend  very  much  upon  the  circum- 
stances to  which  the  term  is  to  be  applied.  It  has  been  de- 
fined to  be  the  want  of  that  ordinary  diligence  and  care  which 
a  usually  prudent  man  takes  of  his  own  property  of  the  like 
description.  This  definition  is  given  by  a  reference  to  the  de- 
gree of  care,  rather  than  the  degree  of  negligence,  which  may 
be  the  easier  and  more  intelligible  mode  of  defining  the  extent 
of  the  obligation,  and  the  measure  of  duty  assumed.  Ordinary 
care  as  well  as  gross  negligence,  the  one  being  in  contrast  ivith 
the  other,  must  be  graded  by  the  nature  and  value  of  the  prop- 
erty, and  the  risks  to  which  it  is  exposed.  A  depositor  of 
goods  or  securities  for  safe  keeping  with  a  gratuitous  bailee, 
can  only  claim  that  diligence  which  a  person  of  common 
sense,  not  a  specialist  or  expert  in  a  particular  department, 
should  exercise  in  such  department."  ^ 

"  Independent  acts  of  negligence,  disconnected  with  the 
loss,  were  not  properly  admissible  in  evidence.  The  defend- 
ant was  not  chargeable  with  negligence  or  want  of  care  for 
not  acting  upon  facts  or  circumstances  not  coming  to  the 
knowledge    of   its  directors   or  officers.     Facts   not  brought 

3  Foster  v.  Essex   Bank,    17  Mass.  479  ;  Scott  v.  National    Bank  of 
Chester  Valley,  72  Pa.  St.  471 ;  but  see  Leach  v.  Hale,  31  Iowa,  69. 
1  §  197.    First  National  Bank  v.  Ocean  National  Bank,  60  N.  Y.  295. 

425 


§  199  SPECIAL   DEPOSIT. 

home  to  them,  tending  to  show  tlmt  the  property  was  exposed 
to  loss  from  some  miusual  cause,  to  some  peril  growing  out 
of  peculiar  circumstances,  were  not  admissible  in  evidence 
^    ,  atjainst  the  defendant.     The  bailee  was  only  called 

Bank  not  ° 

bound  to  pro-  upon  to  take  such  care  as  became  necessary  to  pro- 
nJiknown""  tcct  it  af/ainst  risks  known  to  it,  or  of  which  it  had 
""''"■  notice.     There  was  great  latitude  in  the  evidence  on 

the  part  of  plaintiffs.  .  .  .  The  purpose  and  end  was  to  show 
that  the  place  of  deposit  was  peculiarly  and  extraordinarily 
exposed  to  perils  from  robbers  at  the  time,  calling  for  more 
than  the  usual  cautions  from  the  bailee.  This  was  com- 
petent, so  far  as  facts  and  circumstances  proved  to  exist 
were  communicated  to  the  officers  of  the  bank,  but  no 
farther."  2 

§  198.  "  It  is  usually  stated  that  a  bailee  who  is  to  receive 
no  reward  is  liable  only  for  gross  negligence,  and  some  of  the 
Qfji^,  cases   hold  that  such  a  bailee  is  responsible  only 

Bank" must      {q^  want  of  that  care  which  is  taken  by  the  most 

exercise  or-  tjj.ii 

diiiarycare  inattentive.  But  that  rule  cannot  be  applied  to  all 
speciardel  cascs  of  bailment  without  reward,  for  when  securi- 
^"^'^'  ties  are  deposited  with  persons  accustomed  to  receive 

such  deposits,  they  are  liable  for  any  loss  occurring  through  the 
want  of  that  care  which  good  business  men  would  exercise  in  re- 
gard to  property  of  such  value.  This  was  the  degree  of  care 
required  of  the  bank  in  this  case.  Were  the  bonds  lost  for  the 
want  of  such  care?  They  were  demanded,  .  .  .  and  the  only 
excuse  given  for  not  delivering  them,  as  stated  in  the  answer 
of  the  bank,  was,  that  '  the  said  bank,  not  having  any  such 
bonds  in  its  possession,  did  not  deliver  any  to  the  plaintiffs.' 
No  explanation  was  offered,  and  no  reason  given,  for  the  bonds 
not  being  in  the  possession  of  the  bank.  We  hold  that  under 
these  circumstances  the  proof  of  demand  and  the  refusal  to 
deliver  was  sufficient  evidence  that  the  bonds  had  been  lost 
by  the  gross  negligence  of  the  bank."  ^ 

§  199.    In  England,  it  has  been  held  that  where  securities 
are  deposited  by  a  customer  with  his  banker  for  safe  keeping, 

2  Ibid. 

1  §  198.    First  National  Bank  i-.  Zent,  39  Ohio  St.  105. 

426 


LIABILITY   OF   BANK.  §  200 

or  for  the  purpose  of  having  the  interest  thereon  collected  for 
him  by  the  banker,  the  banker  is  not  liable  if  the    Special  de- 

•'  '  posit. 

securities  be  stolen,  unless  the  loss  has  been  caused   England. 
or  aided  by  his  gross  or  contributory  negligence.^ 
The  court  said  :  "  It  is  clear  that  the  bank  in  this  case  was 
not  bound  to  more  than  ordinary  care  of  the  deposit  intrusted 
to  it,  and  that  the  negligence   for  which  alone  it  could  be 
made  liable  would  have  been  the  want  of  that  ordi-    .  ,. 

Ordinary 

narv  diligence  which  men  of  common  prudence  gen-   care  the 

"  ,      .  PI,    .  rn,  limit. 

orally  exercise  about  their  own  atiairs.  ihere  was 
an  entire  failure  of  evidence  of  the  want  of  that  ordinary 
care  which  the  bank  was  bound  to  bestow  on  the  plaintiff's 
deposit.  The  defendant's  evidence  added  to  the  plaintiff's 
case  the  important  fact,  that  in  the  strong-room  in  which 
the  plaintiff's  debentures  were  kept  there  were,  beside  the 
boxes  of  other  customers,  bills,  securities,  and  specie,  the 
property  of  the  bank,  to  a  very  considerable  amount.  It  may 
he  admitted  not  to  he  sufficient  to  exempt  a  gratuitous  hailee 
from  liahilify  that  he  keeps  goods  deposited  with  him  in  the 
same  manner  as  he  keeps  his  oivn,  though  this  degree  of  care 
will  ordinarily  repel  the  presumption  of  gross  negligence.  But 
there  is  no  case  which  puts  the  duty  of  a  hailee  of  this  kind 
higher  than  this,  that  he  is  bound  to  take  the  same  care  of  the 
property  intrusted  to  him  as  a  reasonably  prudent  and  careful 
man  may  fairly  be  expected  to  take  of  his  own  property  of  the 
like  description.     This  was  in  effect  the  question    ^ 

'  .  1  T        1     Own  care 

left  to  the  jury  in  Dorman  v.  Jenkins,  where  Lord  standard  de- 
Denman  told  them  that  it  did  not  follow  from  the 
defendant's  having  lost  his  own  money  at  the  same  time  as 
the  plaintiff's,  that  he  had  taken  such  care  of  the  plaintiff's 
money  as  a  reasonable  man  would  ordinarily  take  of  his  own  ; 
and  he  added  that  the  fact  relied  upon  was  no  answer  to  the 
action,  if  they  believed  that  the  loss  occurred  from  grosa 
negligence."  ^ 

§  200.    A  bank  is  not  bound  to  use  more  than  ordinary 

1  §  199.    Giblin  v.  M'Mullen,  2  L.  R.  P.  C.  317;  38  L.  J.  P.  C.  25. 

2  Giblin  v.  M'Mullen,  2  L.  R.  P.  C.  317;  38  L.  J.  P.  C.  25. 

427 


I  202  SPECIAL   DEPOSIT. 

Bank  not  prudcncG  ill  the  care  of  a  special  deposit,  and  it  is 
mo're'than  or-  to  bc  the  general  tendency  of  tlie  courts  to  be  satis- 
diiiary  care.     f^^Q^  ^j^^]^  j^y  jggs  than  Ordinary  care.^ 

The  bank  must  keep  a  special  deposit  under  the  same  safe- 
guards afforded  to  its  own  like  property  but  merely  leaving 
the  safe  door  open  during  business  hours,  or  leaving  the  bank 
at  noon  in  charge  of  only  one  person,  is  not  even  negligence, 
let  alone  gross  negligence.^ 

§  201.  When  the  president  for  his  own  purposes  hypothe- 
cates bonds  that  are  held  by  the  bank  on  special  deposit,  and 
Wilful  act  of  they  are  lost,  the  bank  cannot  be  held  unless  the 
yonrdutv  officers  kncw  of  tlie  president's  conduct,  or  were 
niTke"bank  E^^^^Y  ^f  gross  ncglcct  in  the  discharge  of  their 
liable.  duties,  and  this  neglect  opened  the  door  to  the  fraud, 

or  lost  opportunities  of  recovering  the  property.  A  bank  is 
not  liable  by  reason  of  the  crime  or  any  wilful  act  of  an  offi- 
cer out  of  the  course  of  his  duty.^     (§  102  e,  h.) 

If  a  bank  is  guilty  of  no  negligence  in  the  selection  or  su- 
pervision of  its  officers  it  cannot  be  held  for  property  stolen 
by  them. 

A  bank  is  not  liable  for  the  act  of  its  officer  outside  of  his 
sphere  of  duty,  as  every  embezzlement  is,  e.  g.  in  case  of  break- 
ing open  a  cask  of  gold  coin  on  special  deposit  in  the  bank, 
and  taking  the  money.  It  was  not  the  duty  of  the  officer  as 
acting  for  the  bank  to  open  the  cask;  he  was  going  beyond 
his  authority,  and  the  bank  was  not  answerable  for  his  acts.^ 

§  202.  When  bonds  were  left  for  safe  keeping  and  were 
stolen  by  the  teller,  the  court  said  :  "  Being  a  bailment  merely 
for  safe  keeping  for  the  benefit  of  the  bailor,  and  without  com- 
pensation, it  is  evident  the  dishonest  act  of  the  teller 
tii?lfficer"s  was  in  no  way  connected  with  his  employment. 
^"^^''  So  long  as  the  bank  was  ignorant  of  the  dishonesty 

1  §  200.  Griffith  v.  Zipperwick,  28  Ohio  St.  388 ;  First  National  Bank 
V.  Zent,  3.9  Ohio  St.  10.');  Levy  v.  Pike,  2.3  La.  An.  630;  Hills  v.  Daniels, 
15  id.  280  ;  First  National  Bank  v.  Ocean  National  Bank,  60  N.  Y.  295. 

2  Whitney  v.  First  National  Bank,  S.j  Vt.  \b\. 

1  §  20L  First  National  Bank  of  AUentown  v.  Rex,  89  Pa.  St   308. 
•^  Fo.ster  v.  Essex  Bank,  17  Mass.  479;  Ray  v.  Bank,  10  Bush  (Ivy.),  344; 
Finucane  v.  Small,  1  Esp.  R.  315 ;  Gibliu  v.  M'Mulleu,  2  L.  R.  P.  C.  317. 
428 


LIABILITY   OF   BANK.  §  202 

of  the  teller,  and  trusted  him  with  its  own  funds,  confiding  in 
his  character  for  integrity,  it  would  be  a  harsh  rule  that  would 
hold  it  liable  for  an  act  not  in  the  course  of  business  of  the 
bank,  or  of  the  employment  of  the  officer.  There  was  no 
undertaking  to  the  bailor  that  the  officers  should  not  steal. 
Of  course,  there  was  a  confidence  that  they  would  not,  but 
not  a  promise  that  they  should  not.  .  .  .  Nothing  short  of  a 
knowledge  of  the  true  character  of  the  teller,  or  gross 
of  reasonable  grounds  to  suspect  his  integrity,  fol-  "^s^ect. 
lowed  by  a  neglect  to  remove  him,  can  be  said  to  be  gross 
negligence,  without  raising  a  contract  for  care  higher  than  a 
gratuitous  bailment  can  create.  "  ^ 

The  fact  that  for  two  years  he  has  falsified  the  books  of  the 
bank  without  being  discovered  was  held,  in  the  cited  case, 
not  to  be  such  negligence  as  to  render  the  bank  liable.  For 
the  negligence  constituting  the  ground  of  liability  must  be 
such  as  enters  into  the  cause  of  the  loss  ;  but  the  loss  here 
was  chargeable  to  the  immediate  act  of  dishonesty  of  the 
teller,  not  to  the  fact  that  he  had  purloined  the  bank's  funds 
or  falsified  the  bank's  books. 

A  bank  is  not  liable  for  loss  of  a  special  deposit  by  robbery, 
there  being  neither  fraud  nor  gross  negligence  im-     „  , , 

^  o  o    o  Kobbery. 

putable  to  it.^ 

More  proof  must  be  given  by  the  owner  than  merely  that 
the  bonds  were  stolen,  or  he  cannot  recover.^ 

When  the  plaintiff's  evidence  fails  to  exclude  the  possibility 
of  loss  by  other  means  than  the  negligence  of  the  bank,  as 
where  the  evidence  tends  to  show  that  the  bank  did  use  due 
care,  and  there  is  no  evidence  of  negligence  in  the  selection 
of  cashier  or  of  clerks,  and  the  only  evidence  of  negligence  is 
that  provided  by  the  mere  fact  of  loss,  although  the  presump- 
tion of  innocence  will  protect  the  cashier  and  clerks  from  a 
charge  of  theft,  yet  it  will  not  "  sustain  the  burden  of  proof 
in  an  action  against  the  bank  for  negligence."  ^ 

1  §  202.    Scotfc  V.  National  Bank,  72  Pa.  St.  471. 

2  Whitney  v.  First  National  Bank,  55  Vt.  154  (1882). 
8  Wylie  V.  Northampton  Bank,  15  Fed.  Rep.  428. 

*  Smith  V.  First  National  Bank,  99  Mass.  605.     It  seems  to  be  law 

429 


§  203  SPECIAL    DEPOSIT. 

§  203.  Varying  the  Contract  by  Agreement.  —  If  any  Special 
arrangement  should  be  entered  into  by  which  the  bank  should 
be  enabled  to  derive  any  advantage  or  profit  from  the  receipt 
and  custody  of  the  deposit,  or  if  it  should  accept  pay  for  the 
care  of  the  same,  then  its  duties  would  at  once  be  changed  to 
those  of  an  ordinary  bailee  for  hire.  Then,  as  in  the  sup- 
posed instance  of  robbery  or  embezzlement  by  one  of  its  own 
officers,  it  would  be  no  exoneration  from  liability  to  show 
that  the  same  care  had  been  taken  of  this  as  of  the  bank's 
funds,  and  that  the  same  officer  had  in  the  same  way  plun- 
dered the  bank  itself.  The  corporation  would  still  be  held  to 
make  good  the  bailor's  loss.  But  it  is  clear  that  some  such 
direct  advantage,  operating  by  way  of  consideration  for  the 
assumption  of  increased  responsibility,  must  accrue  to  the 
bank  to  place  it  under  such  an  obligation.  An  express  stipu- 
lation or  acknowledgment,  given  by  the  cashier  in  writing, 
to  the  effect  that  the  property  has  been  received  by  the  bank 
"  for  safe  keeping,"  does  not  make  the  transaction  other  than 
a  naked  bailment,  as  above  stated.^ 

(a)  Showing  to  the  depositor  the  arrangements  of  the  bank 
for  safe  keeping  of  deposits  is  not  a  representation  increasing 
the  obligation  or  liability  of  the  bank.^  But  representations 
may  be  made  to  induce  parties  to  deposit,  which  may  call  for 
greater  care  on  the  part  of  the  bank,  or  by  agreement  the 
bank  may  even  become  an  insurer  of  the  deposit,  as  where  a 
written  promise  was  given  to  return  bonds  on  demand  or  pay 
their  value.^ 

that  in  trover  proof  of  demand  and  refusal  will  throw  the  burden  on  the 
defendant,  to  show  a  good  excuse  for  refusal  to  deliver  ;  but  that  iu  as- 
sumpsit or  action  on  the  case  the  burden  is  on  the  plaintiff  to  make  out 
negligence.  See  Story  on  Bailments,  §  213.  This  does  not  commend 
itself  very  strongly,  for,  the  facts  being  the  same,  the  form  of  action  should 
not  be  allowed  to  shift  the  burden.  The  substantial  and  common  sense 
fact  is,  that  the  defendant,  having  failed  to  deliver,  should  justify  him- 
self, especially  as  the  facts  which  can  accomplish  that  object  are  pecu- 
liarly within  his  own  knowledge.  See  also  Merchants'  Bank  v.  Carhart, 
95  Ga.  394  (22  S.  E.  628)  (1894). 

1  §  203.    Foster  v.  Essex  Bank,  17  Mass.  479. 

2  Hale  V.  Rawallie,  8  Kans.  136  ;  Maury  v.  Coyle,  34  Md.  235. 

430 


SPECIAL   DEPOSIT.  §  204 

(5)  A.,  at  the  solicitation  of  the  cashier  of  a  bank,  depos- 
ited with  it,  for  safe  keeping,  certain  bonds,  taking  a  receipt 
therefor,  stating  that  they  were  received  "for  de-    ^gpresenta- 
posit  in  the  vault  of  this  bank  at  the  risk  of  the   tionofcash- 

^  .  .  ,  Kr  iinau- 

depositor."  Held,  that,  in  absence  of  any  evidence  thorized  and 
that  the  bank  was  accustomed  to  receive  bonds  for  board,  can- 
safe  keeping,  except  owner's  risk,  or  that  the  di-  "he  coluilct. 
rectors  had  knowledge  tbat  bonds  were  left  at  the  ^^^  §  ^^^• 
instance,  request,  or  solicitation  of  the  cashier,  evidence  of 
the  latter's  representations  at  the  time  of  the  deposit  as  to  the 
safe  keeping  of  the  bonds  was  not  sufficient  to  change  the 
effect  of  the  receipt  so  as  to  affect  the  bank.'^ 

§   204.    Delivery  of   Special  Deposit. — A  bank   is  liable  for 
gross  negligence  in  keeping  or  delivering  a  special  deposit, 
but  if  the  person  to  whom  it  negligently  delivers    Delivery  to 
the  deposit,  without  requiring  evidence  of  any  au-   luthmlJd, 
thority  on  his  part  to  receive  it,  was  nevertheless    tl^^'fj' t"' '^g 
unknown  to  the  bank,  really  authorized  by  the  de-   so,  is  good. 
positor  to  receive  it,  the  bank  is  discharged. ^ 

The  bank  was  held  liable  where  the  teller  delivered  certain 
bonds,  left  as  a  special  deposit,  to  a  person  calling  himself  by 
the  same  name  as  the  bailor,  but  in  fact  not  being  Delivery  to 
the  bailor;  on  the  ground  that  the  teller  was  ^''''"^'p^'-^""- 
guilty  of  gross  negligence  in  not  taking  proper  care  to 
assure  himself  as  to  the  identity  of  the  stranger  with  the 
bailor.2 

W.  left  securities  with  a  bank  for  safe  keeping,  taking  a  re- 
ceipt which  stated  that  they  would  be  delivered  on  its  surren- 
der. The  bank  delivered  to  W.'s  husband,  without  requiring 
production  of  the  receipt  or  of  an  order  from  W.  Held,  the 
bank  was  still  liable  to  W.^ 

A  bank  is  not  liable  for  delivering  special  deposits  to  an 
agent  who  had  authority  to  control  them  for  cer-   j^^y      ,  ^^ 
tain  purposes,  unless  it  had  notice  of  the  revocation   agent. 

8  Comp  V.  Carlisle  Deposit  Bank,  94  Pa.  St.  409  (1880). 

1  §  204.    Chattahoochee  National  Bank  v.  Schley,  .58  Ga.  369  (1877). 

2  Lancaster  Bank  v.  Snriith,  12  P.  F.  Smith  (Pa.),  54. 
8  Ganley  v.  Troy  City  National  Bank,  98  N.  Y.  487. 

431 


§  205  SPECIAL    DEPOSIT. 

of  his  authority,  or  knew  the  use  he  was  going  to  make  of 
them,  and  that  it  was  an  unauthorized  use.'* 

S  205.  A  Special  Deposit  is  no  Part  of  the  Bank's  Available 
Assets.  —  As  has  been  seen,  a  special  deposit  does  not  enter 
into  the  general  funds  of  the  bank,  and  form  a  part  of  its  dis- 
posable capital.  It  is  to  be  kept  by  itself,  and  specifically 
returned.  Hence  it  follows  that  a  bank  cannot  base  any  in- 
crease of  issues  or  discounts  upon  such  unavailable  deposits. 
They  are  in  no  sense  at  its  disposal,  and  it  can  in  no  man- 
ner (unless  there  be  a  special,  extraordinary,  and  peculiar 
arrangement)  reap  any  advantage  or  profit,  direct  or  indirect, 
from  the  simple  custody  of  them.  They  are  not  part  of  its 
moneys.  Whence  it  follows,  that,  if  the  law  require  the  bank 
to  return  to  the  government  officials  an  annual  account  of 
moneys  deposited,  yet  the  bank  is  not  bound  to  return  any 
account  of  its  special  deposits.^ 

Trover  will  lie  for  a  depositor  to  recover  his  special  deposit, 
in  sjjecie;  or,  if  it  has  been  converted  by  the  bailee,  assumjysit 
will  lie  to  recover  its  value.^ 

Interest  can  be  allowed  on  a  special  deposit  only  from  the 
time  of  wrongful  refusal  to  return  it.^ 

*  Walker  v.  Manhattan  Bank,  25  Fed.  Rep.  247  (1885). 

1  §  205.    Foster  v.  Essex  Bank,  17  Mass.  479. 

2  Ibid. ;  Bank  of  Columbia  v.  Patterson's  Adm'r,  7  Cranch,  299 ;  Green 
V.  Sizer,  40  jMiss.  530. 

3  Andenson   v.  Pacific  Bank,  112  Cal.  598  (44  Pac.  1063). 


432 


CHAPTER  XV. 

SPECIFIC    DEPOSIT. 

§  206.   Analysis. 

Duty  of  the  Bank. 
§  207.  A  specific  deposit  must  not  be  applied  to  any  otlier  purpose  tliaa 

the  one  for  which  it  was  deposited,  and  tlie  instruction  accompa- 
nying it  must  be  carefully  carried  out. 
§  208.  The  bank  has   no  lien  on  such  deposits  for  its  general  balance ; 

and  if  there  is  a  surplus  from  sale  of  collateral,  after  payment 
of  the  debt  secured,  the  bank  cannot  credit  it  on  general  ac- 
count.    §  32-5. 
Liability  of  the  Bank. 
(a)  Property  kept  distinct. 
§  189.  If  the  bank  is  a  gratuitous  bailee,  it  is  liable,  as  for  a  special 

deposit,  in  case  of  negligence. 
§  211.  If  the  bank  is  a  bailee  for  hire,  it  is  bound  to  ordinary  care,  and 

§  212.  no  more,  and  is  liable  for  loss  by  theft,  if  grossly  negligent. 

§  209.  Receiving  a  commission  does  not  necessarily  make  the  bank  a  bailee 

for  hire. 
§  215.      (6)  If  the  fund  is  not  kept  separate,  but  mingled  with  the  property  of 
the  bank  indistinguishably,  the  bank  is  liable  as  for  a  general 
deposit. 
§  630.     The  deposit  becomes  a  debt,  or  a  claim  for  damages  grows  upon  the 

grave  of  tlie  trust. 
§  589  b.  Title  to.     §  505  (2),  (9). 

§  207.  A  Specific  Deposit  must  not  be  diverted  from  its 
Purpose.^  —  A.  deposited  in  a  bank  the  counterparts  of  cer- 
tain contracts  to  deliver  oil  at  his  own  option  within  a  stated 
time,  and,  as  security  for  the  contracts,  also  deposited  checks 
of  H.,  who  was  a  depositor  in  the  bank,  payable  to  the  cashier 
"  for  margin  for  oil  sold  as  per  contracts  in  the  hands  of  "  the 
cashier.  The  counterparts  were  indorsed  by  A.,  to  the  ef- 
fect that  the  margin  was  a  guaranty  for  the  fulfilment  of  the 
contracts,  and  with  the  further  stipulation,  that,  if  more  mar- 
gin be  needed,  demand  should  be  made  on  A.,  and  if  not  met 

0   §  207.  United  States  v.  National  Bank,  73  Fed.  379. 
vol.  I.  —  28  433 


§  208  SPECIFIC    DEPOSIT. 

the  contract  should  be  sold.  The  cashier  also  indorsed  on 
the  counterparts  the  receipts  for  the  margins  on  the  condi- 
tions therein  set  forth.  Before  the  contracts  matured  they 
were  settled,  and  the  margins  were  carried  by  the  bank  to  the 
credit  of  A.,  who  drew  them  out  by  check.  In  an  action 
by  H.  against  the  bank  for  the  margins,  he  recovered,  the 
court  holding  that  the  checks  operated  as  a  specific  appropri- 
ation, to  the  extent  named  therein,  of  the  drawer's  funds,  to 
be  applied  by  the  bank  solely  to  pay  such  sum  as  A.  might 
become  liable  to  pay  on  the  event  of  his  failure  to  comply 
with  the  contracts,  and  the  bank,  as  custodian  of  the  money 
for  that  specific  purpose,  had  no  right  to  appropriate  it  in 
any  other  way.^ 

So,  where  a  buyer  of  cattle,  indebted  to  a  banking  firm  as 
principal  upon  a  note  that  had  matured,  deposited  and  checked 
out  an  amount  greater  than  the  note,  under  a  special  agree- 
ment with  the  bank  that  he  would  give  the  sellers  checks 
payable  after  he  had  sold  the  cattle  and  deposited  the  pro- 
ceeds, and  that  the  bank  should  apply  such  deposits  exclu- 
sively to  pay  such  checks.  Hald,  that  the  same  could  not 
have  been  applied  to  pay  the  note.'^ 

§  208.  Instructions  accompanying  a  Deposit,  and  coming 
from  the  proper  authority,  must  be  carefully  attended  to. 
When  the  depositor  orders  his  money  to  be  put  on  one  of  his 
accounts,  or  to  be  applied  to  take  up  a  particular  check  or 
note,  or  to  be  transmitted  to  a  certain  person,  or  whatever 
special  direction  he  may  give,  the  bank  must  obey  if  it  re- 
ceives the  deposit  at  all.^ 

If  the  purpose  for  which  the  special  deposit  was  made, 
fails,  the  bank  is  liable  to  the  depositor  for  the  return  of  the 
funds.i" 

1  Parker  v.  Hartley,  91  Pa.  St.  465  (1879). 

2  Wilson  V.  Dawson,  52  Ind.  513  (1876). 

1  §  208.  Judy  V.  Farmers  &  Traders'  Bank,  81  Mo.  404  ;  Union  Na- 
tional Bank  v.  Desmond,  33  111.  App.  102  ;  Desmond  v.  Merchants'  Na- 
tional Bank,  33  111.  App.  95 ;  Hummel  v.  First  National  Bank,  2  Col. 
App.  571. 

la  American  Exchange   National  Bank  v.   Loretta  Gold   and   Silver 
Mining  Co.,  46  N.  E.  202. 
434 


LIABILITY   OF   BANK.  §  210 

If  money  is  left  by  C.  to  be  sent  to  bank  A.,  and  instead 
it  is  sent  (according  to  a  custom  among  tlie  banks)  to  B.,  the 
correspondent  of  A,,  without  notice  to  B.  tliat  tlie  fund  belongs 
to  C,  and,  A.  becoming  insolvent,  B.  applies  the  money  on 
A.'s  debt  to  itself,  the  depository  bank  is  liable  to  C.  for  the 
amount,  for  it  should  have  transmitted  directly  to  A.,  or  have 
accompanied  the  funds  with  notice  of  C.'s  rights,  so  that  B. 
could  not  have  acquired  title  to  thcra.^ 

§    209.    A    Commission    does    not  always    make  the    Bank  a 
Bailee  for  Hire.  —  A  bank  was  in  the  habit  of  taking  bonds 
for  safe  keeping,  and  of  detaching  the  coupons  and  Collecting  in- 
collecting  the   interest   for   the    depositors  of   the    bonds,  and 
bonds.     It  sent  these  coupons  to  city  banks  and  the   drafts"for 
proceeds  were  there  placed  to  its  credit,  and  upon   ^'"^'?  ^^'^' 

^  ^  '  ir  mission,  does 

the  funds  thus  accumulated  it  would  draw  drafts   not  make 

.      .  ,  ^  rrn  bank  bailee 

and  charge  a  small  commission  therefor.  The  m-  for  hire, 
terest  paid  by  the  city  banks  was  inconsiderable,  and  the 
amount  realized  therefrom,  and  the  commissions  on  drafts,  did 
not  compensate  for  the  trouble  of  forwarding  the  coupons  and 
paying  out  the  interest.  Held,  that  these  facts  did  not  consti- 
tute the  bank  a  bailee  for  hire.^ 

§  210,  Liability  for  Money  deposited  specifically.  —  It  is 
the  custom  of  banks,  upon  receiving  money  for  a  specific  pur- 
pose, as  to  pay  a  note,  to  mingle  the  funds  with  their  own, 
and  to  pay  the  note  at  the  proper  time,  just  as  they  would  a 
check  ;  the  funds  are  not  kept  separate.  There  is  no  practi- 
cal difference  between  such  a  deposit  and  a  general  deposit, 
and  it  seems  clear  that  the  bank  should  be  held  to  the  same 
liability  as  for  a  general  deposit.^ 

A  certificate  issued  by  a  cashier  of  a  bank  in  the  ordinary 
course  of  business,  stating  the  receipt  of  a  specific   Evidence  of 
deposit,  payable  on  the  happening  of  a  certain  con-    i'ai»i»ty. 
tingency,  is  prima  facie  evidence  of  the  bank's  liability .^ 

2  Drovers'  National  Bank  v.  O'Hare,  10  N.  E.  360  (111.,  April,  1887). 
1  §  209.    Comp  V.  Carlisle  Deposit  Bank,  94  Pa.  St.  409  (1880). 

1  §  210.    McLain  v.  Wallace,  103  Ind.  563. 

2  American  National  Bank  v.  Presnall,  58  Kan.  69  (48  Pac.  556) 
(1897). 

435 


§  212  SPECIFIC   DEPOSIT. 

§  211.  Liability  of  Bank  for  Collateral  Security.  —  In  the 
case  of  property  pledged  to  the  bank  as  collateral  security,  it 
has  been  said  that  the  bank  is  bound  only  to  ordinary  care  in 
keeping  it.^ 

§    212.    Gross   Negligence  makes    the   Bank  liable. — A   bank 

is  liable  for  securities  de{)osited  as  collateral  and  stolen  by 

the  president,  if  the  bank  has  been  remiss  in  its 

Collatc-al  se-  '  .  '  . 

curitv  stolen    duty  in  the  selection    and  supervision  of   its  offi- 
\     es  en  .    ^^^.^  i     j^^  ^j^j^  ^^^^  ^|^g  trustccs  wcrc  in  the  habit 

of  leaving  the  entire  active  management  of  the  bank  in  the 
hands  of  the  president ;  he  had  occasionally  abstracted  se- 
curities and  used  them  in  his  own  private  affairs,  but  had 
been  accustomed  to  return  them  whenever  called  for.  It 
appeared  that  the  borrower  knew  of  these  facts  when  he  de- 
posited the  security.  The  trustees  did  not  hold  the  meetings 
required  by  the  by-laws.  The  court  held  that  the  bank  was 
bound  to  use  ordinary  care  to  select  good  officers  and  servants, 
and  that  it  must  exercise  such  supervision  and  vigilance  as  a 
discreet  person  would  use  in  his  own  affairs.  A  bank  might 
not  be  liable  for  a  single  act  of  fraud  or  crime,  where  it  would 
be  for  a  continuous  series  of  acts,  especially  so  easily  detected 
as  here.  Here  are  no  meetings,  no  supervision,  no  examina- 
tion, no  inquiry,  actual  knowledge  of  the  managing  trustee  of 
the  wrongful  conduct,  and  silence.^     Surely  a  strong  case. 

Bonds  were  deposited  as  a  special  deposit ;  afterward  they 
were  held  as  collateral  security.  They  were  embezzled  by 
the  cashier.  Held,  the  bank  was  liable  as  a  pledgee,  it  having 
been  guilty  of  gross  negligence  in  allowing  the  cashier  to 
retain-  his  position  after  knowledge  that  he  gambled.^ 

Where  bonds  are  delivered  to  a  bank  as  collateral  security 
for  a  debt,  if  it  does  not  appear  what  has  become  of  them,  it 
is  to  be  assumed  that  they  are  in  the  bank's  possession.^ 

^  §  211.  Jenkins  v.  National  Villajre  Bank,  58  Me.  275 ;  Dearborn  v. 
Union  National  Bank,  58  id.  273  ;  61  id.  309. 

1  §  212.    Cutting  V.  Marlor,  78  N.  Y.  451. 

2  Prather  v.  Kean,  29  Fed.  Rep.  498  (Feb.  1887). 

8  Detroit  Motor  Co.  v.  TJiird  National  Bank,  HI  Mich.  407  (69  X.  W. 
726)  (1897). 
436 


CHAPTER   XVI. 

COLLECTION   IN   GENERAL. 

§  213.    Analysis.     (See  "  Title  "  and  "  Deposit.") 

A.  Nature  of  the  Conthact. 

§  214.  In  collecting  upon   paper  in  its  hands,  or  in  applying  money  pre- 

viously received,  the  bank  acts  as  agent  for  the  one  who  is  enti- 
tled to  the  proceeds ;  but  if  money  was  received  before  the  paper 
was  lodged  with  it  for  collection,  or  before  maturity  of  the  paper, 
and  not  applied,  it  has  acted  only  as  agent  of  the  debtor. 

§  215.  The  consideration  arising  from  the  hope  of  attracting  custom  is  suf- 

ficient, though  a  commission  may  be  charged. 

§  21G.  The  authority  to  collect  continues  after  dishonor,  if  the  paper  is  left 

with  the  bank. 

§  217.  Indorsement  to  "  Bank,  for  collection,"  neither  carries  title  to  the 

bank,  nor  makes  the  indorser  liable  as  such,  but  is  notice  to  all  of 
the  indorser's  right  to  the  proceeds,  and  also  that  B.  or  his  agent 
is  the  proper  person  to  receive  payment. 

B.  Duty  of  the  Bank. 

I.   In  General. 
§§  218,  219.     (1)  The  bank  must  use  reasonable  care  and  skill,  keeping  in  mind 
the  best  interests  of  its  principal,  and  so  acting  as  to  pre- 
serve the  liability  of  all  parties  to  him,  by  proper  present- 
§  244.  ment,  protest,  notice,  and  care  of  securities,  so  far  as  rea- 

sonable diligence  can  accomplish  these  objects.     See  §  2.39. 
§  2-30.  (2)   The  bank  must  observe  the  laws  and  usages  prevailing  in  its 

§  243.  locus,  unless  the  contract  is  in  reference  to  some  other,  as, 

§  221.  When  it  receives  special  instructions,  or  when  the  parties 

must  be  presumed  to  have  contracted  in  reference  to  the 
tisarje  of  a  particular  bank. 
§  222.  Proof  of  knowledge  of  usage  of  a  single  bank. 

§  223.  (3)  Local  usage  can  affect  only  the  manner  of  presentment,  notice, 

&c.,  and  cannot  justify  their  omission.     See  contra,  §  231. 
§  224.  (4)  The  bank  must  obey  inMrictions  received  from  its  principal, 

and  must  forward  proper  directions   to   its  correspondent. 
§  802. 
§  225.  (5)  Must  take  care  of  collateral  security,  bills  of  lading,  &c. 

§  220.  (0)  The  bank  has  discretion  in  doubtful  cases.     See  §§  255,  256. 

II.  Special  Statement  of  Duties  of  Bank  collecting  in  Locus. 
(1)  Presentment  for  acceptance.     See  §  252  a. 
§  258.  (a)   What  paper  must  be  presented  for  acceptance. 

§  227.  (] )  Draft  payable  at  a  future  day  should  be  presented. 

437 


§213 


COLLECTION   IN   GENERAL. 


§  258.  (6)  When  presentment  for  acceptance  should  be  made, 

where,  by  wliom,  to  whom,  its  effect,  and  the  effect 
of  failure. 
§§  229,  259.  (2)  Presentment  for  payment. 

§§  240,  242,  245.  («)  Time  of. 

§§  230,  259  6.  (h)    Place  of. 

§§  223,  231.  (c)   Usage  of  some  banks  to  send  notice  to  the  debtor  that 

the  paper  is  at  the  bank,  instead  of  making  demand 
upon  him  in  the  regular  way. 
§  259.  (d)  By  wliom,  on  whom,  and  how,  presentment  for  pay- 

ment should  be  made. 
§  228.  (3)  Protest,  or  steps  taken  to  provide  authentic  evidence  of 

dishonor.     See  §  2-52  c. 
§  260.  What  paper  should  be,  and  what  may  be,  protested, 

where,  when,  by  whom,  and  how  the  protest  is  to  be 
made. 
§  261.  (4)  Notice  of  dishonor. 

General  statement. 
§  232.  The  bank  need  give  notice  only  to  its  immediate  princi- 

pal, unless  agreement  or  usage  vary  the  rule. 

(a)  As  in  New  York  city. 

§  233.  (6)   When  notice  is  to  be  given. 

Manner  of  notice,  when  personal,  and  when  by  mail. 

(b)  Test  of  the  difference  of  place  requisite  to  use  of  the 

mail. 
§  234.  (5)  Excuse  for  failure  to  present  or  notify. 

§  262.  (6)  What  is  no  excuse. 

§  263.  §  234  a.     Insolvency  is  not. 

in.  Collections  not  in  the  Locus  of  the  Depositary. 
§  235.  Duty  of  the  transmitting  bank.     General  statement. 

To  select  its  agent  with  care,  transmit  instructions,  and 
inquire  promptly.     See  §  252  d. 
§  236.  What  is  due  care  in  selecting  a  sub-agent. 

It  is  negligence  in  the  United  States  to  send  the  paper  to 
the  drawee.     §  427. 
§  237.  IV.  Collection  of  Checks. 
§  238.  (1)  Distinction  between   duty  of  bank  to  its   customer   and 

duties  existing  between  other  parties. 
§  239.  Illustration.      The   time    of    presentment    required   to 

fulfil  the  bank's  duty  to  the  depositor,  and  the  very 
different  time   that  may  be   necessary  to  hold  the 
drawer. 
(2)  Time  of  presenting  checks.     See  §  259. 
§  240.  General  rule. 

§  247.  Special  rule,  where  a  check  is  taken  by  an  agent  in  pay- 

ment without  authority  so  to  do. 
§  241.  Time  within  which  a  check  payable  in  another  place  must 

be  forwarded. 
§  245.  Time  enlarged  by  crossing,  in  some  cases. 

438 


COLLECTION.  §  213 

§  242.  The  time  rule  may  be  varied  by  instructions,  course  of  deal- 

§  222.  ing,  general  usage  of  tlie  banks  in  a  city  or  town,  or  usage 

of  a  particular  bank,  in  certain  cases. 
§  244.  The  fundamental  rule. 

Underlying  all  questions  of  presentment,  notice,  &c.,  is 
that  the  bank  must  use  ordinary  care   and  diligence 
under  all  the  circumstances. 
§  245.       V.  Crossed  Checks. 

Must  be  paid  as  crossed. 

Time  for  presentment  may  be  enlarged  by  crossing. 
§  246.     VI.  Suits  by  the  Bank  upon  Paper  it  holds  for  Collection. 

VIL  Proceeds.     §  589  c. 
§  247.  (1)  The  general  rule  is  that  only  good  money  is  to  be  re- 

ceived in  payment  of  paper  by  collecting  bank. 

(a)  Mode  of  dealing,  or  an   agreement,  may  vary  the 

rule,  and  a  bank  may  take  its  own  certificate 
of  deposit,  unless  the  taking  is  a  fraud.     §  305. 

(b)  A  substituted  note  may  be  recovered  by  the  owner 

of  the  note  for  which  the  substitute  was  re- 
ceived, 
(r)  Check  taken  in  payment  without  authority  is  at 
the  bank's  risk,  (unless  the  principal  ratifies  its 
action,  as  he  may  do,  by  receiving  the  check, 
with  knowledge  of  the  facts  of  the  case,)  and 
it  should  take  care  to  preserve  the  evidence  of 
liability  of  prior  parties.  See  §  366. 
§  247.  {d)  If  the  bank  receives  depreciated  currency,  it  must 

make  good  the  face  of  the  paper  in  good  money. 
(2)  Disposal  of  the  Proceeds. 
§  248.  The  bank  may  elect  to  credit  them  to  the  principal 

on  general  deposit  (unless  the  instructions  are  to 
collect  and  remit), 

(1)  When  the  owner  is  a  depositor. 

(2)  When  he  is  not. 

Or  it  may  retain  them  as  a  special  deposit,  or,  with- 
out instructions,  remit  them  at  once. 

If  it  credits  them,  it  will  bear  any  loss  that  occurs 
by  depreciation  of  the  funds  received.  If  it  keeps 
separate  the  specific  funds,  it  may  at  any  time  dis- 
charge itself  by  delivering  them  to  the  owner  of 
the  paper,  from  the  collection  of  which  they  are  the 
proceeds. 
§  248  (a).  Insolvency  revokes  the  right  to  credit  the  proceeds, 

and  mingle  them  with  the  bank's  funds. 

Insolvenc}'  of  the  collecting  bank. 

Insolvency  of  the  transmitting  bank. 
§  248  (6).  Proceeds  of  paper  having  forged  indorsement  belong 

to  the  rightful  owner  of  the  paper. 

Title  to  proceeds.     See  §  565. 

439 


§214 


COLLECTION   IN   GENERAL. 


C.   Liabilities  grooving  odt  of  Collection. 

I.  To  whom  the  liability  runs. 

R  249.  When  the  first  bank  becomes  debtor  to  the  owner. 

Liabilities  of  the  various  banks  to  the  owner. 
§  250.  Cessation  of  the  liability  of  tlie  agent  bank  to  the  owner,  when 

such  agent  becomes  a  bonajide  holder.     See  §  565. 
§251,  §220.  Liability  to  the  Real  Party  in  Interest. 

II.  Causes  of  liability. 

§  2i3.  Failure  to  follow  the  usual  course. 

§  252.  («)    Irregular  acceptance. 

(b)  Taking  check  instead  of  money.     English  usage  allows. 

See  §  247. 

(c)  Failure  to  protest.     §§  228,  259. 
Violation  of  instructions.     §§  220,  224. 

(d)  Failure  to  inquire.     §  235. 

(e)  Negligent  loss  of  the  paper. 
§  253.  Default  of  branch  bank. 

§  255.  Mistakes.    See  §  226. 

§  256.  Of  fact. 

Of  law. 
§  254.  When  Depositor  is  also  in  Fault. 

§  214.  The  Collecting  Bank  acts  as  Agent.  — A  bank  receiv- 
ing paper  for  collection  is  generally  the  agent  of  the  party 
For  whom  ^^^"^  whom  it  reccives  it;^  sometimes  of  the  real 
the  bank  owncr,  if  he  stands  farther  removed  in  the  chain 
agent.  of  title. ^     But  in  no  sense  is  it  the  agent  or  trus- 

tee for  the  maker  of  the  paper  it  holds  for  collection,  or  for 
the  party  who  is  indebted  thereon.  If  the  debtor  simply 
pays  into  the  bank  the  amount  due,  and  takes  up  his  paper, 
he  is  thereby  fully  acquitted  and  absolved.  He  is  not  re- 
sponsible for  the  subsequent  fate  of  the  sum,  and  is  not  bound 
to  inquire  whether  it  comes  to  the  hands  of  the  person  en- 
titled to  it,  or  is  lost,  wasted,  or  embezzled  in  the  bank. 
As  he  is  under  no  liability  of  this  description,  so  it  follows 
that  he  has  no  right  of  action  against  the  bank  if  it  fails  to 
pay  over  properly.     The  whole  business  is  completed,  so  far 

r  1  §  214.  Daly  v.  Butchers  &  Drovers'  Bank  of  St.  Louis,  56  Mo.  94, 
and  cases  cited^os-^-  Ward  v.  Smith,  7  Wall.  447;  Exchange  Bank  r. 
Sutton  Bank,  78  Md.  577;  Medland  National  Bank  f.  Brightwell,  148 
Mo.  358  (1898). 

2  The  question  who,  as  principal,  may  hold  the  bank  as  agent,  is  dis- 
cussed hereafter. 

440 


COLLECTING    BANK    ACTS    AS    AGENT.  §  214 

as  he  is  concerned,  by  his  payment  and  the  contemporaneous 
surrender,  cancellation,  or  destruction  of  the  evidence  of  his 
debt.  3 

If  a  note,  bond,  or  other  instrument,  be  made  payable  at  a 
bank,  and  be  deposited  in  that  bank  for  collection,  the  bank 
becomes  the  agent  of   the   payee   to   receive  the 

,.1.1,1        Paper  pav- 

money.  But  if  it  be  not  deposited  in  the  bank,  able  at  the 
and  the  debtor  deposits  money  there  to  meet  it, 
then  the  bank  is  the  agent  of  the  debtor.^  By  making  such 
deposit  in  due  season,  the  debtor  so  far  fulfils  his  duty  that, 
if  the  obligation  be  not  presented  there  for  payment  at  the 
day  of  its  maturity,  the  debtor  is  liable  for  no  loss  or  damage 
which  may  subsequently  accrue,  either  in  the  way  of  interest 
or  costs  of  suit,  by  reason  of  the  delay.*  Apparently,  too, 
he  should  be  acquitted  if  subsequently,  and  before  demand 
by  the  holder  of  the  paper,  the  bank  should  fail. 

Where  a  seller  consigns  goods  to  his  own  order,  and  at- 
taches to  the  bill  of  lading  a  draft  upon  the  purchaser  for 
the  price,  and  places  such  draft  in  the  bank  with  directions 
to  collect,  and  turn  over  the  bill  of  lading  to  the  purchaser, 
the  bank  is  the  agent  of  the  seller.*" 

A  note  was  sent  to  the  M.  Bank  indorsed  for  collection  for 
the  Y.  Bank.  The  M.  Bank  had  received  money  from  the 
maker  to  pay  the  note,  but  failed  before  remitting  Agent  of 
the  proceeds,  and  the  note  was  found  uncancelled  ?eL5'vin^''^° 
among  its  papers.  Held,  that  the  note  had  not  ^f^l'^^tia 
been  paid ;  the  M.  Bank  had  done  nothing  as  the  possession, 
agents  of  the  holders  of  the  note  toward  paying  it.^ 

This  case  brings  clearly  to  view  the  distinction  that  if  the 
bank,  having  received  a  note  for  collection,  afterward  col- 
lects the  money  for  it,  or,  having  the  money  already  depos- 
ited for  that  purpose,  applies  it  to  the  note,  these  acts  are 
done  as  agent  for  the  holder  of  the  note ;  but  if  the  maker 
deposits  money  to  pay  a  note  before  it  is  received  by  the 

8  Smith  V.  Essex  County  Bank,  22  Barb.  (N.  Y.)  627. 

*  Ward  V.  Smith,  7  Wall.  447. 

4"  Charles  r.  Carter,  96  Tenn.  617  (1896). 

6  Sutherland  v.  First  National  Bank  of  Ypsilanti,  31  Mich.  230. 

441 


S  216  COLLECTION   IN   GENERAL. 

bank,  or  before  it  is  due,  such  receiving  of  money  is  as 
agent  of  the  maker  only,  and  unless  the  bank  subsequently 
does  some  act  applying  the  money  upon  the  note,  it  does 
not  act  as  agent  for  the  note  holder,  and  the  latter  is  not 
prevented  from  recovering  the  paper  and  suing  the  maker 
upon  it. 

So  if  A.  deposits  money  to  pay  a  claim,  and  before  apply- 
ing the  money  to  this  purpose  the  bank  fails,  it  is  the  loss  of 
A.,  not  of  his  creditor.^ 

§  215.  Consideration  for  Collecting.  —  Sometimes  banks 
charge  a  commission  for  collection  where  the  business  is 
required  to  be  done  in  distant  places.  Sometimes  they  do 
it  without  charge,  trusting  to  the  indirect  profits  and  ad- 
vantages which  may  be  expected  to  accrue  by  reason  of  the 
chance  of  the  money  being  left  uncalled  for  during  a  few 
days  following  its  actual  receipt,  and  their  consequent  use 
of  it  for  that  time;  or  from  the  hope  of  attracting  customers 
and  increasing  their  business  by  offering  such  facilities  with- 
out extra  charges.  These  motives  of  self-interest,  which  must 
always  be  supposed  to  influence  the  bank  when  it  consents  to 
collect  without  direct  compensation,  are  to  be  regarded  as 
constituting  a  sufficient  and  valuable  inducement  for  the 
undertaking  to  collect;  and  prevent  the  bank  from  avail- 
ing itself  of  the  plea  that  its  contract  was  without  con- 
sideration.^ 

§  216.  Continuance  of  Authority  to  Collect.  —  Authority  tO 
collect  continues  after  the  paper  is  due  and  protested,  and 
notes  are  often  left  with  a  bank  some  time  after  protest  in 
the  hope  that  they  may  be  taken  up,  as  they  often  are  to  save 
the  credit  of  the  debtor.  But  it  is  questionable  whether  a 
payment  may  be  received  two  or  three  years  after  dishonor, 

6  Moore  v.  INIeyer,  57  Ala.  20;  State  Bank  v.  Byrne,  97  Mich.  178. 

1  §215.  Halls  v.  Bank  of  the  State,  3  Rich.  (S.  C)  366.  Also  see 
remarks  per  Lord  Loughborough  in  Shiells  v.  Blackburne,  1  H.  Bl.  159; 
the  analogy  is  sufficiently  strong  to  make  this  case  an  authority  for  the 
doctrine  of  the  text.  But  in  Bank  v.  Butler,  41  Ohio  St.  519,  the  court 
in  holding  the  bank  excused  on  other  grounds  fortifies  itself  by  saying 
that  the  bank  received  no  remuneration. 

442 


EFFECT   OF  INDORSEMENT   FOR   COLLECTION.  §  21T 

in  a  currency  depreciated  to  one  twelfth  of  the  value  of 
that  in  which  the  note  should  have  been  paid  at  its 
maturity.^ 

§  217.  Effect  of  Indorsement  for  Collection.  —  Indorsement 
for  collection  does  not  give  the  bank  title  to  the  paper,^  nor 
render  the  depositor  liable  as  an  indorser,^  nor  guarantee 
the  drawer's  signature. ^^  But  the  bank  is  deemed  the 
holder  to  receive  and  transmit  notice  of  non-payment.^ 

Indorsement  to  "  B.  for  collection"  is  notice  to  the  maker 
of  the  note  that  B.  or  his  agent  is  the  proper  party   Notice  of 
to  collect  the  note,  and  if  he  pays  it  to  any  one   ownership, 
else  it  is  at  his  own  risk.* 

1  §  216.    Alleys.  Rogers,  19  Gratt.  (Va.)  366. 

1  §  217.  See  §  565,  Title.  So  if  a  note  is  sent  for  collection  and  the 
bank  allows  it  to  remain  uncancelled  among  its  papers,  and  fails,  the  note 
is  unpaid,  and  may  be  recovered,  although  the  bank  had  received  money 
from  the  maker  expressly  to  pay  it.  The  payment  not  having  been  actu- 
ally made,  and  the  title  to  the  note  being  in  the  depositor  of  it,  he  may 
reclaim  it.  Sutherland  v.  First  National  Bank,  31  Mich.  230.  So  col- 
laterills  sent  with  a  draft  which  is  still  uncollected  may  be  recovered ;  they 
are  not  assets  of  the  bank  in  case  of  insolvency.  Corn  Exchange  Bank 
V.  Blye,  44  N.  Y.  (Sup.  Ct.)  473,  aff.  101  N.  Y.  (Ct.  of  Appeals)  303 ; 
U.  S.  National  Bank  v.  Geer,  55  Neb.  469  (1898);  Branch  v.  U.  S. 
National  Bank,  50  Neb.  470  (70  N.  W.)  34  (1897). 

2  Broun  v.  Hull,  33  Gratt.  (Va.)  23.  And  parol  is  not  admissible  to 
show  that  an  indorsement  "  for  collection  "  was  really  an  absolute  one. 
Third  National  Bank  v.  Clark,  23  Minn.  263  ;  U.  S.  National  Bank  v. 
Geer,  55  Neb.  469  (1898). 

2«  Bank  of  Belmont  v.  Bank  of  Barnesville,  55  Ohio  St.  207  (1898). 

s  Freeman's  Bank  v.  Perkins,  18  Me.  292;  Ogden  v.  Dobbin,  2  Hall 
(N.  Y.),  112. 

*  Barnett  v.  Ringgold,  80  Ky.  289  ;  Freeman's  Bank  v.  National  Tube 
Works,  151  Mass.  413  (1890) ;  citing  Lynn  National  Bank  v.  Smith,  132 
Mass.  227;  Rice  v.  Stearns,  3  Mass.  225;  Wilson  v.  Holmes,  5  Mass.  543; 
Dorchester  &  Milton  Bank  v.  New  England  Bank,  1  Cush.  177 ;  Boylsin 
V.  Bank,  118  N.  C.  566  (1896)  ;  First  National  Bank  of  Circleville  v. 
Bank  of  Monroe,  33  Fed.  408.  See  also  Peck  v.  First  National  Bank,  43 
Fed.  357;  Bank  of  Clark  Co.  v.  Gilman,  81  Hun  (N.  Y.),  486;  Manu- 
facturers' Bank  v.  Continental  Bank,  148  Mass.  553  (1889),  citing  Auden- 
ried  v.  Betteley,  8  Allen,  302  ;  Bank  of  Belmont  v.  Bank  of  Barnesville, 
55  Ohio  St.  207  (1898) ;  Tyson  and  Rawls  v.  W^estern  National  Bank, 
77  Md.  412;  Evansville  Bank  v.  German  American  Bank,  155  U.  S.  556. 

443 


S  218  COLLECTION   IN   GENERAL. 

A  bank  receiving  a  note  from  the  owner  indorsed  simply 
for  collection,  with  instructions  to  apply  the  proceeds  to  his 
indebtedness  to  the  bank,  does  not  receive  it  as  collateral 
security,   but  as  his  agent.^ 

Indorsement  for  collection  is  notice  to  all  parties  of  the 
ownership  of  the  proceeds,  and  the  collecting  bank  cannot 
keep  the  proceeds  to  pay  the  debt  of  the  bank  that  forwarded 
the  paper  to  it.^ 

A.  at  St.  Louis,  owing  V.  at  St.  Joseph's  $40,000,  re- 
quested Y.  to  draw  on  him,  and  he  would  raise  the  money 
,    on  the  draft,  and  remit  the  proceeds  to  V.  ;  where- 

Indorsement     ""   ^'  ^  5  i  p      i         i        i         -     ci. 

for  collection   uDOu   V.   drcw  to  the  ordcr  of   the    bank  at   bt. 

destroys  ne-  '  i   •  •      i  -i  ±.^         j      £*. 

gotiabiiity.  Joseph's,  whosc  cashicr  indorsed  on  the  dralt, 
"Pay  to  H.  or  order  for  collection  for  account  of  First  Na- 
tional Bank."  A.  on  receiving  the  draft  accepted  it,  and 
offered  it  for  discount  to  the  Mechanics'  Bank.  By  A.'s 
consent  and  that  of  the  Mechanics'  Bank  the  indorsement 
was  erased,  the  Mechanics'  Bank  discounted  the  draft,  and 
A.  remitted  the  amount  to  V.  In  an  action  by  the  Me- 
chanics' Bank  against  V.,'  it  was  held  that  the  indorse- 
ment, being  restrictive,  destroyed  the  negotiability  of  the 
draft,  and  operated  as  a  mere  power  of  attorney  to  the  plain- 
tiff to  receive  the  proceeds  for  the  use  of  the  drawer;  and 
that  the  erasure  without  V.  's  assent  destroyed  the  validity 
of  the  draft  as  to  him,  and  the  plaintiff  was  bound  to  know 
that  such  was  its  effect  when  the  draft  was  taken. 

§    218.     General    Statement    of    the    Duties    of  the    Collecting 
Bank.— A  bank  contracts  to  use  due  diligence  in  the  busi- 
ness of  collection.!     ^^d  it  is  "bound  only  to  rea- 
ca7e'and  ^      souablc  carc  and  diligence  in  the  discharge  of  its 
^^'"'  assumed  duties.     In  a  case  of  doubt  its  best  judg- 

ment is  all  the  principal  has  a  right  to  require."  Especially 
if  the  doubt  arises  by  reason  of  the  neglect  of  the  principal 

6  Prescott  I'.  Leonard,  .32  Kans.  142. 

6  City  Bank  v.  Weiss,  3  S.  W.  299  (Tex.,  April,  1887)  ;  People's  Bank 
V.  Jefferson  Co.  Savings  Bank,  106  Ala.  525  (189G). 

7  Mechanics'  Bank  v.  Valley  Packing  Co.,  4  Mo.  App.  200  (1877). 
1  §  218.    Fabens  v.  Mercantile  Bank,  23  Pick.  (Mass.)  330. 

444 


bank's  duty.  §  219 

to  give  specific  instructions,  the  bank  will  be  acquitted,  even 
if  its  discretion  be  exercised  erroneously.^ 

The  contract  may  be  varied  by  express  agreement,  and  it 
has  been  held  that  the  plaintiff,  in  a  suit  alleging  negli- 
gence on  the  part  of  the  bank  in  failing  to  make  a  collec- 
tion, may  adduce  evidence  of  the  contents  of  a  placard  posted 
up  in  the  bank,  whereby  the  bank  offered  to  make   „, 

r  y  -J  _  Placard 

collections  upon  certain  terms  (the  president  hav-  lumfr  in  the 
ing  been  notified  to  produce  the  placard,  and  not 
having  done  so) ;  that  this  constituted  an  important  link  in 
the  chain  of  evidence  going  to  show  what  the  contract  be- 
tween the  parties  in  fact  was ;  and  that  this  evidence  was 
admissible  without  preliminary  proof  that  the  plaintiff  had 
read  the  placard,  or  had  acted  upon  the  faith  of  it.^ 

§  219.  The  Bank's  Duty  is  to  act  for  its  principal's  best  in- 
terest, and  preserve  the  liability  of  all  parties  to  him.  "It 
is  the  duty  of  an  agent  who  receives  negotiable  paper  for 
collection,  in  case  such  paper  is  not  paid,  so  to  act  as  to 
secure  and  preserve  the  liability  thereon  of  all  the  parties 
prior  to  his  principal;  and  if  he  fails  in  this  duty,  and 
thereby  causes  loss  to  his  principal,  he  becomes  liable  for 
such  loss.^  But  this  is  not  the  utmost  limit  of  the  agent's 
duty  and  liability.  He  may  so  act  as  to  charge  all  the  par- 
ties to  the  paper,  and  yet  become  liable  for  a  loss  occasioned 
by  his  negligence.  The  rule  which  will  measure  the  dili- 
gence which  is  exacted  of  a  holder  of  such  paper  in  order  to 
charge  the  prior  parties,  will  not  always  measure  the  dili- 
gence which  is  required  of  a  collecting  agent  in  the  dis- 
charge of  his  duty  to  his  principal.  Suppose  an  agent 
receives  for  collection  from  the  payee  a  sight  draft.  No 
circumstance  can  make  it  his  duty  in  order  to  charge  the 
drawer  to  present  it  for  payment  until  the  next  day.     He 

2  National  Eank  of  Commerce  v.  Merchants'  National  Bank,  91  U.  S. 
(1  Otto)  92  ;  Sahlien  v.  Bank,  90  Tenn.  229  (1890). 

3  Wingate  v.  Mechanics'  Bank,  10  Barr  (Pa.),  104. 

•>  §  219.  Jagger  v.  National  German-American  Bank,  53  Minn.  386 ; 
Bank  v.  Bank,  49  Ohio  St.  351  (1892);  West  i'.  St.  Paul  National  Bank, 
54  Minn.  406. 

445 


§  219  COLLECTION    IN   GENERAL. 

has  entered  into  no  contract  with  the  drawer,  is  not  em- 
ployed or  paid  by  him  to  render  him  any  service,  and  owes 
him  no  duty  to  protect  him  from  loss.  What  is  required  to 
he  done  to  charge  the  drawer  is  simply  a  compliance  with 
the  condition  attached  to  the  draft,  as  if  written  therein; 
and  that  condition  is  in  all  cases  complied  with  by  presen- 
tation, demand,  and  notice  on  the  next  day  after  receipt  of 
the  draft.  But  suppose  the  agent  on  the  day  he  receives  the 
draft  obtains  reliable  information  that  the  drawee  must  fail 
the  next  day,  and  that  the  draft  will  not  be  paid  unless  im- 
mediately presented,  what  then  is  the  duty  he  owes  his  prin- 
cipal, whose  interests  for  a  compensation  he  has  agreed  with 
proper  diligence  and  skill  to  serve  in  and  about  the  collec- 
tion of  the  draft?  Clearly,  all  would  say,  to  present  the 
draft  at  once,  and  if  he  fails  to  do  this  and  loss  ensues  he 
incurs  responsibility  to  his  principal;  and  yet  the  drawer 
would  be  charged  if  it  was  not  presented  until  the  next  day. 
When  an  agent  receives  a  bill  for  collection  payable  some 
days  or  months  after  date,  in  order  to  charge  the  drawer,  he 
need  not  present  it  for  acceptance  until  it  falls  due ;  and  if 
he  then  presents  it  and  demands  payment,  and  protests  it, 
and  gives  the  notice,  the  drawer  is  held;  and  yet  in  such 
a  case  he  owes  his  principal  the  duty  to  present  the  bill 
for  acceptance  at  once,  and  if  he  fails  in  such  duty, 
and  loss  ensues  to  his  principal,  he  becomes  liable  for  such 

loss."i 

A  bank  having  a  claim  against  an  insolvent  firm,  upon 
being  consulted  by  other  creditors  of  said  firm  in  regard  to 
Adverse  Collecting  and  securing  their  claim,  is  not  legally 
interest.  bound  to  disclosc  to  such  creditors  the  existence 

of  its  own  claim,  but  may  keep  silent  and  protect  its  own 
interests  provided  it  is  guilty  of  no  fraudulent  conduct, 
and  does  nothing  more  than  is  necessary  to  protect  its  own 
interests.  2 

1  First  National  Bank  i'.  Fourth  National  Bank,  77  N.  Y.  323. 

2  National  Bank  v.  Naill,  52  Kans.  211  (1893),  citing  Bliss  ;;.  Couch, 
46  Kans.  400;  Randall  v.  Shaw,  28  Kans.  419;  Tootle  v.  Coldwell,  30 
Kans.  125. 

446 


CONFLICT    OF   LAWS.  §  220 

And  it  may,  in  good  faith,  obtain  security  to  protect  its 
own  claim  although  it  neglects  to  obtain  security  for  the 
payment  of  paper  it  holds  for  collection.^ 

By  receiving  a  draft  for  collection  a  bank  does  not  waive 
its  right  to  collect  its  own  claims  against  the  drawee,  and  it 
may  secure  by  attachment  priority  for  itself  although  there 
is  nothing  left  to  pay  the  drafts  received.* 

It  is  for  the  jury  to  decide  whether  the  bank  has  acted 
with  negligence  or  fraud. ^ 

§  220.  "What  Law  and  Usage  shall  govern  the  Collection.  — 
The  collecting  bank  must  be  governed  in  all  matters  con- 
cerning the  time  and  mode  of  presentment,  de-  Bank  must 
mand,  and  notice  by  the  laws  and  customs  which  ownTaw^ 
prevail  in  the  place  of  its  own  situation.  If  the  "/J-lf^ft^jQ"' 
paper  has  been  transmitted  from  a  distant  place,  are  sent. 
where  the  laws  and  customs  are  different,  the  transmitting 
party,  if  he  wishes  these  to  be  conformed  to,  must  send 
special  instructions  to  that  effect.  In  that  case  the  collect- 
ing bank,  if  it  undertakes  the  collection,  will  be  bound,  at 
its  own  peril,  not  to  deviate  from  the  course  thus  prescribed ; 
though  in  the  absence  of  express  directions  it  would  not  be 
bound  to  inquire  into,  nor  probably  would  it  even  have  the 
right  to  recognize,  if  it  knew^,  the  laws  or  usages  of  any  place 
other  than  its  own.  The  understanding,  which  is  assumed 
to  be  mutual  and  to  enter  into  the  contract  of  the  parties,  is 
that  the  bank  shall  perform  the  various  acts  which  are  em- 
braced in  the  business  of  collection  in  every  respect  accord- 
ing to  the  method  which  it  is  wont  to  pursue,  in  accordance 
with  the  local  law,  rules,  and  regulations.  ^  Evidence  of 
the  habitual  course  of  dealing,  provided  it  be  not  incurably 
illegal,  is  admissible,  not  as  amounting  to  rules  of  judicial 

8  U.  S.  Bank  v.  Westervelt,  55  Neb.  425  (1898),  distinguishing  Dern 
V.  Kellogg,  54  Neb.  560. 

*  Freeman  v.  Bank,  78  la.  150. 

6  Finch  V.  Karste,  97  Mich.  21. 

1  §  220.  Lincoln  &  Kennebec  Bank  v.  Page,  9  Mass.  155;  Chicopee 
Bank  v.  Eager,  9  Met.  (Mass.)  584;  Hartford  Bank  v.  Stedman,  3  Conn. 
489;  Bowen  v.  Newell,  5  Sandf.  (N.  Y.)  326;  and  all  the  cases  cited 
below  in  the  discussion  of  this  topic. 

447 


§  221  COLLECTION   IN    GENERAL. 

decision,  but  as  evidence  of  the  contract. ^  The  assent  of 
all  concerned  to  the  pursuance  of  this  course  of  dealing,  and 
their  waiver  of  any  strictly  legal  claims  which  they  might 
have  in  contravention  or  variation  thereof,  becomes  then 
an  implication  of  law.  All  the  parties  upon  the  note  are 
equally  bound  by  this  implication,  though  they  have  had 
nothing  whatsoever  to  do  with  the  paper  at  the  time  of  its 
being  deposited  for  collection,  and  so  were  not  by  immediate 
personal  action  parties  to  this  portion  of  the  proceedings,  or 
able  to  influence  or  control  them.-^  They  are  bound  and  con- 
cluded by  the  act,  and  the  legal  implications  arising  from 
the  act,  of  him  who  has  become  the  holder,  and  who  has  the 
right  to  put  the  note  in  the  ordinary  business  channel  for 
collection.  Thus,  if  demand  is  made  upon  a  note  upon 
the  day  before  or  the  day  after  it  falls  due,  according  to 
the  established  custom  of  the  collecting  bank,  or  upon  the 
fourth  day  after  maturity,  under  a  local  custom  to  allow 
four  days  of  grace  instead  of  three,  the  maker  and  the  in- 
dorsers  will  be  held,  and  cannot  set  up  insufficiency  or 
irregularity  in  the  demand.^  So  a  custom  of  a  bank  to 
hold  the  indorser  without  having  first  sued  the  maker, 
though  he  is  solvent,  is  good.^  So  likewise  a  custom  to 
make  demand  on  the  maker  of  a  note  lodged  in  a  bank 
without  presenting  it  to  him.^ 

§  221.  Usage  of  the  Bank.  —  Knowledge  of  the  usage,  either 
express  or  implied,  must,  it  has  been  said,  be  brought  home 

2  Warren  Bank  v.  Suffolk  Bank,  10  Cush.  (:\Iass.)  582;  Blanchard  w. 
Hilliard,  11  Mass.  88;  Jones  v.  Fales,  4  id.  245;  Widgery  v.  Munroe,  6  id. 
449 ;  Renner  v.  Bank  of  Columbia,  9  Wheat.  581 ;  Yeaton  v.  Bank  of 
Alexandria,  5  Cranch,  49;  Bank  of  Columbia  v.  Fitzhugh,  1  Har.  &  G. 
(Md.)  239  ;  Hartford  Bank  v.  Stedman,  8  Conn.  489. 

8  Pearson  (Brent's  f]x'rs)  r.  Bank  of  Metropolis,  1  Pet.  89. 

*  Patriotic  Bank  >;.  Farmers'  Bank,  2  Cranch,  C.  C.  560 ;  Bank  of 
Columbia  I'.  Magruder,  6  Har.  &  J.  (Md.)  172;  City  Bank  c.  Cutter, 
3  Pick.  (Mass.)  414;  Yeaton  v.  Bank  of  Alexandria,  5  Cranch,  49. 

^  Renner  v.  Bank  of  Columbia,  9  Wheat.  581. 

8  Pearson  (Brent's  Ex'rs)  v.  Bank  of  the  Metropolis,  1  Pet.  89  ;  Raborg 
V.  Bank  of  Columbia,  1  liar.  &  G.  (Ud.)  231  ;  Whitwell  v.  Johnson,  17 
Mass.  452 ;  City  Bank  v.  Cutter,  3  Pick.  (Mass.)  414. 
448 


USAGE.  §  221 

to  the  parties  who  are  to  be  bound  by  it.^  But  other  cases 
of  high  authority  declare  that  tlie  usage  of  the  bank  in  col- 
lections will  bind  the  persons  dealing  with  it  in  this  busi- 
ness, whether  such  usage  be  known  to  them  or  not; 2  and  this 
is  certainly  the  correct  rule.  Indeed,  the  opposing  cases  can 
be  easily  reconciled  by  the  link  which  appears  to  be  sug- 
gested in  one  of  them.  The  fact  that  one  deals  with  the 
bank  without  taking  the  trouble  to  inquire  as  to  its  system 
will  raise  the  implication  that  he  already  knows  and  is  sat- 
isfied with  that  system.  It  is  clear  that,  if  a  person  hands 
over  a  note  to  a  bank  for  collection  without  any  species  of 
remark  as  to  the  course  to  be  pursued,  the  bank  is  not  bound 
to  thrust  upon  him  a  statement  of  its  intended  course,  and 
to  retain  him  till  the  whole  theory  has  been  expounded  to 
him,  when  his  conduct  unmistakably  shows  that  either  he 
already  knows  it  or  else  he  does  not  desire  to  know  it. 
Either  he  knows  and  approves  it,  or  he  voluntarily  trusts 
to  the  wisdom  of  the  bank,  at  his  own  deliberately  assumed 
risk  of  its  sufficiency.  In  such  a  case  the  bank  not  only  has 
a  right  to  assume,  but  it  is  even  positively  bound  to  assume, 
that  his  desire  is  that  the  ordinary  and  established  usage  be 
pursued.  An  unordered  deviation  from  that  usage,  though 
the  usage  were  unknown  to  him,  would  lay  the  bank  open  to 
his  suit  for  damages;  and  the  court  must,  as  has  been  already 
shown,  rule  for  him  as  matter  of  law  that  the  pursuance  of 
this  custom  was  an  implied  item  of  the  contract.  It  is  clear, 
then,  that  he  could  not  plead  ignorance  of  it  in  order  to  lay  a 
foundation  for  a  suit  against  the  bank  for  acting  according  to 
it.     The  knowledge  on  his  part  would  be  implied  conclusively.^ 

1  §  221.  Mills  V.  Bank  of  United  States,  11  Wheat.  431;  Peirce  v. 
Butler,  14  Mass,  303. 

2  Smith  V.  Whiting,  12  Mass.  6  ;  Bank  of  Washington  v.  Triplett, 
1  Pet.  25;  Dorchester  &  Milton  Bank  v.  New  England  Bank,  1  Cush. 
(Mass.)  177;  Farmers'  Bank  and  Trust  Co.  r,  Newland,  07  Ky.  472 
(1895);  Jefferson  County  Savings  Bank  v.  Commercial  National  Bank, 
39  S.  W.  338  (1897). 

8  See  §  9,  on  Usage,  in  which  this  subject  is  further  discussed  and  im- 
portant cases  are  cited,  showing  upon  what  grounds  knowledge  of  the 
usage  and  custom  of  the  banks  will  be  conclut-ively  inferred  at  law. 
VOL.  I.  —  29  449 


§  223  COLLECTION   IN   GENERAL. 

§  222.  Proof.  —  Whenever  it  may  be  necessary  to  prove 
knowledge  by  an  individual  of  the  usage  of  a  bank,  proof 
of  one  transaction  having  been  previously  conducted  between 
them  in  accordance  with  that  usage  is  sufficient.^ 

It  has  been  seen  that  the  time  when  demand  must  be  made 
may  be  modified  by  proof  of  usage  concerning  the  local  rule 
of  grace.  In  like  manner  proof  of  a  particular  usage  con- 
cerning the  place  at  which  demand  shall  be  made,  in  default 
of  the  designation  of  any  place  in  the  instrument  itself,  is 
admissible,  and  may  be  conclusive.  Thus,  where  a  customer 
lived  at  a  distance  from  his  bank,  and  was  wont  to  draw  his 
notes  "negotiable  at"  the  bank,  it  was  held  that  it  was  a 
proper  case  for  the  introduction  of  evidence  of  a  custom  to 
make  presentment  and  demand  upon  his  notes  only  at  the 
bank ;  which  custom,  if  sufficiently  proved,  would  justify  the 
collecting  bank  in  presenting  and  demanding  in  compliance 
with  it.2 

§  223.  Usage  can  only  affect  Manner  of  Collecting.  —  But  the 
usages  which  can  be  shown  are  solely  those  which  qualify 
some  portion  of  those  proceedings  which  the  bank  is  obliged 
to  undertake  for  the  immediate  purpose  of  effecting  the  col- 
lection. It  is  only  the  points  of  detail,  or  the  methods  which 
the  bank  pursues  in  presenting,  demanding,  and  notifying, 
that  can  be  thus  modified.  No  usage  will  justify  the  actual 
omission  of  any  of  these  substantial  and  material  acts,  nor 
the  substitution  of  any  other  act  as  an  equivalent  for  any  of 
them.  The  act  must  be  distinctly  done;  it  is  only  in  refer- 
ence to  the  manner  of  doing  it,  as  regards  time  and  place 
and  the  like  considerations,  that  the  rigidity  of  the  general 
doctrines  of  the  law  may  be  slightly  deflected  by  the  force  of 
local  rules.  Thus,  though,  as  has  been  seen,  demand  may 
be  made  a  day  or  two  earlier  or  later  than  the  usual  third 
day  after  the  literal  maturity  of  the  paper,  yet  demand  must 
be  made,  and  it  must  be  a  real  bona  fide  demand.  No  usage 
can  be  allowed  to  substitute  a  notification  to  the  makers  of 

1  §  222.  Dorchester  &  Milton  Bank  v.  New  England  Bank,  1  Cush. 
(Mass.)  177. 

2  Pearson  (Brent's  Ex'rs)  v.  Bank  of  the  Metropolis,  1  Pet.  89. 

450 


INSTRUCTIONS.  §  224 

the  time  and  of  the  place  where  the  paper  is  deposited  for 
collection,  instead  of  the  positive  demand  of  payment  which 
the  law  imperatively  requires.^  The  contrary  has,  however, 
been  held.     See  §  231  below. 

It  is  a  reasonable  usage  for  local  banks  to  accept  in  pay- 

'  ment  of  drafts  sent  them  for  collection  certified  checks  on 

one    of    their   own    number    in    good    standing,    to   present 

these  checks  each  day  at  11  a.m.,   and  to  leave   them  for 

examination.  2 

But  a  mere  usage  between  banks  whereby  the  coHecting 
bank  credits  the  transmitting  bank  with  the  amount  col- 
lected, instead  of  remitting,  is  not  alone  sufficient  to  be  set 
up  against  the  real  owner  of  notes  or  bills  so  as  to  deprive 
him  of  his  rights.^ 

§  224.  Instructions.  —  If  the  customer  gives  any  instruc- 
tions or  directions  concerning  any  item  in  the  method  which 
is  to  be  pursued  in  collecting  or  protesting  the 

.1,1  •    .  1  -,  Bank's  duty 

paper,  the  bank  receiving  the  paper  is  bound  to   to  forward 

p  J  1      •       i.         J.-  -IT         1-  ,        •,       instructions. 

lorward  such  instructions  and  directions  to  its 
agent  or  correspondent.  If  it  neglects  altogether  to  trans- 
mit, or  if  it  fails  to  transmit  them  accurately  as  the  cus- 
tomer gave  them,  it  will  be  liable  for  the  resulting  loss.^ 
It  may  often  happen  that,  where  paper  payable  in  one  State 
is  deposited  in  a  bank  situated  in  another  State,  it  is  neces- 
sary, in  order  to  hold  some  of  the  parties  upon  it,  that 
presentment,  demand,  and  notice  should  all  be  performed 
according  to  the  laws  and  usages  of  the  State  in  which  the 
first  bank  is  situated,  rather  than  of  the  State  where  the 
actual  collection  or  protest  is  to  be  made.  In  such  case  it 
is  certainly  more  proper  for  the  depositor  to  notify  the  first 
bank  of  this  fact.  But  it  seems  that  even  if  he  does  not  do 
so,  yet  the  bank,  if  it  is  aware  or  ought  to  be  aware  of  the 
existence  of  the  necessity,  is  bound  to  transmit  to  its  cor- 

1  §  223.    Farmers'  Bank  v.  Duvall,  7  Gill  &  J.  (Md.)  78. 

^  Jefferson  County  Savings  Bank  v.  Commercial  National  Bank,  98 
Tenn.  337  (39  S.  W.  338)  (1896). 

8  Armstrong  v.  National  Bank,  90  Ky.  438  (1890). 

1  §  224.  Borup  v.  Niuinger,  5  Minn.  523  ;  Mechanics'  Bank  v.  Earp, 
4  Rawle  (Pa.),  384. 

451 


§  224  COLLECTION   IN   GENERAL. 

respondent  full  and  ample  directions  as  to  the  precise  form 
to  be  adhered  to  throughout  the  whole  process. ^     In  fact,  it 
was  upon  this  very  point  that  the  decision  in  the  famous  case 
of   Allen  V.   Merchants'  Bank   really  turned.     The  facts  of 
that  case  were  that  the  notary  in  protesting  complied  per- 
fectly with  the  laws  and  customs  of  the  place  of  his  own 
residence.     But  these  were  different  from  the  laws  and  cus- 
toms of  New  York  City,  wherein  the  Merchants'  Bank  was 
situated.     And  though  the  court,  choosing  to  call  this  a  de- 
fault on  the  part  of  the  notary^  which  was  not  certainly  his 
personal  error,  or  his  default  at  all  in  any  usual  sense  of  the 
word,   gave  a  judgment  in  favor  of  the  plaintiff,  upon  the 
ground  that  the  bank  was  liable  for  the  acts  of  all  the  sub- 
agents;   yet  it  was  not  really  necessary  for  them  to  have 
divided  upon   this  question  at  all,   provided  they  were  all 
united,  as   they  seem   to   have  been,  upon  the    other   point 
which  was    ruled    in  the  case.     This  other  point  was  pre- 
cisely the  doctrine  just  asserted,  and  the  declaration  in  the 
opinion  was  simply  that,   since   the  lex  loci  contractus  gov- 
erned, it  was  the  duty  of  the  bank  to  have  notified  its  cor- 
respondents of  the  requirements  of  that  law ;  and  inasmuch 
as  the  loss  had  been  caused  by  the  failure  of  the  notary  to 
comply  with  those  requirements  which  the  bank  had  negli- 
gently failed  to  transmit,  it  was  in  fact  caused  by  the  non- 
performance on  the  part  of  the  bank  of  its  obvious  duty,  and 
must  therefore  be  made  good  by  the  bank.     It  is  curious  thus 
to   observe   how   easily  the    whole    controversy,   which    has 
made  this  cause  famous,   and  a  subject  of   criticism  in   so 
many  tribunals,  might  have  been  completely  avoided  in  it. 

Instructions  to  a  bank  to  "  collect  and  credit  a  draft  en- 
closed," which  is  indorsed  to  the  writer,  require  the  pro- 
ceeds to  be  credited  to  the  writer. 2" 

A  bank  must  obey  the  instructions  of  its  principal,  and 

where  it  was  told  to  allow  a  renewal  of  a  note  on 

diTresard'ing    couditiou  that  a  good  indorser  should  be  obtained 
instructions.    ^^  ^^^^  ^^^  ^^^^^   ^^^  ^^^^  ^^^^    ^^^^  j^  renewal 

2  Allen  V.  Merchants'  Bank,  22  Wend.  (N.  Y.)  215. 
^^  Long  V.  Bank  of  Commerce,  38  S.  W.  886  (1897). 

462 


INSTRUCTIONS.  §  225 

without  such  indorscr,  it  was  held  liable  to  its  principal 
on  the  subsequent  insolvency  of  the  raaker.^ 

A  bank  having  claims  against  D.  to  the  extent  of  his 
entire  property  receives  for  collection  a  draft  on  D.  with 
instructions  to  return  immediately  if  not  paid.  These  in- 
structions are  disobeyed,  and  subsequently  directions  to  turn 
the  draft  over  to  attorneys  for  suit  are  neglected  until  the 
bank  has  secured  a  mortgage  on  D. 's  property.  The  case 
should  go  to  the  jury  on  the  questions  of  negligence  and 
fraud.  ^" 

Where  the  orders  were,  "On  payment  of  the  drafts,  you 
will  deliver  the  cargo  to  the  order  of  A.  If  not  paid,  please 
hold  and  advise  by  telegraph,"  —  and  the  receiving  bank  col- 
lected the  sight  drafts,  and  took  an  acceptance  of  one  of  the 
drafts  which  was  on  time,  and  delivered  the  cargo  of  wheat, 
the  bills  of  kding  of  which  accompanied  the  drafts,  and  be- 
fore the  maturity  of  the  time  draft  the  acceptor  failed, 
the  question  of  negligence  went  to  the  jury.  The  court 
thought  there  was  a  violation  of  the  instructions  amounting 
to  negligence* 

Where  a  bank  receives  for  collection  a  draft  to  which  is 
pinned  a  package  with  the  instructions,  — "  Papers  to  be 
delivered  only  on  payment  of  draft,"  —  the  word  "  delivered  " 
means  absolute  delivery,  and  permission  of  the  bank  to  the 
drawee  to  take  the  package  for  the  purpose  of  examination 
is  not  within  the  prohibition  of  the  instructions.*" 

Where  the  drawee  is  entitled  to  delivery  of  the  bills  of 
lading  upon  acceptance  of  the  draft,  of  course  the  bank  is 
guilty  of  no  negligence  in  so  doing. ^ 

§  225.  Duty  of  Collecting  Bank  concerning  Collateral  Security. 
—  It  has  been  held  that  where  a  time  draft,  drawn  by  con- 
signors of  merchandise  upon  the  consignees,  is  forwarded 
to  a  bank  without  any  special  instructions,  but  having  the 

8  Central  Georgia  Bank  i\  Cleveland  National  Bank,  59  Ga.  667. 

3«  Finch  V.  Karste,  97  Mich.  21. 

4  National  Bank  v.  City  Bank,  103  U.  S.  668. 

4"  People's  National  Bank  v.  Freeman's  National  Bank,  169  Mass.  129. 

6  Woolen  V.  N.  Y.  &  Erie  Bank,  12  Blatchf.  359. 

453 


§  226  COLLECTION   IN   GENERAL. 

bills  of  lading  for  the  merchandise  attached,  the  bank  is 
justified,  by  reason  of  the  implied  intention  of  the  parties 
and  the  usages  and  necessities  of  business,  in  surrendering 
the  bills  of  lading  to  the  consignees  upon  their  acceptance 
of  the  draft,  without  waiting  for  them  to  make  final  payment 
of  it.i 

But  a  bill  of  lading  accompanying  a  time  draft  must  be 
retained  by  a  collecting  bank  after  acceptance  of  the  draft, 
to  secure  its  payment  when  the  bill  of  lading  is  made  deliv- 
erable to  consignor  or  his  order. ^"^  A  bank  receiving  a  sight 
draft  for  collection  should  not  surrender  the  accompanying 
bill  of  lading  until  the  draft  has  been  paid.^* 

Indorsement  by  a  bank  "for  collection"  on  invoices  that 
accompany  bills  of  lading  attached  to  drafts  creates  no  re- 
sponsibility on  the  part  of  the  bank;  it  is  not  a  guaranty 
that  the  bills  of  lading  are  genuine.^  "It  imported  nothing 
more  than  that  the  goods  which  the  bills  stated  had  been 
shipped  were  to  be  held  for  the  payment  of  the  drafts,  if  the 
drafts  were  not  paid  by  the  drawees,  and  that  the  bank  trans- 
ferred them  only  for  that  purpose. "  ^ 

Where  a  customer  intructs  a  bank  to  accept  bills  of  ex- 
change drawn  against  bills  of  lading,  the  bank  does  not  have 
to  inquire  as  to  the  genuineness  of  the  bills  of  lading,  and 
though  they  prove  to  be  forgeries,  it  may  recover  the  amount 
paid  on  the  bills  of  exchange.* 

§  226.  Discretion  of  the  Bank  in  Doubtful  Cases.  —  If  any 
point  of  law  concerning  any  act  in  the  business  of  collec- 

1  §  225.  National  Bank  of  Commerce  v.  Merchants'  National  Bank, 
91  U.  S.  (I  Otto)  92;  Lanfear  v.  Blossman,  1  La.  An.  148;  Wisconsin 
Marine  &  Fire  Ins.  Co.  v.  Bank  of  British  North  America,  21  Upper 
Canada,  Q.  B.  284;  s.  c.  affirmed,  2  Upper  Canada,  E.  &  A.  282;  Mason 
V.  Hunt,  1  Dongl.  (Eng.)  297;  Commercial  Bank  v.  Railway  Co.,  160  111. 
401,  407,  citing  National  Bank  v.  Merchants'  Bank,  91  U.  S.  92;  Porter 
on  Bills  of  Lading,  §  521 ;  Bank  v.  Cummings,  89  Teun.  613  (1890). 

i«  Bank  v.  Cummings,  89  Tenn.  616  (1890;. 
i»  Ibid. 

2  Craig  V.  Sibbett,  15  Pa.  238;  Hunter  v.  Wilson,  19  L.  J.  Ex.  8; 
Leather  i'.  Simpson,  L.  R.  11  Eq.  398. 

8  Goetz  V.  Bank  of  Kansas  City,  7  Supr.  Ct.  Rep.  318  (1887). 
*  Woods  V.  Thiedemann,  1  H.  &  C.  478. 

454 


BILLS    OP   LADING.  §  227 

tion  is  in  doubt  by  reason  of  having  never  been  adjudicated 
upon,  if  the  bank  using  its  best  discretion  should  pursue  the 
course  which  the  courts  subsequently  declare  to  be  improper 
and  illegal,  it  will  nevertheless  be  absolved  from  all  liability 
for  the  results  of  its  mistake.^  But  if  the  bank  makes  a 
mistake  for  which  it  has  no  such  excuse,  as  simply  a  mis- 
take of  misreading,  it  will  not  be  discharged  from  its  lia- 
bility to  make  good  the  consequent  loss.^  Though  of  course 
in  this  case  of  a  misinterpretation  it  is  to  be  supposed  that, 
if  the  writing  really  appeared  so  illegible  that  the  mistake 
was  reasonably  excusable,  and,  which  is  essential,  the  bank 
by  reason  of  distance  and  want  of  time  was  actually  unable 
to  obtain  directions  or  explanations  from  competent  author- 
ity, it  would  be  acquitted  if  it  pursued  its  own  best  discretion. 
In  the  cited  case  there  was  obvious  negligence  on  the  part 
of  the  bank  in  the  reading  of  the  note. 

§  227.  Collections  made  in  the  Locus  of  the  Bank.  —  The  duty 
of  the  bank  to  the  holder  of  the  paper  which  is  received  for 
collection  differs  slightly,  according  to  the  character  of  the 
paper  and  the  place  where  it  is  made  payable.  First  in 
order  will  be  considered  those  collections  which  are  to  be 
made  in  the  same  place  where  the  collecting  bank  itself  is 
situated.  For  the  purpose  of  this  discussion  it  makes  no 
difference  whether  the  bank  is  itself  the  owner ;  or  has  come 
by  the  paper  directly  from  the  hands  of  the  owner  or  his 
agent;  or  has  received  it  from  a  correspondent  of  its  own  in 
some  distant  place.  The  only  conditions  are,  that  the  bank 
performing  the  actual  collection  be  situated  in  the  same 
town  where  is  also  the  person  who  is  bound  to  make  the 
payment,  or  the  banking-house  at  which,  by  the  terms  of 
the  instrument,  payment  is  to  be  made.  If  the  paper  be 
a  promissory  note,  a  bill  of  exchange,  or  a  draft,  the  duty 
of  the  collecting  bank  is  comparatively  simple.  It  must  per- 
form the  ordinary  requirements  in  the  way  of  presenting  for 

1  §  22(3.  Mechanics'  Bank  v.  Merchants'  Bank,  6  Met.  (Mass.)  13; 
National  Bank  of  Commerce  v.  Merchants'  National  Bank,  91  U.  S. 
(1  Otto)  92. 

"^  Bank  of  Delaware  County  v.  Broomhall,  38  Pa.  St.  135. 

455 


R  228  COLLECTION    IN   GENERAL. 

acceptance  if  the  paper  ought  to  be  accepted,  and  of  present- 
ing for  payment  at  maturity  when  such  presentment  is  nec- 
essary. But  the  bank  is  not  liable  for  neglecting  to  present 
a  draft  where  presentment  is  not  necessary  for  charging  any 
of  the  parties,  and  must  therefore  be  legally  useless  even  if 
made.i  If  either  acceptance  or  payment  is  refused,  the 
paper  must  be  sent  to  a  notary  for  protest,  provided  there  is 
any  occasion  for  having  it  protested  at  all.^  And  the  bank 
is  liable  if,  through  an  erroneous  opinion  as  to  the  legal 
character  of  any  especial  piece  of  business  paper,  though 
in  an  unlisual  form,  it  docs  not  cq.use  presentment,  demand 
and  protest  to  be  made  in  the  manner  which  the 
court  holds  to  be  necessary.^  Though  if  the  per- 
son from  whom  the  bank  received  the  paper  is  immediately 
accessible,  there  seems  to  be  no  reason  why  the  bank  should 
not  be  allowed  at  once  to  return  the  paper  to  him,  and  leave 
him  to  have  it  protested,  if  he  sees  fit.  But  in  such  case  it 
is  essential  that  the  return  can  be,  and  in  fact  is,  accom- 
plished with  sufficient  despatch  to  leave  him  reasonable  time 
for  attending  to  the  protesting  before  it  is  too  late  to  secure 
its  advantages. 

As  it  is  the  duty  of  the  bank  as  agent  to  act  as  a  prudent 
man  would  in  his  own  affairs,  and  as  it  is  for  the  interest  of 
Dutvtopre-  tJie  holder  oi  a  draft  payable  at  a  day  certain  in 
'TvaWeata  ^^^®  futurc  to  prcscnt  it  at  once  for  acceptance, 
future  day.  gincc  acceptance  binds  the  drawee,  and  if  it  is 
not  accepted  the  owner  has  a  right  of  action  against  the 
drawer  or  indorser  on  notice  and  protest,  without  waiting 
for  the  day  of  payment,  therefore  the  bank  should  present 
such  a  draft  for  acceptance  with  due  diligence.* 

§  228.    Notary's  Duty.  —  "When  a  note  is  put  in  bank  for 

1  §  227.  Mobley  v.  Clark,  28  Barb.  (N.  Y.)  390 ;  West  Branch  Bank 
V.  Fulmer,  3  Barr  (Pa.),  399. 

2  Georgia  National  Bank  v.  Henderson,  46  Ga.  487. 

*  Ibid.  But  see  National  Bank  of  Commerce  r.  Merchants'  National 
Bank,  91  U.  S.  92. 

<  Lenox  v.   Cook,  8  Mass.  460;  Whitehead  v.  Walker,   10  INIees.    & 
Wels.  696 ;  Robinson  v.  Ames,  20  Johns.  (N.  Y.)  146.     See  3  Kent,  94, 
and  Mount  v.  First  National  Bank,  37  Iowa,  457. 
456 


PRESENTMENT.  §  230 

collection,  if  not  paid  when  due,  it  is  placed  in  the  hands  of 
a  notary,  whose  duty  it  is  to  demand  payment.  If  not  paid 
during  bank  hours  of  the  last  day  of  grace,  the  notary  on 
the  evening  of  that  or  on  the  next  day  gives  notice  to  all  the 
indorsers  if  they  reside  in  town,  if  out  of  town  then  by  the 
next  mail,  and  it  is  not  until  after  all  this  is  done  that  he 
returns  it  to  the  bank  under  protest,  and  notice  to  the 
holder  is  considered  no  part  of  his  duty. "  ^ 

§  229.  Presentment  for  Payment.  —  Presentment  for  pay- 
ment should  be  within  business  hours,  and  when  a  note  is 
payable  at  a  bank,  that  means  during  its  hours  of  ximeof  pre- 
business;  but  if  a  demand  is  made  of  the  officers  sentment. 
at  the  bank  after  banking  hours,  and  the  cashier  or  teller 
states  that  there  are  no  funds,  the  presentment  is  suffi- 
cient. ^  Demand  must  be  made  on  the  last  day  of  grace, 
in  business  hours ;  a  demand  on  any  previous  day  is  too 
soon  to  bind  the  indorser.^ 

The  general  usage  is  to  allow  three  days'  grace,  but  this 
rule  may  be  varied  by  custom  in  a  particular  local-    Days  of 
ity  which  entered  into  the  contract  of  the  parties,^   ^'''^'^'^• 
or  by  express  agreement. 

§  230.  Place  of  Presentment. — 'The  presentation  of  a  draft 
for  payment  at  the  place  of  its  date  is  a  sufficient  demand  to 
charge  the  drawer  or  acceptor  after  notice  of  protest,  where 
the  place  at  which  it  was  payable  is  not  stated  in  the 
writing,  and  no  proof  made  that  any  particular  place  was 
agreed  on.^ 

When  a  bill  or  note  made  payable  at  a  bank  is  present 
there,  with  the  knowledge  of  the  bank,  and  ready  to  be  de- 
livered up  on  payment,  such  mere  presence  is  a  sufficient 
demand ;  and  if  business  hours  pass  and  it  is  not  paid,  it  is 

1  §  228.   Johnson  v.  Harfh,  1  Bail.  463  (S.  C). 

1  §229.  Salt  Springs  National  Bank  v.  Burton,  58  N.  Y.  430;  First 
National  Bank  v.  Owen,  23  Iowa,  185;  Flint  v.  Rogers,  15  Me.  67. 

2  Farmers'  Bank  v.  Duvall,  7  Gill  &  Johns.  (Md.)  78. 

8  Bank  of  Columbia  v.  Magruder,  6  Harr.  &  Johns.  (Md.)  180 ;  Renner 
V.  Bank  of  Columbia,  9  Wheat.  581.     See  Usage. 

1  §  230.   Wittkowski  v.  Smith,  84  N.  C.  671  (1881). 

45T 


§  231  COLLECTION   IN   GENERAL. 

deemed  to  be  dishonored  and  notice  must  be  given. ^  And 
the  same  rule  holds  as  to  any  place  at  which  paper  is  made 
payable; 2  mere  presence,  if  known,  is  enough,  and  it  is  not 
necessary  even  that  it  should  be  in  possession  of  the  proper 
officer.*  If  it  belongs  to  the  bank,  the  law  presumes  its 
presence  there  until  disproved.^  Mere  physical  presence 
in  the  bank  unknown  to  the  officers,  as  where  the  letter  con- 
taining the  bill  slipped  through  a  crack  in  the  cashier's 
desk,  is  not  sufficient;  the  bill  is  not  ready  to  be  deliv- 
ered on  payment.^ 

Where  the  maker  and  indorser  of  a  note  know  that  the 
bank  having  the  note  for  collection  has  made  the  office  of 
another  bank  its  own  for  discount,  deposit,  etc.,  and  put  its 
notes  held  for  collection  into  the  hands  of  this  other  bank, 
demand  at  said  office  is  sufficient." 

§  231.     Usage  as  Altering  the  Rules  as  to  Place  of  Presentment. 

A  custom  prevails   in  some   places  for  a   bank   to  send 

notice  by  mail  to  the  payor  a  little  before  ma- 
bank  to  send  turity,  requesting  him  to  come  and  settle  at  the 
bt°ad^'"pre-  p^opcr  time.  As  applied  to  paper  made  payable 
senting.  ^^  ^^^q  bank,  of  courso  there  is  no  difficulty,   the 

law  being  as  above;  but  as  to  paper  not  in  terms  payable 
there  trouble  appears  when  a  bank  undertakes  to  substitute 
such  a  custom  of  presenting  by  such  notice,  instead  of  mak- 
'  ing  demand  upon  the  payor  as  the  general  rules  of  the  law 
merchant  require.  In  Massachusetts  the  usage  is  so  general 
as  to  have  become  a  part  of  the  law  in  reference  to  which 
parties  are  presumed  to  contract. ^  So  in  Maine,  but  Mary- 
land and  New  Hampshire  contra^ 

2  Bank  of  United  States  v.  Carneal,  2  Pet.  543;  Chicopee  Bank  v. 
Philadelphia  Bank,  8  Wall.  641  ;  Folger  v.  Chase,  18  Pick.  (.Mass.)  63. 

3  Hunt  V.  Maybee,  3  Seld.  (N.  Y.)  266. 

*  Folger  V.  Chase,  18  Pick.  (Mass.)  63;  State  Bank  v.  Napiex-,  6 
Humph.  (Tenn.)  270. 

6  See  cases  quoted  in  notes  1  and  3. 

6  Cliicopee  Bank  v.  Philadelphia  Bank,  8  Wall.  641. 

7  Crews  V.  Farmers'  Bank,  31  Gratt.  (Va.)  348. 

1  §  231.  Whitwell  v.  Johnson,  17  Mass.  449  ;  Grand  Bank  v.  Blanchard, 
23  Pick.  (Mass.)  305  ;  Marine  Bank  v.  Smith,  18  Me.  99.     Contra,  Far- 
458 


PRESENTMENT.  §  231 

Upon  principle,  if  the  usage  were  prevalent  generally 
among  the  banks  of  a  given  place,  it  should  bind  persons 
of  the  place,  provided  the  paper  is  payable  in  that  place.^ 
But  if  the  usage  is  that  of  a  particular  bank  only,  it  is  diffi- 
cult to  see  on  what  ground  a  party  who  has  not  contem- 
plated that  bank  as  a  factor  in  the  matter  can  be  held  by 
such  a  custom,  merely  because  some  holder  has  selected 
that  bank  to  act  for  him  in  collection.^  It  should  be 
shown  that  the  party  knows  of  the  usage  of  the  bank,  and 
had  reason  to  suppose  the  bank  would  act  in  the  matter  in 
order  to  hold  a  party  who  has  not  selected  or  adopted  tliat 
bank  to  act  in  collecting  the  bill,  for  nothing  less  will  lay  a 
foundation  for  a  reasonable  inference  that  such  party  con- 
tracted in  reference  to  such  usage.  The  case  is  entirely 
different  from  those  in  which  the  bill  is  made  payable  at  a 
particular  bank,  for  then  the  parties  to  the  bill  are  dealers 
with  the  bank,  and  bound  by  its  usages,  whether  known  to 
them  or  not.^     See  §§  9,  221. 

A  note  was  made  payable  to  a  certain  bank  or  order,  as 
if  for  discount  by  that  bank.  It  was  not  discounted  there, 
however;  but  was  sold  to  another  party,  who  deposited  it 
in  the  bank.  It  was  held  that  the  sureties  were  liable  to 
pay  it.^ 

Sending  a  check  by  post  to  the  drawee  is  a  good  present- 
ment ;  but  if  the  money  does  not  come  back  by  the  return 
mail,  notice  of  dishonor  should  be  given.^ 

Where  A.  delivers  a  certificate  of  deposit  to  a  bank  to  be 
collected  from  a  bank  in  another  place  without  any  inquiry 
as  to  the  methods  of  collection,  there  is  an  implied  un- 
derstanding  that  the  established  usage  in  making  collec- 

mers'  Bank  v.  Duvall,  7  Gill  &  J.  (Md.)  78 ;  Moore  v.  Waitt,  13  N.  II. 
415. 

'  Adams  v.  Otterback,  15  How.  539  (S.  C.)  ;  Renner  v.  Bank  of  Co- 
lumbia, 9  Wheat.  587;  Dorchester  &  Milton  Bank  v.  New  England  Bank, 
1  Cush.  (Mass.)  177. 

8  See  notes  1  and  2,  and  Pearson  v.  Bank  of  Metropolis,  1  Pet.  89. 

*  Mills  V.  Bank  of  U.  S.,  11  Wheat.  431. 

8  Ward  V.  Northern  Bank,  14  B.  Monr.  (Ky.)  351. 

«  Bailey  v.  Bodenham,  10  L.  T.  n.  s.  422;  12  W.  R.  865. 

459 


§  232  COLLECTION  IN  GENERAL. 

tions  will  be  followed;  and  if  the  bank  to  which  it  is 
delivered,  acting  accordingly  and  in  the  exercise  of  due 
care,  mails  the  certificate  to  the  payor  bank,  and  receives 
the  latter's  check  on  a  bank  in  a  third  place,  it  will  not  be 
liable  to  the  owner  of  the  certificate  if  the  payor  bank  be- 
comes insolvent  before  presentation  of  the  check. ^^ 

If  a  bill  of  exchange  is  presented  through  a  banker,  one 
more  day  is  allowed  for  giving  notice  of  dishonor  than  would 
be  allowed  if  it  were  presented  by  the  party  himself.  But 
no  additional  time  is  allowed  ior  presentment  for  2)ayment.'^ 

If  a  note  be  payable  at  a  particular  bank,  and  at  maturity 
the  bank  has  no  place  of  business  and  another  occupies  its 
room,  it  is  sufiicient  to  present  it  for  payment  at  such 
room.^ 

§  232.  Notice  of  Dishonor.  —  Where  a  bank,  not  upon  its 
own  account  but  as  agent  for  collection,  holds  indorsed 
paper  of  any  description  which  is  dishonored,  it 
bank's  duty  has  been  questioned  to  whom  it  is  bound  to  give 
bJitTts  imniT  noticc  of  the  dishonor,  — whether  only  to  its  own 
pat^unless'  principal,  that  is  to  say,  the  party  from  whom  it 
there  is  a        received  the  paper,  or  to  the  makers  and  all  the 

usage  to  the  '     '       ' 

contrary,  or     indorscrs  thcrcon.     The  decisions  have  not  from 

an  agreement.  c        i       i  •  -r->  i 

the  outset  been  perfectly  harmonious.  But  the 
doctrine  that  the  duty  extends  to  the  notification  of  any 
persons  behind  the  party  recognized  by  the  bank  as  its 
immediate  principal  is  comparatively  little  supported.  The 
chief  authority  is  the  New  York  case  of  Smedes  v.  The  Bank 
of  Utica.i  But  in  this  case  there  was  evidence,  which  the 
court  deemed  satisfactory,  of  an  estaljlished  custom  and  gen- 
eral understanding  to  this  effect  in  New  York,  and  it  was 
strictly  upon  this  evidence  that  the  decision  was  really 
based;  though  the  judge  intimated  that,  if  this  proof  had 
been  omitted,   it  was   possible  that  the  court  might   have 

««  Farmers'  Bank  and  Trust  Co.  i'.  Newland,  31  S.  W.  38  (1895). 
»  Alexander  v.  Burchfield,  Car.  &  M.  75;  3  Scott  N.  E,.  555;  7  M.  & 
G.  lOGl. 

8  Lane  v.  Bank  of  West  Tennessee,  9  Ileisk.  (Tenn.)  419  (1872). 
1  §  232.    20  Johns.  (N.  Y.)  372;  3  Cow.  (N.  Y.)  662. 
460 


DISHONOR.  §  232 

taken  judicial  cognizance  of  the  usage.  Thus  this  ruling 
really  is  entitled  to  no  weight  in  a  discussion  of  the  gen- 
eral principle  of  the  law;  and  even  the  judge's  remark 
serves  only  to  show  how  universal  and  notorious  Avas  the 
usage  in  his  own  State,  and  has  not  at  all,  and  does  not 
communicate  to  the  ruling,  the  character  of  a  general  prin- 
ciple. The  language  of  the  court  in  a  few  other  cases,  more 
especially  in  McKinster  v.  Bank  of  Utica,^  Fabens  v.  Mer- 
cantile Bank, 3  Bank  of  Washington  v.  Triplett,^  and  West 
Branch  Bank  v.  Fulmer,^  has  been  regarded  as  sustaining  the 
same  view.  The  language  used  might  induce  the  citation  of 
these  causes  as  authorities,  but  they  can  serve  only  as  very 
weak  ones,  and  perhaps  it  would  hardly  be  an  unfair  state- 
ment to  say  that,  so  far  as  they  bear  upon  this  precise  point, 
they  contain  little,  if  anything,  more  than  obiter  dieta.^  On 
the  other  hand,  the  authorities  which  take  the  opposite  view 
are  numerous,  direct  and  weighty.'^  Among  them,  as  cited 
in  the  margin,  it  will  be  noticed  that  there  are  other  cases 
decided  in  New  York ;  and  especially  should  be  noted  one, 
later  in  date  than  any  of  those  to  the  contrary  effect  occur- 
ring in  the  decisions  in  the  same  State.  Therein  the  court 
acknowledge  that  the  question  whether,  where  the  note  is 
sent  for  collection  merely,  it  is  a  presumption  of  law  that 

2  9  Wend.  (N".  Y.)  46 ;  11  id.  473. 
8  23  Pick.  (Mass.)  330. 
4  1  Pet.  (U.  S.)  25. 

6  3  Barr  (Pa.),  399. 

®  See  also  Curtis  v.  Leavitt,  15  N.  Y.  9 ;  Montgomery  County  Bank  v. 
Albany  City  Bank,  3  Seld.  (N.  Y.)  460;  Foster  v.  Essex  Bank,  17  Mass. 
479  ;  Blakeslee  v.  Hewett,  76  Wis.  341. 

7  State  Bank  v.  Bank  of  the  Capitol,  41  Barb.  (N.  Y.)  343  ;  Bank  of 
United  States  v.  Goddard,  5  Mason,  36G;  Phipps  v.  Millbury  Bank,  8  Met. 
(Mass.)  79  ;  Colt  v.  Noble,  5  Mass.  167;  Eagle  Bank  v.  Chapin,  3  Pick. 
(Mass.)  180  (see  comments  upon  this  case,  made  by  the  court  in  Phipps 
V.  Millbury  Bank,  supra)  ;  Mead  v.  Engs,  5  Cow.  (N.  Y.)  303;  Howard  o. 
Ives,  1  Hill  (N.  Y.),  263;  Spencer  v.  Ballou,  18  N.  Y.  327;  Farmers' 
Bank  v.  Vail,  21  id.  485  (cited  in  41  Barb.  343,  supra)]  Bank  of  Mobile  v. 
Hoggins,  3  Ala.  N.  s.  206;  Branch  Bank  v.  Knox,  1  id.  148.  So  the 
English  case  of  Haynes  v.  Birks,  3  Bos.  &  P.  599.  See  also  Bank  of 
United  States  v.  Davis,  2  Hill,  451. 

461 


§  232  COLLECTION   IN    GENERAL. 

the  collecting  agent  will  notify  all  parties,  is  one  of  much 
embarrassment,  and  not  clearly  settled  in  New  York.  Pre- 
vious cases  in  the  State,  being  those  just  cited,  have  arisen 
between  a  holder  and  an  early  indorser,  and  concern  the 
point  whether  such  indorser  could  be  held  by  virtue  of  a 
series  of  notices  sent  day  by  day  by  each  indorser  in  turn 
to  his  predecessor.  But  the  discussion  has  never  arisen 
directly  between  the  holder  and  the  collecting  agent,  where 
the  right  of  the  former  to  recover  from  the  latter  has  turned 
upon  whether  or  not  the  latter  had  contracted,  as  part  of  his 
undertaking  to  collect,  to  notify  all  the  indorsers.  After  a 
careful  consideration  of  all  the  precedents,  the  court  con- 
clude that  the  collecting  bank  need  notify  only  its  own 
principal,  from  whom  it  has  immediately  received  the 
paper.  In  the  case  cited  from  Mason's  Reports  the  mat- 
ter is  subjected  to  a  very  thorough  and  satisfactory  dis- 
cussion, as  it  is  also  in  the  case  of  Phipps  v.  Milbury 
Bank.  Where  the  weight  of  opposing  authorities  is  so 
very  disproportionately  balanced,  and  especially  where  the 
latest  among  the  authorities  all  consistently  incline  in  favor 
of  the  doctrine  which  was  already  the  stronger,  it  can  hardly 
be  considered  that  the  true  rule  is  any  longer  open  to  doubt. 
It  must  be  assumed  now  to  be  law  that  the  notification  to  the 
principal  —  i.  e.  to  the  immediate  predecessor  in  possession, 
the  party  from  whom  the  bank  receives,  no  matter  what  may 
be  the  nature  of  the  title  or  interest  of  that  party  to  or  in  the 
paper  —  is  sufficient  to  acquit  the  bank.  But  though  this  is 
settled  as  the  general  rule,  it  is  of  course  open  to  material 
variation  from  extrinsic  causes.  A  special  agreement,  ex- 
press or  implied,  between  the  bank  and  its  principal,  may 
require  notice  to  be  given  to  all  the  parties,  or  to  any  partic- 
ular party,  on  the  paper.  So  a  local  usage,  as  in  New  York 
City,  or  the  usage  of  the  collecting  bank,  to  notify  indorsers 
or  makers,  may  render  it  obligatory  upon  the  bank  to  do  so, 
as  a  part  of  the  contract  of  collection.  There  can  be  no 
question  that  the  court  in  the  case  of  Smedes  v.  Bank  of 
Utica  was  right  in  admitting  evidence  of  such  usage;  and, 
of  course,  also  in  being  governed  by  it,  since  it  was  sus- 
462 


DISHONOR.  —  NOTICE.  §  233 

tained  by  satisfactory  proof.  None  of  the  cases  in  which 
this  decision  has  been  since  commented  upon,  and  which 
in  the  absence  of  proof  of  usage  have  laid  down  an  opposite 
doctrine,  have  criticised  the  correctness  of  the  course  then 
pursued  in  this  matter.  On  the  contrary,  they  have  by  plain 
implication  approved  it. 

(a)   It  should  seem,  too,  that  the  bank  ought  to  choose 
distinctly  between  the  two  courses.     For  if  it  undertakes  to 
notify  all  the  parties,  and  does  not  do  so  properly,    Evidence  of 
it  is  at  least  possible  that  it  might  be  held  respon-   ^^^^fZ^l^- 
sible  for  the  loss  arising  from  the  insufficiency,    tifyaii. 
Certainly  the  fact  of  its  undertaking  to  notify  all  would  be 
very  strong  evidence  that  the  notification  of  all  was  under- 
stood to  be  a  part  of  the  contract.     Indeed,  it  has  been  held 
that  the  fact  of  notification  to  a  part  only  of  the  indorsers 
was  admissible  in  evidence,  as  going  to  show  an  agreement 
to  notify  all,  and  the  court  only  restricted  its  force  by  say- 
ins:  that  it  was  not  conclusive  to  this  effect.^ 

(5)  Each  transferee  of  a  check  has  one  day  allowed  him 
in  which  to  give  notice  of  its  dishonor  to  his  transferrer. 
Nor  does  it  make,  any  difference  that  any  one  or  more  of 
the  transferees  are  parties  who  have  been  simply  organs 
of  transmission  without  any  actual  interest  in  the  check. ^ 

Notice  of  dishonor  may  be  given  at  once,  on  refusal  to  pay 
upon  demand  in  business  hours  of  the  last  day  of 

r  .        When  notice 

grace;  it  is  not  necessary  to  wait  till  the  day  is   is  to  be 
done.  ^^ 

(c)    No  notice  need  be  given  if  the  party  has 

^  .  ,-,  Excuse. 

actual  knowledge  of  the  fact  to  be  notified.  ^^ 

§233.  Manner  of  Notice.  —  The  general  rule  is  that  per- 
sonal notice  must  be  given  to  a  party  in  the  same  place  as 
the  bankji  but  a  mailed  notice  is  sufficient  if  such  is  the 

8  State  Bank  v.  Bank  of  the  Capitol,  41  Barb.  (N.  Y.)  343. 

9  Prideaux  v.  Criddle,  L.  R.  4  Q.  B.  455 ;  Buniham  v.  Webster,  19  Me. 
232. 

10  Farmers'  Bank  v.  Duvall,  7  Gill  &  Johns.  (Md.)  78. 
"  West  Branch  Bank  i-.  Fulmer,  3  Pa.  399. 

1  §  233.    When  au  indorser  dwells  iu  the  same  post-oflace  delivery,  the 

463 


§  233  COLLECTION    IN    GENERAL. 

usage  of  the  bank  at  which  a  note  is  payable  ;2  and  an  in- 
dorser  (A. )  who  receives  notice  by  mail  may  forward 
mairpiod  notice  to  his  indorser  (B.)  by  mail,  if  he  does  it 
by  usa{,a-.  ^j^^  same  day,  so  that  it  would  reach  his  indorser 
the  same  day  he  would  have  received  the  notice  sent  to  A.  if 
it  had  been  originally  addressed  to  B.  instead  of  to  A.-^  In 
Alabama,  notice  that  may  be  sent  by  mail  under  the  law 
merchant  is  sufficiently  addressed  if  sent  to  the  residence 
or  post-office  nearest  the  residence  of  the  party  to  be 
charged  at  the  time  he  became  a  imrty^  without  regard  to 
his  residence  at  the  time  of  notice.* 

When  the  protest  is  made  at  a  different  place  from  that 
where  the  parties  reside,  the  mail  may  be  properly  used.'^ 

(a)  As  to  the  test  of  difference  in  place,  the  United  States 
Supreme  Court  holds  that,  even  though  the  parties  get  their 
mail  at  the  same  post-office,  yet  if  the  party  to  be 
ferenceiu  notified  has  no  residence  nor  place  of  business  in 
^**^®*  the  town,  but  lives  two  or  three  miles  in  the  coun- 

try, the  mail  may  be  used.^  Other  authorities  make  the 
post-office  the  test ;  if  the  parties  get  their  mail  at  the  same 
post-office,  the  mail  is  not  to  be  used  (unless  the  place 
of  payment  is  elsewhere),  for  the  post  is  not  to  be  made 
a  place  merely  of  deposit,    and  is  only  properly  used  for 

notice  must  be  personal,  or  left  at  his  residence  or  place  of  business. 
Forbes  v.  Omaha  National  Bank,  10  Neb.  338;  Louisiana  State  Bank  v. 
Rowel,  6  Mart.  (La.)  506  ;  Babcock  v.  Benham,  4  Hill  (N.  Y.),  129. 

2  And  what  is  its  usage  is  a  question  of  fact  for  the  jury.  Carolina 
National  Bank  v.  Wallace,  13  S.  C.  347  (1879).  See  Gindrat  v.  :\Iechan- 
ics'  Bank,  7  Ala.  324;  Usage,  §  9.  The  parties  to  a  note  payable  at  a 
bank  are  dealers  with  the  bank,  and  bound  by  its  custom  as  to  notifying 
by  mail.  Chicopee  Bank  v.  Eager,  9  Met.  (Mass.)  583;  Mills  v.  Bank  of 
United  States,  11  Wheat.  431. 

3  United  States  National  Bank  v.  Burton,  58  Vt.  426;  Manchester 
Bank  v.  Fellows,  28  N.  H.  302 ;  Shelburne  Falls  National  Bank  v.  Towns- 
ley,  102  Mass.  177. 

*  John  V.  City  National  Bank  of  Selma,  57  Ala.  96  (1876). 

6  Hartford  Bank  v.  Stedman,  3  Conn.  489;  Greene  r.  Farley,  20  Ala. 
322;  Eagle  Bank  v.  Hathaway,  5  Met.  (Mass.)  212;  Warren  c.  Oilman, 
17  Me.  .360. 

8  Bank  of  Columbia  v.  Lawrence,  1  Pet.  (U.  S  )  578. 
464 


COLLECTIONS   IN   DISTANT   PLACES.  §  235 

transportation;'^  this,  however,  is  of  course  subject  to  ex- 
ception where  a  postal  delivery^  exists  in  the  city  where  the 
parties  live,  or  where  it  is  the  usage  ^  of  a  bank  to  deposit 
notice  in  the  post-office,  as  such  a  usage  will  bind  those 
dealing  with  the  bank. 

§  234.  Waiver  of  Demand  and  Notice.  Insolvency  no  Excnse. 
—  Indorser's  acknowledgment  of  "the  receipt  of  notice  of 
protest  on  the  within  note  "  (a  note  delivered  to  a  savings 
bank  as  collateral  security  for  a  previous  loan),  was  held  to 
release  the  bank  from  all  obligation  to  demand  payment  or 
give  notice  of  non-payment. ^ 

(a)  Insolvency  of  the  drawee  will  not  excuse  failure  to 
present  for  payment  or  acceptance,  or  failure  to  give  notice 
of  nonpayment  or  non-acceptance.  From  friends  or  unknown 
resources  the  drawee  may  have  power  to  pay,  and  only  when 
a  party  cannot  possibly  be  damaged  by  the  want  of  due  pre- 
sentment or  notice  is  the  failure  excused.  The  mere  fact 
that  he  has  not  been  injured  is  no  defence,  if  he  might  have 
been  damaged  by  the  omission. ^ 

S  235.  Collections  that  are  not  to  be  made  in  the  Locus  of  the 
Bank.  —  When  the  paper  is  payable  in  some  other  place 
than  that  in  which  the  bank  is  located,  its  duty  is  (1st)  to 
forward  the  bill,  or  note,  or  check  in  proper  season,  to  a 

7  Eagle  Bank  v.  Hathaway,  5  Met.  (Mass.)  212;  Shelburne  Falls  Na- 
tional Bank  v.  Townsley,  102  Mass.  177;  Louisiana  State  Bank  v.  Rowel, 
6  Mart.  (La.)  506. 

8  Shoemaker  v.  Mechanics'  Bank,  59  Pa.  St.  83;  Walters  v.  Brown, 
15  Md.  292. 

9  Chicopee  Bank  v.  Eager,  9  Met.  583 ;  Mills  v.  Bank  of  U.  S.,  11 
Wheat.  431. 

1  §  234.    City  Savings  Bank  v.  Hopson,  53  Conn.  453  (1885). 

2  1  Parsons  on  Notes,  446,  528,  551,  630;  Story  on  Notes,  286,  367; 
Story  on  Bills,  318,  326,  346;  Daniel  on  Neg.  Inst.,  1171,  1172;  Chitty 
on  Bills,  354,  396,  490;  Smith  v.  Miller,  52  N.  Y.  545;  Welch  v.  Taylor 
Manuf.  Co.,  82  111.  579  ;  Hawley,  Dodd,  &  Co.  v.  Jette,  10  Oregon,  36. 

Where  the  bank  was  in  default  in  presentation  and  protest,  it  was 
held  that,  in  a  suit  for  damages  by  the  owner  of  the  note,  the  bank 
might  show  that  the  maker  of  the  note  was  insolvent,  and  that  there  had 
been  no  real  loss  to  the  holder;  but  evidence  only  that  the  maker  was  in 
embarrassed  circumstances  was  declared  inadmissible.  Steele  v.  Russell, 
5  Neb.  211. 

VOL.  I.  — 30  465 


§  236  COLLECTION   IN   GENERAL. 

Bub-agent  selected  with  due  care ;  (2d)  to  send  to  such  agent 
any  instructions  bearing  upon  its  duty  that  may  have  been 
received  from  the  depositor  (§  224) ;  and  (3d)  to  make  in- 
quiry with  due  diligence  if  notice  of  the  arrival  of  the  paper 
does  not  come  to  it  within  such  time  as  it  might  reasonably 
be  expected.     See  §§  235,  252  d. 

§  236.  Selection  of  Sub-agent.  —  The  bank's  duty  is  to  use 
every  reasonable  precaution,  so  far  at  least  as  its  own  action 
is  concerned,  to  secure  the  collection,  if  possible;  and,  fail- 
ing in  this,  the  prompt  and  accurate  performance  of  all  the 
items  connected  with  the  protest.  It  must  therefore  either 
transmit  to  a  bank  in  good  standing,  or  hand  over  to  a  notary 
in  good  repute,  as  the  case  may  be.  And  if  it  be  proved  to 
have  been  careless  in  the  choice  of  the  agent,  and  to  have 
selected  one  which  it  knew  or  ought  to  have  known  to  be  an 
improper  one,  it  will  be  answerable  for  the  injury  resulting 
therefrom. 1  Ordinarily,  of  course,  it  will  be  very  strong 
evidence  of  due  care  on  the  part  of  the  bank  if  it  is  shown 
to  have  selected  the  agent  which  it  is  wont  to  employ  for  the 
transaction  of  its  own  business  of  the  same  nature, ^  and  the 
courts  are  accustomed  to  speak  of  such  evidence  as  if  it  were 
substantially  conclusive.  Generally  it  may  be  thus  regarded, 
but  it  is  clearly  possible  that  a  bank  may  be  shown  to  be 
culpably  remiss  in  the  selection  of  its  own  agents,  and  then 
the  fact  that  the  agent  was  employed  in  its  private  affairs 
would  be  no  excuse  for  the  employment  of  the  same  agent 
in  the  affairs  of  the  customer.  The  contract  is  not  that  the 
bank  shall  employ  its  own  usual  agents,  but  that  it  shall 
employ  proper  agents. 

By  the  custom  of  London  bankers,  when  a  foreign  check 
is  paid  to  a  banker  by  a  customer,  if  the  banker  has  no 
agent  at  the  place  where  the  check  is  payable,  he  sends  it 

1  §  236.  Fabens  v.  Mercantile  Bank,  23  Pick.  (Mass  )  3.30 ;  ^tna 
Insurance  Co.  v.  Alton  City  Bank,  25  111.  2i3;  Stacy  v.  Dane  County 
Bank,  12  Wis.  629;  Bellemire  i*.  United  States  Bank,  4  Whart.  (Fa.) 
105;  Bowling  v.  Arthur,  34  Miss.  41. 

2  Warren  Bank  v.  Suffolk  Bank,  10  Cush.  (Mass.)  583;  Hj'de  v. 
Planters'  Bank,  17  La.  560;  Baldwin  v.  Bank  of  Louisville,  I  La.  An. 
13. 

466 


SELECTION   OF   SUB -AGENT.  §  236 

direct  to  the  banker  on  whom  it  is  drawn,  demanding  pay- 
ment, and  the  banker  immediately  either  remits  the  money 
or  returns  the  check.* 

(a)  But  in  this  country  the  party  who  is  to  pay  a  check  is 
not  a  suitable  agent  for  its  collection. 

A  Chicago  bank  received  a  certified  check  for  collection, 
and  sent  it  to  the  drawee  bank.  The  latter  mailed  in  return 
a  worthless  draft,  surrendered  the  check  to  the 
drawer  as  paid,  failed,  and  closed  its  doors.  The  employ  an 
Chicago  bank  was  liable  to  the  depositor  for  the  nfanif^rad* 
full  amount  of  the  check.  The  debtor  cannot  be  B^ut^Je' N*ew 
the  disinterested  agent  of  the  creditor  to  collect   yorkcase 

°  in  (6). 

the  debt,  and  it  cannot  be  considered  reasonable 
care  to  select  an  agent  known  to  be  interested  against  the 
principal,  to  put  the  latter  into  the  hands  of  his  natural 
adversary;  surely  it  is  not  due  care  in  one  holding  a  prom- 
issory note  for  collection  to  send  it  to  the  debtor,  trusting 
him  to  pay,  delay,  or  destroy  the  evidence  of  debt,  as  his 
conscience  may  permit.  With  especial  force  does  this  rea- 
soning apply  to  the  case  of  a  certified  check,  for  on  that  the 
bank  is  primarily  liable.* 

(5)  Pennsylvania  also  holds  that  a  bank  on  which  a  check 
is  drawn,  though  not  certified,  is  not  a  suitable  agent  for  its 
collection.^ 

In  New  York^  it  has  been  held  that  the  bank  at  which 
a  note  is  payable  is  a  suitable  agent  to  collect  it  from  the 
maker;  such  a  bank  has  no  primary  liability,  and  in  this 
case  there  was  no  indorser  except  the  maker.  It  was  not  a 
claim  against  the  bank,  and  the  court  found  that  it  was  a 

8  Heywood  v.  Pickering,  Law  R.  9  Q.  B.  428  (1874). 

*  Drovers'  National  Bank  v.  Anglo-Amer.  P.  &  P.  Co.,  117  111.  100 
(1886). 

6  Merchants'  National  Bank  v.  Goodman,  109  Pa.  St.  422. 

«  Indig  V.  City  Bank,  80  N.  Y.  100.  See  also  Western  Wheeled 
Scraper  Co.  v.  Sadilek,  50  Neb.  105  (69  N.  W.  765)  (1897)  ;  First  Nar 
tional  Bank  v.  City  National  Bank,  34  S.  W.  458  (1896)  ;  German  National 
Bank  v.  Burns,  12  Col.  539;  Wagner  v.  Crook,  167  Pa.  259  ;  First  National 
Bank  v.  Fourth  National  Bank,  56  Fed.  967  ;  Anderson  v.  Kodgers,  53 
Kans.  542  (1894),  citing  Bank  i;.  Ober,  31  Kans.  599. 

467 


§  237  COLLECTION   IN   GENERAL. 

usual  method  of  business  to  send  by  mail,  and  that  whether 
it  was  or  was  not  negligence  to  send  to  that  bank  at  which 
the  note  was  payable,  it  was  clear  that  no  injury  resulted 
from  it  in  this  case;  the  damage  zvould  have  arisen  just  the 
same  if  a  third  party  had  been  agent. 

(c')  It  is  not  a  reasonable  usage  to  send  the  draft  to  the 
drawee,  and  run  the  risk  of  receiving  worthless  paper  in 
return,  and  of  sacrificing  the  claims  of  the  owner  on  prior 
parties,'^  An  independent  agent  should  be  selected,  and  he 
should  take  nothing  but  money,  unless  he  has  authority  to 
do  otherwise. 

§  237.  Collection  of  Checks.  —  Where  the  instrument  re- 
ceived for  collection  is  a  check,  the  duties  of  the  bank 
become  somewhat  more  complicated,  at  the  same  time 
that  a  more  correct  understanding  of  them  is  rendered 
vastly  more  important  by  reason  of  the  immense  amount 
of  business  of  this  description  which  all  banks  are  obliged 
to  transact.  Every  bank  of  deposit  in  the  country  is  wont 
daily  to  receive  from  its  customers  upon  deposit  for  their 
credit  great  numbers  of  checks  drawn  upon  other  banks. 
Whenever  a  check  is  deposited,  and  credit  therefor  is 
given  on  the  depositor's  check-book,  the  memorandum  may 
be  subsequently  cancelled  if  the  collection  should  not 
be  accomplished  in  due  course. ^  If  circumstances  should 
cause  the  obligation  in  any  particular  transaction  to  run 
to  any  person  or  party  other  than  the  one  from  whom  the 
bank  receives  the  check,  the  nature  of  the  obligation  is  not 
thereby  substantially  affected;  certainly  it  can  never  be 
increased. 

The  duty  of  the  bank  is  still  precisely  the  same  duty, 
though  it  may  prove  that  a  true  owner,  not  at  first  known 
to  the  bank,  is  the  party  who  is  really  entitled  to  claim  a 
performance  of  that  duty,  or  damages  for  its  breach.  For 
the  sake  of  brevity,  we  will  hereafter  designate  the  person, 

'  Whitney  v.  Esson,  99  Mass.  311.  Contra,  see  Farmers'  Bank  and 
Trust  Co.  V.  Newlaud,  31  S.  W.  38  (1895). 

1  §  237.  National  Gold  Bank  v.  IMcDonald,  51  Cal.  64;  Medland 
National  Bank  v.  Brightwell,  li8  Mo.  358  (1898). 

468 


COLLECTION   OF   CHECKS.  §  238 

whoever  he  may  be,  to  whom  the  obligation  of  the  bank 
runs,   as  the  depositor  or  the  customer. 

§  238.  Distinction  bet-wreen  the  Duty  of  the  Bank  to  the  Cus- 
tomer and  the  Duties  existing  between  other  Parties.  —  It  is 
necessary  in  the  outset  thoroughly  to  disembarrass  the  rela- 
tion of  the  bank  to  the  customer,  and  consequently  the  whole 
matter  of  the  duties  and  liabilities  of  the  bank  in  the  prem- 
ises form  two  wholly  distinct  and  alien  subjects;  to  wit,  the 
relation  of  the  payee,  owner,  or  holder  of  the  paper  to  the 
maker,  drawer,  or  acceptor  thereof;  and  the  relation  of  the 
party  giving  it  in  charge  to  the  bank  to  any  other  person 
standing  earlier  in  the  progression  of  title.  With  the  two 
last  mentioned  considerations  the  collecting  bank  has  noth- 
ing whatsoever  to  do;  it  may  ignore  them  utterly;  in  fact, 
oftentimes  it  may  even  be  incumbent  upon  it  to  ignore  them 
utterly,  for  they  may  be  rendered  by  circumstances  in  any 
particular  case  inconsistent  with  its  own  different,  peculiar, 
and  wholly  independent  obligations  in  the  business. 

The  reiteration  of  this  doctrine  must  be  pardoned  by  reason 
of  its  importance.  The  common  law,  speaking  through  a 
great  multitude  of  decisions,  has  laid  down  the  rules  which 
govern  the  presentment  of  checks  as  between  the  drawer,  the 
indorsers,  and  the  various  subsequent  holders  ;  and  there  is 
complication  enough  in  the  topic.  The  common  law  has,  in 
like  manner,  laid  down  the  principles  controlling  the  present- 
ment of  checks  by  a  collecting  bank  as  between  the  bank  and 
the  depositor  ;  and  in  this  topic  also  there  is  independent 
and  ample  complication.  The  entanglement  of  the  two  would 
result  in  a  senseless  and  inextricable  confusion.  If,  then,  one 
deposits  a  check  in  a  bank,  there  is  a  certain  time  within 
which  the  bank  is  bound  to  that  depositor  to  present  the 
check  to  the  drawee  for  payment.  It  may  be  that  a  present- 
ment within  a  shorter  limit  of  time  would  be  necessary  to 
enable  the  payee  to  hold  the  drawer,  or  to  enable  the  holder 
to  hold  his  indorser,  in  case  of  nonpayment ;  or  it  may  be 
that  presentment  after  that  time  would  suffice  for  both  these 
purposes.  Neither  of  these  facts  modifies  or  affects  the  time 
within  which  the  bank  is  bound  to  its  customer  to  present. 

469 


§  239  COLLECTION   IN   GENERAL. 

By  the  ordinary  rule  of  common  law,  this  time  is  until  the 
close  of  banking  hours  on  the  business  day  next  following 
that  on  which  the  bank  comes  into  possession  of  the  check.^ 
This  is  the  general  rule,  and  of  course  is  liable  to  occasional 
modifications,  which  will  be  noticed  hereafter. 

§  239.  It  may  be  well  to  illustrate  more  fully  the  principles 
above  laid  down  ;  for  they  are  fundamental  and  important. 
A.  and  B.  are  both  living  in  the  same  town,  and  keep  their 
bank  accounts  at  the  C.  and  D.  banks  respectively,  also  in  the 
same  town.  A.  gives  his  check  upon  the  C.  bank  to  B.  on 
Monday.  B.  deposits  it  in  the  D.  bank  on  Tuesday.  The  D. 
bank  presents  it  for  payment  to  the  C.  bank  on  Wednesday. 
In  this  case  the  D.  bank  will  have  done  its  full  duty  by  B. 
under  the  rule  of  the  common  law  above  laid  down.  It  will 
have  presented  for  payment  on  the  day  after  it  received  the 
check.  So,  if  the  C.  bank  were  paying  checks  all  day  Tues- 
day, but  stopped  payment  on  Wednesday  morning,  B.  would 
have  no  remedy  against  the  D.  bank  for  laches  or  neglect  of 
duty.  Neither  could  he  look  to  A. ;  for  A.  had  a  right  to  have 
payment  of  his  check  demanded  upon  Tuesday,  and  depos- 
iting it  in  the  bank  could  not  be  allowed  to  extend  his  risk 
over  Wednesday  also.  If  A.  did  not  wish,  or  was  not  able, 
to  deposit  on  Monday,  he  should  either  have  made  demand 
himself  on  Tuesday,  instead  of  depositing,  or  he  should  have 
deposited  under  a  special  agreement  with  his  bank  that  it 
was  either  to  demand  payment  on  Tuesday,  or  else  itself  to 
assume  the  risk  of  the  customary  postponement  till  the  fol- 
lowing day.  In  like  manner,  if  A.  and  B.,  and  their  respec- 
tive banks,  were  in  two  distant  towns,  and  A,  delivered  or 
sent  to  B.  his  check,  the  common  law  would  declare  in  what 
manner  and  within  what  time  B.  must  despatch  his  check  to 
the  C.  bank  for  payment.     The  cases  generally  hold  that  the 

1  §  238.  Byles  on  Bills,  p.  *20;  Boddington  v.  Schlencker,  4  B.  &  Ad. 
752;  1  2^ev.  &  Man.  510;  Alexander  v.  Burchfield,  Car.  &  M.  75  ;  3  Scott, 
N.  R.  555;  7  Man.  &  Gr.  1061  ;  Hare  v.  Henty,  10  C.  B.  N.  s.  65  ;  Rick- 
ford  V.  Ridge,  2  Camp.  537;  Moule  v.  Brown,  4  Ring.  N.  C.  266; 
5  Scott,  694;  Martin  v.  Home  Bank,  30  App.  Uiv.  (Hun,  N.  Y.)  498 
(1898). 

470 


COLLECTION    OP    CHECKS.  §  240 

check  must  ho  mailed  so  as  to  go  by  the  mail  of  the  day  fol- 
lowing its  receipt,  in  ordinary  cases.  But  this  is  the  rule 
as  between  A.  and  B.  only,  and  the  breach  of  it  would 
only  operate  to  imperil  B.'s  right  of  action  against  A.  But 
if  B.  deposits  in  his  bank,  his  bank  has  the  right  to  for- 
ward the  check  to  tlie  C.  bank  through  its  wonted  channel 
of  correspondence  ;  and  it  is  not  ordinarily  obliged  to  start 
it  upon  this  progress  until  the  day  after  it  receives  it.  See 
§245. 

§  240.    Time  of  Presentment  of   Checks.  —  A  check  must  be 
presented  within  a  reasonable  time,  which  is  set-      General 
tied  in  ordinary  cases  to  be  before  close  of  business      ''"''^' 
hours  on  the  day  following  its  receipt.^ 

But  "  when  a  check  is  taken  instead  of  money,  by  one  act- 
ing for  others,  a  delay  of  presentment  for  a  day,  or  for  any 
time  beyond  that  within  which  with  proper  and  check  taken 
reasonable  diligence  it  can  be  presented,  is  at  the  ^^  ag^""'- 
peril  of  the  party  thus  retaining  the  check  and  postponing 
presentment,  as  between  him  and  the  persons  in  interest 
whom  he  represents."  ^  And  where  loss  occurs  because  such 
a  check  is  not  presented  on  the  day  of  its  reception,  the  agent 
is  liable.''^ 

Lord  EUenborough  well  said  that  it  would  be  impossible  for 
any  banker,  receiving  checks  by  mails  due  at  various  hours  all 
through  the  day,  to  keep  an  army  of  clerks  ready  to  Lord  Eiien- 
present  them,  or  forward  them,  all  upon  the  day  of  ^°'""s'*- 
receipt.  "  Bankers  would  be  kept  in  a  continual  fever,  if  they 
were  obliged  to  send  out  a  check  the  moment  it  is  paid  in." 
The  arrangement  of  presenting  or  forwarding  on  the  next 
following  day  "  appears  subservient  to  general  convenience, 
and  not  contrary  to  the  law  merchant,  which  merely  requires 
checks  to  be  presented  with  reasonable  diligence."  ^ 

1  §  240.  Burkhalter  v.  Second  National  Bank,  42  N.  Y.  538 ;  Turner 
V.  Bank  of  Fox  Lake,  3  Keyes  (N".  Y.),  425  ;  23  How.  Pr.  (N.  Y.)  399  ; 
Turner  v.  Wilson,  11  Met.  (Mass.)  51. 

2  Smith  V.  Miller,  43  N.  Y.  17G.     See  next  note. 

3  First  National  Bank  v.  Fourth  National  Bank,  77  N.  Y.  320;  89  id. 
412  ;  Bank  of  New  Hanover  v.  Kenan,  76  N.  C.  340.  ^ 

*  liickford  v.  Ridge,  2  Camp.  537. 

471 


S  242  COLLECTION   IN    GENERAL. 

§  241.  In  like  manner,  each  bank  in  the  chain  of  progress 
has  a  right  to  delay  forwarding  until  the  business  day  next  fol- 
Time  of  lowing  the  day  of  its  own  receipt.     So  if  C.  bank 

forwarding,  j^j^^j  J)  bank  aro  in  two  provincial  towns,  and  D. 
bank  has  no  correspondent  in  the  place  where  C.  bank  is 
situated,  it  may  send  to  its  correspondent  in  the  nearest  large 
town  or  city  whose  facilities  for  collecting  from  C.  bank  are, 
or  might  reasonably  be  supposed  to  be,  greater  and  more 
available.  This  course  of  proceeding  on  the  part  of  B.'s 
bank  may  be  perfectly  sufficient  as  an  acquaintance  of  its  duty 
and  liability  to  B.  Yet  it  may  also  be  perfectly  consistent 
with  B.'s  loss  of  his  remedy  against  A.  in  case  payment  of  the 
check  should  be  lost  by  reason  of  its  arriving  at  C.  bank  later 
by  this  process  than  it  would  have  arrived  if  sent  according  to 
those  ordinary  requirements  of  the  common  law  which  govern 
the  relations  of  drawer  and  payee.  It  will  be  seen,  therefore, 
that  the  deposit  of  a  check  in  the  holder's  bank  for  collection 
may  in  a  certain  conjunction  of  circumstances  result  in  his 
total  loss  of  the  amount,  without  any  right  of  action  against 
any  person  or  corporation  for  reimbursement.  Several  facts 
,  must  combine,  it  is  true,  to  produce  this  conjunction,  to  wit: 
first,  the  presentment  by  the  collecting  bank  to  the  drawee 
bank  for  payment  must  be  later  than  it  would  have  been  had 
the  ordinary  rule  of  presentment  as  between  drawer  and  payee 
been  followed ;  second,  it  must  appear  that  the  check  would 
have  been  paid  had  it  been  presented  within  the  time  set  by 
this  rule,  or,  at  least,  that  the  bank  was  paying  during  that 
time,  and  that  the  drawer's  account  was  good  for  the  sum 
called  for ;  third,  payment  must  be  refused,  and  the  refusal 
must  be  by  reason  of  the  failure  of  the  bank  occurring  sub- 
sequent to  such  time  and  before  actual  presentment,  or  by 
some  other  like  reason  beyond  the  control  of  the  drawer. 

§  242.  But  the  common  rule  giving  to  the  bank  the  whole 
of  the  day  following  its  receipt  of  the  check  is  liable  to  be 
Tmeruie  materially  qualified  through  various  causes.  The 
varied.  time  may  be  shortened  or  extended,  either  (1)  by 

express  instructions  given  by  the  depositor,   or  an  express 
understanding  had  between  him  and  the  bank,  in  reference 
472 


ESTABLISHED    USAGE   PART   OF   THE   CONTRACT.  §  243 

to  the  particular  transaction ;  ^  or  (2)  by  the  uniform  course 
of  dealing  previously  pursued  between  himself  and  the  bank 
in  the  conduct  of  similar  business ;  or  (3)  by  the  known  usage 
of  the  individual  bank  in  such  matters,  provided  the  usage 
is  one  which  the  courts  can  properly  sustain;  or  (4)  by  the 
general  usage  of  banks  and  custom  of  the  banking  business 
in  the  city  or  town  where  the  bank  is  situated. 

§  243.  Bank  liable  for  Loss  resulting  from  Failure  to  follow  the 
Usual  Course.  —  Tiic  customer  is  entitled  to  expect  and  re- 
quire of  his  bank  that  it  shall  not  capriciously  or  need- 
lessly deviate  from  the  established  system,  whatever  that 
may  be ;  and  if  it  does  so  deviate,  and  a  loss  is  the  result, 
he  may  look  to  the  ])ank  for  compensation.  For  example,  if 
the  bank  neglects  to  send  the  check  through  the  clearing- 
house at  the  customary  time  and  in  the  ordinary  manner,  and 
elects  rather  to  keep  it  till  a  later  hour  and  present  it  at  the 
counter,  then,  if  it  would  have  been  paid  through  the  clear- 
ing-house but  is  refused  at  the  counter,  this  conduct  of  the 
bank,  being  contrary  to  its  wont  in  such  business,  will 
render  it  liable  to  the  depositor  of  the  check  for  its 
amount.^  But  the  bank  must  always  make  the  present- 
ment directly  to  the  drawee,  and  cannot  send  it  through 
other  banks  or  agents  of  any  description,  presentment 
through  the  clearing-house  being  for  this  purpose  a  pre- 
sentment direct  to  the  drawee.  There  can  be  no  real  ne- 
cessity for  the  employment  of  any  intermediate  agencies, 
where  the  collecting  bank  and  the  drawee  bank  are  both 
in  the  same  place.  If  the  collecting  bank,  without  distinct 
permission,  sees  fit  to  have  recourse  to  them,  it  does  so 
at  its  own  risk  of  all  the  consequences  which  may  result. ^ 
This  rule  of  course  does  not  operate  to  abridge  the  rights  of 
banks  to  make  any  of  those  transfers  of  debits  and  credits 

^  §  242.  Ill  New  York,  "  peculiar  circumstances  "  together  with  the 
knowledge  and  concurrence  of  the  depositor  were  held  to  justify  a  delay  in 
presentment  by  the  collecting  bank.  Jacobsohn  v.  Belmont,  7  Bosw. 
(N  .Y.)  14. 

1  §  243.  Boddington  v.  Schlencker,  4  B.  &  Ad.  752;  Alexander  v. 
Burchfield,  Car.  &  M.  75. 

2  Moule  V.  Brown,  4  Bing.  N.  C.  266 ;  5  Scott,  694. 

473 


§   244  COLLECTION   IN   GENERAL. 

among  themselves  in  the  course  of  clearing  which  usage  has 
introduced  for  the  purpose  of  facilitating  the  settlement  of 
their  mutual  accounts  in  the  most  convenient  manner. 

A  question  arising  as  to  the  custom  of  the  bankers  of 
London  in  presenting  checks  for  collection,  testimony  was 
offered  to  show  a  custom  of  "  all  London  bankers 
east  of  St.  Paul's"  to  present  for  payment  upon 
the  same  day  on  which  they  receive  the  check.  Lord  Ellen- 
borough  rejected  this  testimony  very  contemptuously.  "It 
is  not  competent  to  bankers  to  lay  down  one  rule  for  the 
eastward  of  St.  Paul's  and  another  for  the  westward.  They 
may  as  well  fix  upon  St.  Peter's  at  Rome."  ^ 

A  custom  will  not  be  binding  upon  a  party  who  has  no 
reason  to  anticipate  that  he  is  to  be  brought  within  its 
operation.  For  example,  where  an  indorsed  check  drawn 
on  a  bank  in  Albany  was  cashed  at  the  Mohawk  Bank  in 
Schenectady,  and  forwarded  thence  to  the  bank  in  Albany 
for  collection,  the  court  said  that  they  must  lay  out  of  the 
question  certain  special  findings  of  the  jury  as  to  the  usual 
course  of  exchanges  between  the  bank  at  Schenectady  and 
the  bank  at  Albany.  Since  there  was  "no  pretence  that 
this  check  was  drawn  or  indorsed  with  a  view  to  its  being 
negotiated  or  cashed  at  the  Mohawk  Bank,  or  that  there  was 
any  usage  of  trade  from  which  the  defendants  had  reason  to 
suppose  it  would  be  collected  through  that  bank."^ 

§  244.  The  Fundamental  Rule  underlying  all  the  decisions 
in  regard  to  time  of  presentment,  forwarding,  and  so  forth, 
is  that  reasonable  diligence  must  be  observed.  Upon  the 
facts  of  every  case,  then,  must  depend  the  actual  length  of 
time  that  is  to  be  considered  reasonable. 

Consequently,  where  the  question  comes  before  a  jury,  a 
diversity  in  decisions  may  be  expected;  it  can  only  be  said 
that  this  rule  of  presenting  or  forwarding  on  the  day  fol- 
lowing receipt  has  come  to  be  regarded  as  satisfactory  in 
the  majority  of  cases  where  no  circumstances  interfere  to 
change  the  rule.     In  New  York  it  has  been  held  that,  if  the 

3  Rickford  v.  Ridge,  2  Camp.  537. 

4  Mohawk  Bank  v.  Broderick,  13  Wend.  (N.  Y.)  133. 

474 


CROSSED    CHECKS.  §  245 

facts  are  established  beyond  dispute,  the  question  whether 
upon  them  the  presentment  was  made  within  reasonable  time 
becomes  one  of  law  for  the  court.  ^ 

§  245.  "  Crossed "  Checks  to  be  paid  only  as  the  Crossing 
directs.  —  In  England  it  has  been  intimated,  if  not  directly 
decided,  that  if  the  payee  of  the  check  had  stipulated  with 
the  drawer  that  the  name  of  the  payee's  bankers  should  be 
"  crossed  "  on  the  check,  this  would  have  amounted  to  an 
agreement  by  the  drawer  that  the  usual  course  of  Time  of  pre- 
presentment  of  the  check  through  bankers  might  laJS'bv*^"" 
be  followed.  In  such  case,  if  this  method  in-  crossing. 
volved  a  delay  greater  than  the  law  ordinarily  allows  as 
between  drawer  and  payee,  the  former  would  nevertheless 
not  be  acquitted  by  the  failure  of  his  bankers  before  pre- 
sentment, though  they  had  continued  to  pay  through  the 
whole  period  of  time  which  the  payee  would  otherwise 
have  been  entitled  to  for  presentation.^  In  this  country 
the  system  of  "crossed  checks,"  strictly  so  called,  is  un- 
known. But  of  late  the  germ  of  a  similar  custom  has  begun 
to  manifest  itself.  Occasionally  checks  have  stamped  or 
written  upon  them  some  form  of  words  which  is  intended 
to  secure  their  payment  exclusively  through  the  clearing- 
house. No  especial  form  has  as  yet  been  generally  ac- 
cepted, and  the  legal  effect  of  none  of  those  in  use  has 
ever  been  passed  upon.  It  is  safe  to  say,  however,  that 
there  is  no  question  but  that  the  drawer  could  embody  in 
his  order  a  direction  to  his  bank  to  pay  only  upon  presenta- 
tion of  the  instrument  in  the  usual  course  through  the  clear- 
ing-house, and  that  such  a  direction  would  be  as  valid  and  as 
binding  upon  the  bank  as  a  direction  to  pay  only  to  the  order 
of  a  particular  person.  If  the  check  be  payable  to  the  order 
of  A.  B.,  it  is  probable  that  the  privilege  of  including  such 
instructions  in  his  order,  when  indorsing  over,  might  be 
accorded  to  him;   certainly  indorsements  in  this  form  are 

1  §  244.   Mohawk  Bank  v.  Broderick,  13  Wend.  (N.  Y.)  133 ;  Gough  v. 
Staats,  id.  549. 

1  §  245.    Alexander  v.  Burchfield,  Car.  &  M.  75  ;  3  Scott,  N.  R.  555; 
7  Man.  &  Gr.  1061. 

475 


R  246  COLLECTION   IN   GENERAL. 

very  frequent,  and  no  bank  would  be  safe  in  disregarding 
them.  Supposing  the  direction  to  be  properly  given,  the 
collecting  and  the  paying  bank  must  both  respect  it,  and  the 
English  cases  above  mentioned  would  be  precedent  directly 
in  force.  It  would  amount  to  an  express  designation  by  the 
drawer,  or  the  payee,  of  the  manner  in  which  alone  payment 
is  authorized  to  be  demanded  or  made.  , 

Bobbett  drew  a  check  on  his  banker,  M.,  payable  to  order, 
crossed  it  "London  and  County  Bank,"  and  for  value  sent  it 
to  the  payee,  from  whom  it  was  stolen  and  his  indorsement 
forged.  Pinkett,  a  taker  in  good  faith,  ignorant  of  the  for- 
gery, gave  it  to  his  country  bankers;  and  their  agent,  the 
London  and  Joint  Stock  Bank,  presented  and  received  pay- 
ment for  it  from  M.,  who  did  not  perceive  or  else  disregarded 
the  crossing.  P.,  on  hearing  that  it  was  paid,  gave  value 
for  it  to  a  customer.  Meanwhile  B.,  at  the  payee's  request, 
had  sent  him  a  second  check  for  the  same  amount,  which 
was  also  paid  by  M.,  and  B.'s  account  debited  with  both 
checks.  In  an  action  by  B.  against  P.  for  the  amount  of  the 
first,  for  money  had  and  received,  there  was  a  finding  that 
P.  and  M.  and  the  payee  had  been  guilty  of  negligence  as 
to  the  payment.  Held,  that  the  action  was  maintainable. 
M.'s  payment  to  a  banker  other  than  the  one  named  in  the 
crossing  was  improper. ^ 

§  246.  Initiation  of  Suits  and  Rights  of  Action.  —  Louisiana 
holds  that  the  scope  of  a  collecting  bank's  agency  does  not 
extend  to  the  initiation  of  suits  against  the  debtor  upon  com- 
mercial paper  of  which  payment  is  refused. ^  Indeed,  it  is 
conceivable  that  the  bank  might  be  seriously  prejudiced  by 
the  institution  of  such  proceedings;  for  the  fact  might, 
under  some  circumstances,  be  evidence  going  to  show  that 
the  bank  had  itself  adopted  the  paper,  and  therefore,  whether 

2  Bobbett  V.  Pinkett,  1  L.  R.  Ex.  D.  368  (187G).  The  negotiability 
of  a  check  is  not  affected  by  21  &  22  Vict.  c.  79,  §  2,  which  enacts  that 
the  drawee  shall  pay  to  no  other  person  than  the  banker  named  in  the 
crossing.  Smith  v.  Union  Bank  of  London,  L.  R.  10  Q.  B.  291 ;  affirmed 
1  Q.  BrD.  31  (1875). 

1  §  246.  Crow  v.  Mechanics  &  Traders'  Bank,  12  La.  An.  692;  Ryan 
V.  Manufacturers  &  Merchants'  Bank,  9  Daly  (N.  Y.),  308  (1880). 

476 


RIGHTS    OP    ACTION.  .    §  246 

it  were  paid  or  not,  owe  the  amount  of  it  to  the  original 
holder.  2 

A  note  given  in  charge  to  a  bank  for  collection,  and  so 
indorsed  as  to  place  the  apparent  and  technical  title  in  the 
bank,  if  not  withdrawn  after  nonpayment  and  protest,  may 
be  sued  upon  by  the  bank  in  its  own  name.^^  But  unless 
specially  so  instructed,  it  is  not  the  duty  of  the  bank  to 
bring  suit  under  such  circumstances. ^^  It  would  seem, 
therefore,  that  its  doing  so  will  be  purely  a  gratuitous  un- 
dertaking upon  its  part,  for  which  it  might  perhaps  be 
allowed  its  actual  and  necessary  disbursements,  but  cer- 
tainly nothing  more  in  the  way  of  compensation  for  its 
trouble  in  attending  to  the  proceedings.^ 

But  in  New  York  (in  which  State  it  will  be  remembered 
that  it  is  held  that  the  first  bank  which  receives  paper  for 
collection  is  responsible  for  the  conduct  and  doings  of  all 
subsequent  banks  and  agents  through  whose  hands  the  paper 
must  pass  in  the  process  of  collection)  it  has  been  ruled  that 
this  first  bank  has  such  an  interest  in  the  paper  as  to  give  it 
a  right  of  action  to  recover  full  damages  for  any  injury  re- 
sulting by  reason  of  any  default  on  the  part  of  any  subse- 
quent agent,  in  a  suit  against  such  agent,  although  no  steps 
have  been  taken  by  its  own  principal  to  hold  itself  liable  to 
respond  to  him  for  his  loss.*  Whether  or  not  this  principle 
would  be  sustained  in  States  which  do  not  hold  the  first  bank 
to  that  liability  to  which  it  is  held  in  New  York  is  perhaps 
doubtful,  though  certainly  very  improbable. 

In  Minnesota,  by  statute,  an  indorsement  to  "  B.  for  col- 
lection "  gives  no  title  on  which  the  bank  can  sue.^  At  com- 
mon law,  the  beneficial  owner  of  a  bill  to  bearer,  or  indorsed 

2  Wetherill  v.  Bank  of  Pennsylvania,  1  Miles  (Pa.),  399. 
2«  Regina  Flour   Mill  Co.    v.  Holnies,  156    Mass.  11  (1892);    citing 
Whitten  v.  Hayden,  9  Allen,  408;  Spofford  v.  Norton,  126  Mass.  533. 
2*  Freeman  v.  Citizens'  National  Bank,  78  la.  150. 

*  Sterling  v.  Marietta  &  Susquehanna  Trading  Co.,  11  Serg.  &  E. 
(Pa.)   179. 

*  Commercial  Bank  v.  Union  Bank,  19  Barb.  (N.  Y.)  391 ;  1  Kern. 
(N.  Y.)  203. 

s  Rock  Co.  National  Bank  v.  Hollister,  21  Minn.  385. 

477 


§  247  COLLECTION    IN   GENERAL. 

in  blank,  can  sue  in  the  name  of  any  real  party  who  will 
allow  his  name  to  be  used;  and  the  maker  cannot  object  that 
the  plaintiff  is  not  the  real  party  in  interest.^ 

§  247.  Only  Good  Money  to  be  received.  —  Except  by  agree- 
ment or  usage,  a  bank  has  no  right  to  take  anything  but 
money  in  payment  of  paper  it  holds  for  collection.  If  it 
takes  a  check,  it  is  agent  of  the  drawer  in  collecting  the 
check,  and  not  until  the  money  is  obtained  has  it  fulfilled 
its  duty  as  agent  of  the  holder  of  the  paper.  ^  So  that  although 
it  has  had  such  check  certified,  and  has  credited  the  amount 
to  the  owner  of  the  paper  it  is  agent  to  collect,  yet  if  it  be- 
comes insolvent  before  actually  receiving  the  money  on  such 
check,  the  owner  can  claim,  in  preference  to  the  general 
creditors ;  proceeds  received  subsequent  to  insolvency  being 
held  in  trust. ^ 

(a)  Where  E.  had  for  two  years  frequently  sent  paper  to 
Mode  of  ■^-  for  collection,  and  nearly  always  received  in 
dealing.  return,  not  money,  but  drafts,  drawn  by  the  mer- 

chant from  whom  the  collections  were  made,  E.  was  held  to 
be  prevented,  by  this  long  course  of  dealing,  from  recover- 
ing from  A.  on  account  of  a  draft  that  was  dishonored.^ 

(b}  If  a  bank  takes  a  new  note  for  the  one  it  is  engaged  to 
Substituted  collcct,  and  then  becomes  insolvent,  this  substir 
"°^®-  tuted  note  can  be  recovered  by  the  owner  of  the 

first,  but  the  receiver  cannot  be  compelled  to  pay  the  amount 
of  the  first  note.* 

(<?)  When  the  holder  of  negotiable  paper  takes  a  check  in 
payment  of  it,  he  should  take  care  to  present  the  check  with 

«  Morton  v.  Rogers,  14  Wend.  (N.  Y.)  575. 

[1  §  2:t7.  Ward  v.  Smith,  7  Wall.  U7;  Farmers'  Bank  and  Trust  Co. 
r.Newland,  97  Ky.  472  (1895)  ;  Bank  v.  Cummings,  89  Tenn.  620  (1890)  ; 
Morris  v.  Euiaula  National  Bank,  106  Ala.  388  (1894);  Donogh  v.  Gil- 
lespie, 21  Ont.  App.  292;  Hazlett  v.  Commercial  National  Bank,  132  Pa. 
118;  Fifth  National  Bank  v.  Ashworth,  123  Pa.  212;  Tootle  v.  Cook, 
4  Col.  App.  Ill  ;  Bank  v.  Union  Trust  Co.,  149  111.  343.     See  next  note. 

2  Levi  V.  National  Bank,  5  Dill.  104  ;  German  American  Bank  v.  Third 
National  Bank,  18  Alb.  L.  J.  2.52. 

8  New  York  Daily  Register,  Jan.  7,  1885. 

4  National  Bank  v.  Ellicott,  31  Kans.  173. 

478 


ONLY  GOOD  MONEY  CAN  BE  TAKEN.         §  247 

such  diligence,  that,  if  it  is   not  paid,  he  may  return  it  to 
the  drawer  and   reclaim  the  bill  or  note  in  time    preserving 

to  make  a  iDroper  demand  and  protest,   so  as  to   the  liability 
i     i  .  of  prior  par- 

preserve  the  liability  of  the  drawer  and  indorsers.    ties  when  a 

cliGck  is 

For  example,  in  case  of  a  foreign  bill,  he  would  taken  in  pay- 
have  to  present  the  check  the  same  day,  for  a  "^°"  ' 
protest  on  the  day  following  would  not  be  good.  In  case  of 
an  ordinary  draft  on  demand,  he  must  present  and  protest 
before  the  close  of  the  day  following  his  receipt  of  the  bill, 
so  that  he  may  preserve  the  liability  of  the  prior  parties  by 
presenting  the  check  he  took  in  payment  upon  the  same  day 
if  it  was  taken  the  day  following  his  receipt  of  the  draft,  or 
upon  the  day  succeeding  the  taking  of  it  in  payment  if  this 
was  upon  the  very  day  of  receiving  the  draft. ^ 

A  bank  or  other  agency  may  in  the  same  way  preserve  the 
liability  of  former  parties  when  a  check  is  taken  in  payment 
of  paper  it  holds  for  collection ;  but  it  does  not  follow  that  it 
will  free  itself  from  all  responsibility  by  such  preservation 
of  liability,  for,  the  taking  of  the  check  in  payment  being 
in  excess  of  authority,  any  loss  that  results  will  have  to  be 
borne  by  the  agent,  ^  as  if  a  check  thus  taken  would  have 
been  paid  if  presented  the  same  day,  but  is  dishonored  the 
next,  and  although  the  liability  of  the  drawer  of  the  draft 
is  preserved,  yet  is  worthless  because  of  his  insolvency,  the 
bank  is  liable  to  the  holder.  It  is  the  bank's  duty  to  receive 
only  money ;  if  it  takes  a  check,  and  by  delay  in  presenting 
it  loss  occurs,  it  is  liable.  If  the  check  was  worthless  when 
it  was  given,  or  became  worthless  before  it  could  be  pre- 
sented by  the  exercise  of  reasonable  diligence,  and  the  bank 
has  so  acted  as  to  preserve  the  liability  of  former  parties,  no 
loss  has  occurred  by  negligence  in  taking  or  presenting  the 
check. ^  But  if  the  check  would  have  been  paid  if  presented 
without  unreasonable  delay,  yet  afterward  is  dishonored,  the 
loss  is  clearly  the  result  of  negligence. 

6  Turner  v.  Bank  of  Fox  Lake,  3  Keyes  (N.  Y.),  425;  First  National 
Bank  v.  Fourth  National  Bank,  77  N.  Y.  320;  89  N.  Y.  412. 

6  Burkhalter  v.  Second  National  Bank,  42  N.  Y.  538  ;  Smith  v.  Miller, 
43  N.  Y.  171. 

479 


§  247  COLLECTION    IN    GENERAL. 

It  is  clearly  held  in  New  York'^  and  Alabama-"  that,  if 
a  bank  takes  a  check  in  payment  of  paper  it  holds  for 
collection,  it  must  present  the  check  the  same  day,  if  it  is 
possible  by  reasonable  diligence ;  and  if  it  fails  to  do  so, 
and  the  check  would  have  been  good  on  that  day,  but  is  bad 
on  the  next,  the  bank  is  liable. 

A  bank  holding  a  check  for  collection,  and  having  it  certi- 
fied instead  of  demanding  payment,  becomes  liable  to  the 
owner  for  the  amount  of  the  check  with  interest  from  the 
date  of  certification.^ 

Where  the  principal  takes  the  check  from  the  collecting 
agent,  who  has  received  it  instead  of  money,  it  is  a  ratifica- 
tion of  the  agent's  deviation,^  unless  it  is  done 
in  ignorance  of  some  material  fact  affecting  the 
matter,  as  if  the  drawer  of  the  check  had  failed  before 
the  principal  received  the  check. ^^^ 

Where  the  payee  of  a  check,  though  never  having  indorsed 
the  same  for  collection,  subsequently  accepts  part  of  the  pro- 
ceeds of  an  unauthorized  collection  and  a  promissory  note 
in  settlement  of  her  claim,  with  full  knowledge  of  all  the 
material  facts,  the  bank  through  which  the  collection  is 
negotiated  is  not  liable. ^^^ 

(d)  When  a  bank  is  employed  to  make  a  collection,  it  has 
no  authority  to  take  payment  in  any  description  of  depreci- 
ated currency,  even  though  the  same  may  consti- 

Pavment  in  .       .       ,  •  i  •    i      .  i  t 

depreciated  tuto  the  principal  currcucy  in  which  the  ordinary 
curieucy.  transactions  of  business  are  conducted  at  the 
place.  If  it  accepts  such  depreciated  currency,  it  is  never- 
theless liable  to  pay  the  full  face  amount  to  its  principal 
in  good  money.  The  only  description  of  money  which  the 
bank  is  justified  in  receiving  is  either  that  which  is  legal 

">  First  National  Bank  of  Meadville  v.  Fourth  National  Bank  of  New 
York,  16  Hun  (N.  Y.),  332;  citing  Smith  v.  Miller,  43  N.  Y.  171  ;  s.  c. 
52  N.  Y.  545. 

""^  Morris  v.  Eufaula  National  Bank,  106  Ala.  388  (1894). 

8  Essex  Co.  National  Bank  v.  Bank  of  Montreal,  7  Biss.  193. 

'  Rathbun  v.  Citizens'  Steamboat  Co.,  76  N.  Y.  376. 

10  Walker  v.  Walker,  5  Heisk.  (Tenn.)  425. 

io«  Hughes  V.  The  Neal  Loan  and  Banking  Co.,  97  Ga.  383  (1895). 
480 


PROCEEDS.  §  248 

tender,  or  bank  bills  which  are  actually  redeemed  on  pre- 
sentment at  the  counter  of  the  bank  issuing  them  for  their 
full  face  value  in  legal  tender. ^^  But  if  any  especial 
circumstances  should  exempt  a  bank  from  the  operation  of 
this  rule,  and  should  justify  it  in  receiving  current  funds, 
though  depreciated,  then,  if  the  bank  returns  these  specific 
and  identical  funds  actually  received  by  it  to  the  principal, 
it  is  thereby  acquitted.  If,  however,  it  gives  the  princi- 
pal credit  for  them  generally  on  account,  then  any  subse- 
quent depreciation  in  them  which  may  take  place  before  the 
bank  makes  actual  payment  to  the  principal  will  be  the  loss 
of  the  bank.  Its  duty  is  to  account  to  the  principal,  in  such 
a  case,  for  the  full  real  value  of  the  funds  received  by  it 
for  the  collection  as  that  value  was  at  the  date  of  the 
collection.  ^2 

§248.  Disposal  of  Proceeds.  —  After  the  collection  has 
been  made,  the  bank  becomes  a  simple  contract  debtor  for 
the  amount,  less  the  commission,  if  any  has  been  charged. 

If  the  party  for  whom  the  collection  is  made  is  a  regular 
depositor,  the  sum  will  be  properly  placed  to  his  credit 
upon  his  general  deposit  account,^  unless  a  peculiar  usage  or 
special  instructions  demand  some  different  course  of  deal- 
ing, i"  If  the  party  has  no  deposit  account,  the  bank  simply 
owes  him  the  amount  on  demand. ^  But,  if  it  chooses,  the 
bank  may  credit  him  with  it  as  if  it  were  an  ordinary  pay- 
ment on  deposit,  and  thus  initiate  and  establish  the  relation 
of  banker  and  depositor  between  itself  and  him.  For  though 
this  may  operate  to  place  the  bank  under  obligations  and 
duties  towards  him  which  would  not  otherwise  have  existed, 

"  Ward  V.  Smith,  7  Wall.  447. 

12  Marine  Bank  v.  Fulton  Bank,  2  Wall.  252. 

1  §  248.  Marine  Bank  i'.  Rushraore,  28  111.  463;  Akin  v.  Jones,  93 
Tenn.  360  (1894),  citing  Howard  &  Co.  v.  Walker,  8  Pickle,  456;  First 
National  Bank  v.  Wilmington,  77  Fed.  401;  Commercial  Bank  v.  Arm- 
strong, 148  U.   S.   50   (1893). 

1"  Sherwood  r.  Savings  Bank,  103  Mich.  109  ;  Wallace  v.  Stone,  65 
N.  W.  113  (1895)  ;  citing  In  re  Johnson,  61  N.  W.  352. 

2  Tinkham  v.  Heyworth,  31  111.  519;  Planters'  Bank  i».  Union  Bank, 
16  Wall.  483;  Duncan  v.  Magette,  25  Tex.  245. 

VOL.  I.  — 31  481 


§  248  COLLECTION   IN   GENERAL. 

yet  these  are  all  for  his  advantage,  and  his  own  right  to  with- 
draw the  whole  sum  instantly  upon  demand  is  in  no  respect 
altered,  if  he  does  not  wish  to  ratify  the  option  of  the  bank 
and  to  become  an  ordinary  depositor. ^  In  Wisconsin  the 
proceeds  arc  always  held  in  trust. ^ 

When  a  draft  is  forwarded  to  a  bank  for  collection  and 
remittance,  and  collection  is  made,  and  the  proceeds  placed 
in  the  vaults  of  the  bank,  a  draft  for  the  amount  less  charges 
for  collection  being  forwarded  in  payment,  such  proceeds  do 
not  become  a  trust  fund  in  the  hands  of  the  bank.^" 

If  the  bank  elects  to  retain  the  proceeds  as  a  special 
deposit,  or  remit  them  at  once,  it  will  not  lose  in  case  of 
Deprecia-  depreciation  of  the  funds.  It  may  discharge  itself 
*'"'|j^"|^pio-  at  any  time  by  payment  of  the  specific  funds  re- 
collection, ceived,  but  if  it  credits  the  proceeds,  it  must 
answer  for  the  amount  credited  in  an  equal  amount  of  good 
money  at  the  time  of  demand,  and  so  will  lose  by  whatever 
depreciation  of  the  bank  bills  constituting  the  proceeds  may 
have  occurred  between  making  the  collection  and  paying  the 
deposit.* 

(a)  After  a  bank  has  suspended,  it  ought  not  to  receive 
payments  upon  business  paper  previously  deposited  with  it 
,     ,  for  collection;  or  at  least  not  in  such  a  manner 

Insolvency  .,,  .  . 

revokes  that  the  money  so  received  by  it  will  pass  into  its 

crpcUt  pro-  general  assets,  and  the  owner  of  the  paper  will  be 
*^'^'^'^'*'  placed  in  the  position  of  one  of  its  creditors,  en- 

titled only  to  take  his  dividend.  The  subsequent  discharge 
of  the  bank,  in  bankruptcy  or  insolvency,  will  not,  it  is  said, 
bar  the  right  of  the  owner  of  such  paper  to  recover  in  full 
from  the  bank  the  amount  received  by  it.^  Proceeds  re- 
ceived after  the  bank  becomes  insolvent  are  held  in  trust, 
and  may  be  recovered  in  full.^ 

8  McLeod  V.  Evans,  28  N.  W.  Rep.  173. 
8"  Bowman  v.  National  Bank,  9  Wash.  614  (1894). 
*  Marine  Bank  v.  Fulton  Bank,  2  Wall.  252 ;  Phoenix  Bank  v.  Risley, 
111  U.  S.  125. 

^  .Tockusch  V.  Towsey,  51  Tex.  129. 

6  Iiavens's  Petition,  8  Bened.  309 ;  Levi  v.  National  Bank  of  Missouri, 
482 


LIABILITIES   OP    THE   BANKS.  §  248 

Collection  by  a  bank  of  a  debt  sent  to  it  for  collection  in 
a  check  upon  itself,  is  equivalent  to  collection  in  money  even 
if  the  bank  failed  the  same  day.^<* 

When  a  bank  on  the  day  of  its  failure  credits  the  owner 
with  the  amount  of  a  draft  then  unmatured  and  uncollected, 
it  holds  the  entire  amount  subsequently  collected  on  the  draft 
in  trust  as  agent  of  the  owner. ^'' 

But  if  the  proceeds  are  collected  and  credited  before  insol- 
vency, the  owner  cannot  recover  in  preference  to  the  other 
creditors.'^ 

And  even  though  a  check  has  been  sent  for  the  amount, 
it  will  not  avail  to  secure  the  owner  in  those  States  which 
refuse  to  recognize  a  check  as  an  assignment.^ 

And  if  the  proceeds  have  come  to  the  possession  of  a  bona 
fide  holder  for  value,  they  cannot  be  recovered,  as  where  the 
E,  Bank  received  in  good  faith  and  in  payment  of  C. 's  debt 
to  it,  the  proceeds  of  paper  intrusted  to  C.  for  collection.^ 

(h)  If  a  negotiable  instrument  having  a  forged  indorse- 
ment come  to  the  hands  of  a  bank  and  is  collected  by  it, 
the  proceeds  are  held  for  the  rightful  owners  of  the    „       ^    , 

'  °  Proceeds  of 

paper,  and  may  be  recovered  by  them,  although  the   forf,'ed  and 
bank  gave  value  for  the  paper,   or  has  paid  over 
the  proceeds  to  the  party  depositing  the  instrument  for  col- 
lection. ^^ 

When   a  correspondent  bank  presents   a  raised  draft  as 

5  Dill.  104  ;  First  jSTational  Bank  v.  First  National  Bank  of  Richmond,  76 
Ind.  561  (1881). 

6«  Sayles  v.  Cox,  95  Tenn.  583  (1895);  citing  Howard  &  Co.  v.  Walker, 
8  Pickle,  452. 

«5  Jones  V.  Killveth,  49  Ohio  St.  401  (1892). 

T  Bank  v.  Russell,  2  Dill.  215;  People  v.  City  Bank,  93  N.  Y.  582; 
Hallan  v.  Tillinghast,  19  Wash.  20  (1898)  ;  Billingsley  v.  Pollock,  69  Miss. 
761  (1892);  Sayles  v.  Cox,  95  Tenn.  580  (1895);  citing  Akin  v.  Jones,  93 
Tenn.  352. 

8  People  V.  Merchants  &  Mechanics'  Bank,  78  N.  Y.  269. 

®  Charlotte  Iron  Works  v.  American  Exchange  National  Bank,  34 
Hun  (N.  Y.),  26. 

10  Boyce  v.  Brockway,  31  N.  Y.  490;  Talbot  v.  Rochester,  1  Hill 
(N.Y.),  295  ;  Johnson  v.  First  National  Bank,  6  Hun  (N.  Y.),  124;  Cran- 
dall  V.  Schro3ppel,  1  Hun  (N.  Y.),  557. 

483 


§  249  COLLECTION    IN    GENERAL. 

agent  and  the  drawee  pays  it  by  mistake,  the  latter  cannot 
recover  the  money  from  the  collecting  bank  which  acted  in 
good  faith,  without  notice,  and  has  paid  over  the  money  to 
its  principal  before  knowing  of  the  mistake. ^^ 

Where  A.  purchases  a  draft  drawn  on  the  B,  Bank,  and 
subsequently  a  person  representing  himself  to  be  A.  pre- 
sents the  draft  to  the  C.  Bank  and  requests  its  collection, 
the  draft  having  been  raised,  the  C.  Bank  in  directing  the 
collection  of  the  draft  for  its  account  assumes  the  character 
of  principal,  so  far  as  the  B.  Bank  is  concerned.  As  the  B. 
Bank  makes  payment  of  the  draft  to  the  C.  Bank  as  owner 
thereof,  and,  being  guilty  of  no  negligence,  it  can  recover 
the  money.  12 

§  249.  When  the  First  Bank  becomes  the  Customer's  Debtor. 
—  The  theory  that  the  banks  and  agents  subsequent  to  the 
first  bank  are  independently  direct  agents  of  the  holder  of 
the  paper,  and  immediately  liable  to  him,  is  obviously  in- 
consistent with  holding  that  the  receipt  of  the  sum  due  by 
any  subsequent  bank  is  in  law  the  receipt  by  the  first  bank, 
and  at  once  renders  the  first  bank  answerable  for  the  amount. 
Yet  any  feature  in  the  dealing  of  the  first  bank  with  any  of 
the  parties,  which  manifests  an  understanding  or  intention 
on  the  part  of  that  bank  to  adopt  the  receipt  of  the  subse- 
quent agent  as  being  its  own  receipt,  will  be  seized  upon  by 
the  courts  as  a  ground  for  holding  it  directly  answerable 
to  the  depositor  of  the  paper.  In  the  case  of  Mackersy  v. 
Ramsays,^  elsewhere  fully  stated,  there  appears  to  have 
been  a  distinct  agreement  between  the  parties  that  the  first 
bank  should  pay  the  depositor  so  soon  as  it  was  notified  of 
the  payment  having  been  actually  made  to  the  correspondent 
abroad.  In  Tabor  v.  Perrot  ^  there  was  no  such  agreement ; 
but  the  conduct  of  the  first  bank  in  ordering  the  foreign  col- 
lecting bank  to  give  it  credit  for  the  sum,  and  in  drawing 
bills  in  its  own  behalf  against  this  credit,  was  regarded  as 

"  National  Park  Bank  v.  Seaboard  Bank,  114  N.  Y.  28. 
12  National  Park  Bank  v.  Eldred  Bank,  90  Hun  (N.  Y.),  285. 

1  §  249.    9  Clark  &  F.  (Eng.)  818. 

2  2  Gall.  565. 

484 


LIABILITIES   OF    THE   BANKS.  §  250 

constituting  a  complete  appropriation  of  the  amount  to  its 
own  use,  rendering  it  directly  responsible  to  the  depositor  of 
the  paper,  from  the  moment  that  the  credit  was  given  to  it 
in  accordance  with  its  order. 

Where  the  first  bank  pays  the  amount  of  the  paper  to  the 
depositor  under  the  belief,  arising  from  the  circumstances, 
that  its  correspondent  has  successfully  effected  the  collec- 
tion, if  it  should  afterward  turn  out  that  the  collection  has 
not  in  fact  been  thus  effected,  such  bank  may  recover  back 
from  the  depositor  the  amount  so  paid  to  him,  on  the  ground 
that  it  was  a  payment  made  under  mistake  of  fact. 2"  So  if 
the  payment  was  made  by  any  bank,  other  than  the  collect- 
ing bank  itself,  to  its  predecessor  in  the  series  of  agents.^ 
In  the  courts  of  New  York  and  of  the  United  States  the  first 
bank  is  liable  as  soon  as  the  money  is  paid  either  to  it  or 
to  its  sub-agent.* 

§  250.  Liabilities  of  the  Various  Banks  directly  to  the  Owner. 
—  If  commercial  paper  is  deposited  in  a  bank  for  collection, 
and  is  by  that  bank  transmitted  to  any  other  bank  or  agent, 
or  through  any  series  of  banks  or  agents,  till  it  reaches  the 
possession  of  the  last  bank  or  agent,  whose  duty  it  becomes 
actually  to  make  the  collection,  can  the  bank  or  agent  actu- 
ally making  the  collection  be  held  directly  by  the  owner  of 
the  paper  to  pay  the  amount,  less  charges  and  expenses,  to 
him  ?  If  his  demand  of  payment  is  refused,  without  suffi- 
cient excuse,  may  he  sue  the  bank  or  agent?  If  the  paper 
is  transmitted  through  several  banks,  is  each  one  of  them 
directly  liable  to  the  owner  for  its  prompt  and  accurate  for- 
warding to  the  next  bank  or  agent  ? 

Some  of  the  opinions— those  only  of  course  which  hold  that 
the  first  bank,  or  any  bank  in  the  series,  is  not  liable  for  the 
act  of  any  subsequent  bank  or  agent,  but  only  for  the  due 
performance  of  the  especial  task  allotted  to  itself  —  regard 

2»  First  National  Bank  v.  Behaii,  91  Ky.  562  (1891). 

8  Bank  of  Orleans  v.  Smith,  3  Hill  (N.  Y.),  560  ;  East  Haddara  Bank 
V.  Scovil,  12  Conn.  303;  Mechanics'  Bank  v.  Earp.,  4  Rawle  (Pa.),  384. 

4  Hyde  v.  First  National  Bank,  7  Biss.  156.  See  Hoover  i'.  Wise, 
1  Otto,  308;  Ayrault  v.  Pacific  Bank,  47  N.  Y.  570. 

485 


§  250  COLLECTION   IN   GENERAL. 

each  bank,  and  the  notary  too,  if  a  notary  is  employed,  not 
as  the  sub-agent  of  its  predecessor  or  of  the  first  bank,  but 
Courts  ^^  ^^^®  direct  agent  of  the  owner  of  the  paper,  for 

which  hold  the  purpose  of  doing  the  precise  act  which  falls 
bank  not  re-  to  its  share  in  the  chain  of  proceeding.  Thus,  if 
euh-a\;eiit  the  paper  is  transmitted  through  three  banks  to  a 
f/veat^t^on  fourth,  which  has  to  collect,  and  is  by  that  fourth 
to  the  owner,  bank  delivered  to  a  notary  to  be  protested,  it  is 
not  correct,  according  to  the  doctrine  of  these  cases,  to  regard 
the  second,  third,  and  fourth  banks,  and  the  notary,  as  sub- 
agents  of  the  first  bank,  neither  to  regard  the  notary  as  the  sub- 
agent  of  the  fourth  bank.  But  each  successive  party  is  deemed 
to  be  an  independent  agent  directly  of  the  owner  of  the  paper, 
having  for  the  scope  of  its  agency,  in  the  case  of  any  one  of  the 
first  three  banks,  only  the  transmission  to  the  next ;  in  the  case 
of  the  fourth  bank,  the  collection,  or,  in  default  of  payment,  the 
delivery  to  a  proper  party  for  protest ;  and  in  the  case  of  the 
notary,  the  various  acts  which  go  to  make  up  a  legal  protest.^ 
This  view  makes  the  owner's  right  of  action  exclusive ;  the 
first  bank  having  no  right  to  sue  any  other.^  But  some  of 
Where  first  the  Other  class  of  cases,  which  regard  all  the  subse- 
sponsibierstiil  qucnt  bauks  and  the  notary  as  sub-agents,  each  of 
mavTuTthe  ^^^  predcccssor  and  all  of  the  first  bank,  allow  a 
sub-affentdi-   double    right   of   action    against  the  one   through 

rectly,  it  he  »  °  ° 

so  elects.  whosc  default  loss  accrues  ;  for  these  cases  declare 
that  the  defaulting  agent  may  be  sued  directly  by  the  owner 
of  the  paper,  who  is  the  original  principal  in  the  whole  series ; 
and  at  the  same  time  it  is  a  necessity,  resulting  from  the  fact 
of  the  sub-agency,  that  suit  may  also  be  brought  by  that  first 
agent  who  stands  to  all  the  subsequent  ones  in  the  relation  of 
an  imuiediate  principal.^  It  makes  no  difference  that  the 
first  bank  is  regarded  as  liable  for  all  the  sub-agents.  This 
gives  the  owner  a  right  of  action  against  the  first  bank,  but 
does  not  deprive  him  of  the  collateral  right  to  sue  the  default- 

1  §  250.    Lawrence  v.  Stonington  Bank,  6  Conn.  521 ;  Mechanics'  Bank 
i;.  Earp,  4  Rawle  (Pa.),  384  ;  Reeves  v.  State  Bank,  8  Ohio  St.  465. 

2  Farmers'  Bank  v.  Owen,  5  Cranch,  C.  C.  504. 
8  Wilson  V.  Smith,  3  How.  (U.  S.)  763. 

4H6 


LIABILITIES   OP  THE  BANKS.  §  251 

ing  sub-agent  directly  and  primarily  if  he  wishes.  He  simply 
has  his  election  whether  he  will  pursue  his  remedy  against 
the   one  or  the  other.* 

Those  cases,  however,  which  hold  the  New  York  rule  with 
greatest  strictness,  and  carry  it  to  its  fullest  consequences, 
deny  the  right  of  the  owner  to  sue  the  sub-agent,^  except  that 
where  the  transmitting  bank  becomes  insolvent  before  the 
agent  bank  receives  payment  of  the  note,  and  the  agent  bank 
has  not  acquired  a  right  to  the  note  or  its  proceeds  as  a  bona 
fide  holder  for  value,  the  owner  may  recover  the  note,  or  the 
proceeds  if  collected.^"    (§  565.) 

The  mere  crediting  of  the  account  of  the  remitting  bank  by 
a  correspondent  who  makes  the  collection  does  not  preclude 
the  owner  of  the  paper  from  recovering  the  proceeds  from  the 
correspondent,^  but  a  continual  course  of  dealing  between  the 
collecting  bank  and  its  sub-agent  may  pass  title  of  the  pro- 
ceeds of  collection  to  the  sub-agent.'^ 

§  251.  Liability  to  the  Real  Party  in  Interest.  —  In  case  of 
any  default  on  the  part  of  any  bank  engaged  in  conducting 
the  collection,  whereby  it  would  ordinarily  lay  itself  open  to  a 

*  Bank  of  Orleans  r.  Smith,  3  Hill  (N.  Y.),  560,  per  Nelson,  C.  J.,  who 
takes  pains  to  show  that  this  does  not  conflict  with  Allen  v.  INIerchants' 
Bank,  22  Wend.  (X.  Y.)  215.  In  New  York,  in  cases  where  the  collect- 
ing bank  is  held  liable  for  the  default  of  a  notary  employed  by  it,  the 
measure  of  damages  which  the  holder  of  the  paper  can  recover  from 
the  bank  on  the  ground  of  such  default  of  the  notary  is  the  amount  of  the 
note  and  interest.  If  the  holder  has  sued  an  indorser,  and  has  failed  to 
recover  by  reason  of  the  default  of  the  notary,  he  cannot  increase  the 
damages  by  adding  the  expenses  of  the  suit.  For  the  action  against  the 
bank  is  based  upon  the  implied  undertaking  of  the  bank  to  give  the  notice, 
and  not  upon  any  false  representation  that  the  notice  has  been  duly  given. 
Downer  v.  Madison  City  Bank,  6  Hill  (N.  Y.),  648. 

5  Hyde  v.  First  National  Bank,  7  Biss.  158.  See  Hoover  i;.  Wise, 
1  Otto,  308;  Ayrault  v.  Pacific  Bank,  47  N.  Y.  570. 

6a  Bank  of  Clark  Co.  v.  Gilman,  84  Hun  (N.  Y.),  486. 

6  Branch  v.  United  States  National  Bank,  50  Xeb.  470  (70  N.  W.  34) 
(1897) ;  Commercial  National  Bank  v.  Hamilton  National  Bank,  42  Fed. 
880. 

7  Franklin  County  Bank  v.  Beal,  49  Fed.  606;  First  National  Bank  v. 
First  National  Bank,  55  Neb.  303. 

487 


§  252  COLLECTION    IN   GENERAL. 

suit  by  the  party  who  deposited  the  paper  for  collection,  suit 
may  also  be  brought,  instead,  by  any  real  party  in  interest, 
though  his  name  was  not  mentioned  and  the  fact  of  his  inter- 
est was  entirely  unknown  to  the  bank  at  the  time  of  its  re- 
ceiving the  paper.  The  naked  fact  that  such  person  had  a 
real  beneficial  interest  in  having  the  bank  do  its  duty  in  the 
premises,  and  must  therefore  be  an  actual  loser  in  some  shape 
by  its  failure  to  do  so,  gives  the  right  of  action. ^ 

§  252.  Causes  of  Liability.  —  If  a  bank  fails  to  do  its  duty 
in  the  matter  of  collection  with  reasonable  skill  and  care,^  it 
is  liable  for  the  damage  resulting  ^  to  any  party  interested  in 
the  paper,  whether  his  name  appears  on  the  paper  or  not.^ 
It  will  be  no  defence  for  the  bank  to  assert  that  it  was  not 
accustomed  to  undertake  collections,  and  that  the  error  arose 
from  its  want  of  familiarity  with  the  ordinary  course  of  pro- 
ceedings. Having  undertaken  the  business,  it  is  liable  for  the 
results  of  an  improper  performance  of  it.^  It  has  been  already 
stated  that  the  bank  cannot  set  up  want  of  consideration.^ 

It  has  been  held,  also,  that  where  a  bank  demands  and  re- 
ceives payment  of  a  dishonored  note  from  an  indorser,  and  he, 
seeking  in  his  turn  to  recover  from  a  prior  indorser,  fails  to 
do  so  by  reason  of  a  default  by  the  bank  in  not  making  a 
proper  demand  upon  the  maker,  which  insufficiency  was  un- 

1  §  251.   McKinsteru.  Bank  of  Utica,  9  Wend.  (N.  Y.)  46;  11  id.  473. 

1  §  252.  Fabens  v.  Mercantile  Bank,  23  Pick.  (Mass.)  330;  Bailie  v. 
Augusta  Savings  Bank,  95  Ga.  281  (1894). 

2  McKinster  v.  Bank  of  Utica,  9  Wend.  (N.  Y.)  46  ;  11  id.  473. 

®  The  measure  of  damages  will  be  the  amount  of  actual  loss  which  he 
has  sustained.  Bank  of  Washington  v.  Triplett,  1  Pet.  25;  McKinster  v. 
Bank  of  Utica,  9  Wend.  (N.  Y.)  46;  Tyson  v.  State  Bank,  G  Blackf. 
(Ind.)  225. 

For  pleadings,  burden  of  proof,  and  evidence  in  suit  of  a  customer 
against  a  collecting  bank  for  negligent  failure  to  collect,  see  Sahlieu  v. 
Bank,  90  Tenn.  227  (1890),  citing  Bruce  v.  Baxter,  7  Lea,  477;  Collier  v. 
Pullian,  13  Lea,  114;  Morris  v.  Eufaula  National  Bank,  106  Ala.  387 
(1894),  citing  Industrial  Trust  Title  Co.  v.  Weakley,  113  Ala.  458;  Fox 
r.  Davenport  National  Bank,  73  la.  649 ;  Oil  Well  Co.  v.  Exchange 
National  Bank,  131  Pa.  101. 

■*  Ivory  V.  Bank  of  State  of  Missouri,  36  Mo.  475. 

6  Halls  V.  Bank  of  the  State,  3  J.  S.  G.  llich.  (S.  C)  366. 
488 


CAUSES   OF   LIABILITY.  §  252 

known  to  the  paying  indorser  when  he  made  the  payment,  he 
shall  recover  back  the  amount  of  his  payment  from  the  bank. 

(a)  If  the  paper  is  returned  to  it  by  its  correspondent  as 
uncollectible  it  must  in  its  turn  promptly  send  the  paper 
back  with  this  information  to  the  owner.^  If  it  is  irregular 
the  duty  of  the  bank  to  procure  the  acceptance  of  a  ^tc^i'f^"^^- 
draft  or  bill,  it  is  bound  to  procure  an  absolute  and  outright 
acceptance,  legally  binding  upon  the  acceptor,  at  least  so  far 
as  concerns  the  form  and  circumstance  of  the  act  itself  of 
accepting.  If  it  takes  any  acceptance  which  is  irregular  in 
form,  and  which  therefore  fails  to  hold  the  party  drawn  upon, 
and  rests  satisfied  with  this  without  at  once  notifying  its  prin- 
cipal, it  will  be  liable  itself  to  pay  the  amount  of  the  paper,  if 
otherwise  the  amount  would  be  lost  to  the  depositor  by  reason 
of  his  inability  to  hold  the  proper  party  as  acceptor.^  If  the 
bank  takes  the  check  of  the  party  who  is  bound  to  pay  the 
paper,  and  thereupon  surrenders  the  paper  to  him,  it  assumes 
the  responsibility  for  the  check  proving  good.  If  it  is  not 
paid,  tlie  bank  is  still  obliged  to  pay  the  amount  to  the  person 
from  whom  it  received  the  paper.^ 

In  Citizens'  Bank  v.  Houston^"'  it  was  held  that  when  a  bank 
which  receives  from  the  payee,  for  collection,  a  check  upon 
another  bank,  which  check  is  duly  protested  and  notice  of  dis- 
honor given,  subsequently  surrenders  said  check  to  drawer  and 
accepts  in  lieu  thereof  a  check  on  another  bank,  with  protest 
fees  added,  which  latter  check  is  also  protested,  the  collecting 
bank  does  not  thereby  become  liable  to  the  payee,  he  having 
suffered  no  damage  from  the  act,  which  was  in  good  faith. 

(b)  But  if  the  bank  can  show  that  it  has  conducted  itself 
in  the  transaction  in  strict  accordance  with  the  customary 
and  established  mode  of  transacting  such  business,  it  seems 

G  Van  "VVart  v.  WooUey,  3  Barn.  &  Cres.  439  ;  Wingate  v.  INIechanics' 
Bank,  10  Barr  (Pa.),  lOi  ;  McKiuster  v.  Bank  of  Utica,  9  Wend.  (N.  Y.) 
46;  11  id.  473. 

'  Walker  v.  Bank  of  State  of  New  York,  9  N.  Y.  .582. 

8  Commercial  Bank  v.  Union  Bank,  1  Kern.  (N.  Y.)  203;  Kirkham  v. 
Bank  of  America,  26  App.  Div.  (Hun,  N.  Y.)  110  (1898). 

8"  Citizens'  Bank  v.  Houston,  98  Ky.  141  (1895). 

489 


^  252  COLLECTION  TN  GENERAL. 

that  this  might  suffice  to  acquit  it  of  all  responsibility  for 
any  mishap.^''     For  it  has  been  held  in  England 
?"ife*?o  that  a  banker  who  gave  up  bills  indorsed  to  him 

take  check.  ^^^,  collection,  upon  receiving  the  acceptor's  check, 
which  was  subsequently  dishonored,  could  not  be  charged 
with  negligence  because  the  transaction  was  not  an  unusual 
one.^  It  may  be  doubted  whether  it  would  free  a  banker  from 
liability  if  he  should  simply  show  a  frequent  habit  of  part- 
ing with  paper  upon  receiving  the  check  of  the  debtor;  or 
whether  he  would  not  have  to  go  further,  and  show  posi- 
tively that  it  was  uriderstood  in  all  such  transactions  that  the 
banker  discharged  his  full  duty  to  his  customer  by  so  doing. 
Otherwise,  the  usage  might  amount  only  to  a  usage  of  bankers 
to  assume  a  liability  to  their  customers  in  such  cases. 

If  a  bank  fails  to  use  due  diligence  in  presenting  paper  for 
acceptance,  it  is  liable. i*'  And  notice  of  dishonor  must  be 
duly  given,  even  though  the  presentment  for  acceptance 
which  resulted  in  the  dishonor  was  not  legally  requisite; 
for  example,  the  holder  of  a  draft  payable  at  a  future  day  is 
not  required  to  present  it  for  acceptance,  but  if  it  is  pre- 
sented, notice  of  the  dishonor  must  be  promptly  given  to  the 
drawer  or  indorser,  or  he  will  be  discharged. ^^  See  §  258, 
Duty  to  present. 

(c)  Where  a  bank  fails  to  protest  a  draft  taken  in  part 
payment  of  paper  left  for  collection,  it  is  liable  for  the  dam- 
Failure  to  age  consequent  on  its  negligence. ^^  go  where  it 
protest.  omitted  to  protest  a  draft  improperly  accepted  in 

such  a  way  as  to  bind  no  one  as  acceptor. ^^  And  where  the 
instructions  were  "  to  return  at  once  without  protest  if  not 
paid,"  and  in  violation  of  this  order  it  was  kept  seven  days 
Violation  of  though  Hot  paid,  and  then  returned,  the  depositor 
instructions,  having  been  in  the  mean  time  paid  on  the  repre- 
ss Davis  V.  First  National  Bank,  118  Cal.  600  (1897). 

9  Russell  V.  Hankey,  6  T.  R.  12. 

10  Allen  V.  Suydani,  20  Wend.  (X.  Y.)  321;  Exchange  National  Bank 
V.  Third  National  Bank,  112  U.  S.  290. 

11  Walker  v.  Bank,  9  N.  Y.  582 ;  Bank  v.  Triplett,  1  Pet.  25. 

12  Capitol  State  Bank  u.  Lane,  52  Miss.  677. 
18  Walker  v.  Bank,  9  N.  Y.  582. 

490 


CAUSES   OF   LIABILITY.  §  252 

sentation  of  the  drawee,  who  was  also  president  of  the  de- 
fendant bank,  the  hitter  was  held  for  the  damage  resulting 
from  its  disobedience  of  instructions. i*  This  case  does  not 
seem  very  strong.  The  loss  does  not  to  ordinary  vision  flow 
naturally  from  the  failure  to  obey,  but  from  the  negligence 
of  the  plaintiff  in  taking  the  word  of  the  drawee. 

(t?)  A  bank  mailed  paper  it  had  received  for  collection  to 
the  drawee;  it  miscarried,  and  the  drawee  failed  nineteen 
days  after.  For  twenty-eight  days  after  sending  Failure  to 
the  paper  the  bank  made  no  inquiry  about  it,  and  i"fii''re. 
gave  the  depositor  no  notice  concerning  it,  till  two  days 
more  had  elapsed.  The  bank  was  held  liable  for  its 
negligence.  ^^ 

So  where  a  check  was  forwarded  by  the  depositary  on  the 
third,  and  in  the  regular  course  of  events  it  should  have 
received  on  the  fourth  word  of  its  arrival  but  did  not,  and 
did  not  know  until  the  16th  that  the  check  was  lost,  of 
which  it  notified  the  holder  on  the  18th,  the  bank  was  held 
liable  for  its  negligence  in  omitting  to  inquire  in  regard  to 
the  check,  whereby  loss  occurred, ^'^  the  drawee  having  funds 
of  the  drawer  until  the  20th. 

If  notice  is  actually  received  in  time  by  an  indorser  from 
any  source,  although  the  hank  was  negligent  and  did  not  send 
the  notice  it  should,  it  is  not  liable  for  such  neglect,  for  no 
damage  is  caused  by  it.^'^ 

A  bank  failing  to  notify  the  depositor  of  a  check  upon 
itself  of  the  nonpayment  of  the  same,   is  liable.^^ 

(e)    A    letter    containing    a    bill    for    collection    slipped 
through  a  crack    in   the    cashier's   desk   at  the    bank,    and 
remained  undiscovered  till   after  maturity.     The    Negligent 
court  said  that  the  bill  was  not  presented  in  the    ^°*''- 
sense  of  the  law,  though  physically  present  at  maturity,  and 

1*  Merchants  &  Manufacturers'  National  Bank  v.  Stafford  National 
Bank,  44  Conn.  504  (U.  S.  Dist.  Ct.). 

15  Trinidad  National  Bank  v.  Denver  National  Bank,  4  Dill.  290. 

IS  Shipsey  v.  Bowery  National  Bank,  59  N.  Y.  485. 

1'  Hallowell  v   Curry,  41  Pa.  322. 

18  Bank  of  New  Hanover  v.  Kenan,  76  N.  C.  340. 

491 


§  255  COLLECTION   IN   GENERAL. 

the  acceptor  had  no  funds ;  that  the  loss  carried  with  it  the 
presumption  of  negligence  on  the  part  of  the  bank,  and  if  it 
could  be  explained  and  rebutted  the  facts  for  this  purpose 
■were  peculiarly  within  the  knowledge  of  its  officers,  and  it 
must  produce  thcm.^^  The  bank  was  held  liable  to  the  holder, 
who  had  by  the  disappearance  of  the  bill  lost  his  remedy 
against  the  drawer  and  indorser.  The  bank  as  agent  must 
do  all  that  the  owner  would  be  required  to  do  to  protect  his 
rights,  and  is  liable  to  the  owner  for  failure  in  such  duty.^o 
But  failure  to  collect  a  draft  or  to  return  it  where  there  is 
an  attachment  or  legal  proceeding  against  the  owner  of  the 
draft,  jus  tertii,  exonerates  a  bank  from  negligence.^i 

§  253.  LiabiUty  for  Default  of  a  Branch.  —  Where  a  branch 
bank  was  negligent  in  not  serving  notice  of  dishonor  sent  to 
it  by  the  mother  bank,  the  latter  was  held.^ 

§  254.  When  the  Depositor  is  in  Fault.  —  If  the  rule  of  the 
bank  is  that  costs  of  protest  must  be  deposited  along  with 
paper  put  in  the  bank  for  collection,  and  in  consequence  of 
the  fact  that  this  is  omitted  the  bank  fails  to  protest  and 
give  notice,  it  is  not  liable,^  nor  is  it  responsible  for  the 
miscarrying  of  a  note  because  the  depositor  failed  to 
give  the  correct  address  of  the  bank  where  it  was  to  be 
paid. 2 

Where  a  depositor  of  a  draft  for  collection,  which  is 
credited  to  him,  knows  of  the  failing  condition  of  the 
drawee  and  does  not  impart  his  information,  the  bank  is 
discharged  from  liability. ^ 

§  255.  Mistakes  of  Fact.  —  If  a  bank  mistakes  the  date  of 
a  note  and  presents  it  for  collection  too  soon,i  or  sends 
notice  to  the  wrong  person,  though  one  of  the  same  name 

19  Chicopee  Bank  v.  Philadelphia  Bank,  8  Wall.  641. 

20  Davey  v.  Jones,  42  N.  J.  Law,  30;  Beale  v.  Parrish,  20  N.  Y.  407; 
Paint  Co.  v.  National  Bank,  4  Utah,  353  (1886). 

21  Davis  V.  First  National  Bank,  118  Cal.  000  (1897). 
1  §  253.    Bird  v.  Louisiana  State  Bank,  93  U.  S.  96. 

1  §  254.    Pendleton  v.  Bank,  1  T.  B.  Mon.  (Ky.)  171. 

2  Chapman  v.  Union  Bank,  32  How.  Pr.  (N.  Y.)  95. 

8  Freeholders  of  Middlesex  v.  State  Bank,  32  N.  J.  Eq.  467. 
1  §  255.    Bank  of  Delaware  Co  v.  Bromhall,  33  Pa.  St.  135. 

492 


CAUSES   OF   LIABILITY.  §  255 

as  the  real  indorscr  but  living  in  a  different  county,^  it  is 
liable  for  the  loss  resulting. 

Where  a  certificate  was  deposited  for  collection  and  a 
receipt  given  which  stated  that  the  certificate  was  due 
December  18,  whereas  it  was  due  on  demand  and  the  bank 
collected  it  at  once,  the  depositor  cannot  require  the  bank 
to  pay  interest  which  would  have  accrued  had  the  paper  been 
held  until  December  18.  There  was  no  agreement  that  the 
paper  should  be  held  and  there  was  no  negligence  or  viola- 
tion of  instructions,  and  interest  cannot  be  claimed. 2" 

Where  a  bank  mistook  a  note  that  was  really  negotiable 
for  a  non-negotiable  one  (because  it  contained  provisions 
beyond  those  usually  found  in  notes,  saying,  "being  in  part 
payment  for  a  portable  engine,  which  engine  shall  be  and 
remain  the  property  of  the  owner  of  this  note  until  the 
amount  hereby  secured  is  fully  paid  "),  and  did  not  prop- 
erly protest  and  notify,   it  was  held  responsible.  ^ 

A  bill  of  exchange  was  sent  to  a  bank  for  collection.  The 
bank  thought  it  was  a  check,  and  not  entitled  to  grace,  and 
presented  and  protested  it  on  the  day  of  maturity.  This  dis- 
charged the  indorser,  and  the  bank  was  held  to  make  good 
the  loss.*  The  indorser  in  this  case  had  notified  the  bank 
that  the  instrument  had  grace,  which  strengthened  the  case 
against  the  bank. 

A  mere  nominal  error,  not  calculated  to  mislead,  or  which 
does  not  in  fact  mislead,  is  not  fatal,  as  where  a  draft  was 
signed  Burton  and  Sowles,  and  notice  was  addressed  0.  A. 
Burton,  and  under  it  Edward  A.  Sowles,  although  not  accu- 
rate, it  was  held  sufficient.^ 

If  the  collecting  bank  has  knowledge  of  the  address  of  a 
party  to  be  notified,  it  must  impart  it  to  its  agent  or  notary.® 

2  Mount  V.  First  National  Bank,  37  Iowa,  457 ;  Borup  v.  Nininger, 
5  Minn.  523. 

2«  Ide  V.  Bank,  73  la.  58. 

8  Mott  V.  Havana  National  Bank,  22  Hun  (N.  Y.),  354. 
*  Georgia  National  Bank  v.  Henderson,  43  Ga.  487. 
6  United  States  National  Bank  v.  Burton,  58  Vt.  426. 
«  Bai-tlett  V.  Isbell,  31  Conn.  296  ;  Borup  v.  Nininger,  5  Minn.  552. 

493 


§  258  COLLECTION   IN   GENERAL. 

But  it  is  not  required  of  the  owner  that  he  shall  send  the 
address  of  an  indorser  known  to  him  to  the  bank,  with  a  note 
deposited  for  collection.  If  the  agent  and  the  notary  use 
due  diligence,  and  cannot  discover  the  address,  the  bank 
can  send  the  notice  to  the  owner,  and  he  may  forward  it, 
and  if  the  agent  and  notary  use  proper  care  and  come  to 
the  conclusion  that  a  party's  address  is  M.,  and  send  notice 
there,  such  notice  is  sufficient,  though  never  received,  the 
real  address  being  N.,  and  the  owner  plaintiff  having  knowl- 
edge of  this  fact.'^ 

§  250.  Mistake  of  Law.  —  Generally  a  mistake  of  law  is  no 
excuse,  but  when  a  question  has  not  yet  been  decided,  and 
there  is  no  uniform  practice  to  guide  the  bank,  it  is  not 
responsible  for  mistaking  ^v]lat  will  he  the.  future  decision  of 
the  law ;  it  is  only  the  law  that  is  established  that  is  pre- 
sumed to  be  known.  A  post  note  was  presented  and  notice 
given  on  the  day  of  maturity;  this  discharged  the  indorsers. 
The  question  whether  a  post  note  shall  have  grace  or  not 
being  doubtful,  no  uniform  usage  existing  and  the  law  not 
having  been  established  by  decision,  the  bank  was  not 
responsible.  1 

§  257.    A  Brief  Statement  *  of  the  General  Principles  of  the  La'wr 
Merchant,  regarding,  — 
§  258.    Presentment  for  Acceptance. 
§  259.    Presentment  for  Payment. 
§  260.   Protest. 

§  261.   Notice  of  Dishonor,  and 
§§  262,  263.    Excuses  for  Failure  to  Present  or  Notify. 

§  258.  Presentment  for  Acceptance.  —  (a)  What  Paper;  (i)  When; 
(c)  Where;  {d)  By  Whom ;  (e)  To  Whom;  (/)  How;  {g)  Effect  of;  and 
(//)  Faihire,  its  Excuse  and  Effect. 

T  Ransom  v.  Mack,  2  Hill  (N.  Y.),  592 ;  Belden  v.  Lamb,  17  Conn. 
441. 

1  §  256.    Mechanics'  Bank  v.  Merchants'  Bank,  6  Met.  (Mass.)  13. 

1  §  257.  So  far  as  not  verified  in  the  chapters  on  Collection  and  Checks, 
these  rules  are  easily  found  in  the  standard  books,  as  Daniel  on  Negotiable 
Instruments,  Parsons  on  Bills  and  Notes,  or  Sharswood's  Byles.  The  object 
here  is  to  give  in  a  very  condensed  form  the  essence  of  Presentment,  Protest, 
and  Notice,  for  easy  reference  and  a  bird's-eye  view  of  matters  a  comprehension 
of  which  is  necessary  to  an  understanding  of  banking  cases. 

494 


LIABILITY   FOR    MISTAKE.  §  258 

(a)  What  Paper.  —  All  bills  payable  at  sight  or  after  an  uncertain 
event,  as  after  sight  or  demand,  must  be  presented  for  acceptance  without 
unreasonable  delay,  unless  they  contaiu  a  waiver  ("  acceptance  waived"). 
Bills  payable  on  demand,  or  a  certain  time  after  a  fixed  date,  need  no 
presentment  for  acceptance;  but  when  payable  at  a  future  day  it  is  usual 
to  present  for  acceptance  -with  diligence,  because,  if  accepted,  the  accept- 
or's liability  is  assured,  if  not,  the  holder  must  protest  and  notify,  and 
has  an  immediate  right  of  action  against  the  drawer  and  indorsers. 
And  if  there  is  an  express  direction  to  present  given  to  the  payee  or 
holder  of  a  bill  payable  at  a  fixed  time,  or  if  it  is  put  into  the  hands  of  an 
agent  to  negotiate,  it  must  be  presented  for  acceptance. 

(I)  When. — During  business  hours,  within  a  reasonable  period  after 
the  bill  is  received,  taking  into  account  the  means  of  communication,  the 
fluctuations  in  the  rate  of  exchange,  the  putting  of  the  bill  into  circula- 
tion (delay  of  a  year  might  not  be  negligent  if  the  bill  were  in  circula- 
tion), and  any  other  circumstances,  as  war,  sickness,  or  accident,  which  in 
common  reason  affects  the  question. 

Of  course,  presentment  for  acceptance  must  be  previous  to  the  day  on 
which  the  paper  is  due,  or  it  is  merged  in  presentment  for  payment. 

Business  hours,  if  tlie  paper  is  payable  at  a  bank,  mean  its  banking 
hours;  if  not  at  a  particular  bank,  but  generally  "  at  bank,"  the  usual 
banking  hours  of  the  place  of  payment;  if  at  any  other  "  place  of  busi- 
ness," the  hours  during  which  such  places  are  usually  open  ;  in  other 
cases,  business  hours  continue  till  the  hours  of  rest  usual  in  the 
community. 

Presentment  is  always  sufficient  if  it  is  properly  responded  to. 

If  the  drawee  of  a  bill  is  not  at  his  house  or  counting-room,  the  holder 
may  wait  a  reasonable  time  for  his  return ;  a  call  next  day  has  been  held 
reasonable. 

(c)  Where.  —  Presentment  for  acceptance  must  be  made  at  the  dwell- 
ing or  the  place  of  business  of  the  drawee,  without  regard  to  the  place  of 
payment,  and  this  although  the  drawee  has  removed  his  domicil  from 
the  place  to  which  the  bill  is  addressed. 

(d)  By  Whom.  —  The  holder  or  his  authorized  agent. 

(e)  To  Whow.  — The  drawee  or  his  authorized  agent. 

(/)  How.  —  The  presenter  should  actually  exhibit  the  bill  to  the 
drawee,  though  the  drawer  and  indorsers  may  be  bound  without  such 
formality,  if  the  drawee  is  able  to  and  does  give  an  intelligent  answer  as 
to  acceptance  of  it  from  knowledge  previously  acquired. 

{g)  Effect.  —  (1)  If  accepted,  the  drawee  becomes  liable  for  the 
amount,  the  acceptance  operates  as  a  legal  assignment  of  the  amount  to 
the  holder,  if  the  drawing  of  the  bill  did  not  have  that  effect.  (2)  If 
not  accepted,  the  holder  must  protest  and  notify  the  drawer  and  indorsers, 
and  then  may  sue  them  without  waiting  until  the  maturity  of  the  paper  ; 
and  if  a  State  law  forbids  suit  tiU  maturity,  the  United  States  courts  will 

495  * 


§  259  COLLECTION  IN  GENERAL. 

not  be  affected  by  the  statute,  the  question  being  one  of  general  commer- 
cial law,  and  well  settled  beside. 

(//)  Failure,  Excuse  for.  —  (1)  When  the  drawing  of  the  bill  is  a  fraud 
on  the  holder.  ("2)  When  the  residence  of  the  drawee  cannot  with  rea- 
sonable diligence  be  discovered,  the  bill  may  be  treated  as  dishonored. 

Effect  of  unexcused  failure  to  present  properly  is  to  destroy  the 
holder's  remedy  on  the  bill,  and  also  on  the  debt  for  which  the  bill 
was  received. 

§  259.  Presentment  for  Payment.  —  (a)  When ;  (b)  Where ;  (c)  By 
Whom;  (<I)  On  Whom;  (e)  How. 

(a)  When.  —  Within  business  hours,  according  to  the  custom  of  the 
place  where  payable.     See  above.     As  to  the  day,  — 

1st.  A  bill  or  note  payable  at  a  fixed  time  must  be  presented  on  the 
day  of  maturity.  One  day  before  or  after  is  of  no  effect  to  charge  the 
drawer  or  indorser. 

2d.  As  to  the  maker  of  a  note  or  acceptor  of  a  bill,  (1)  if  payable  at 
a  particular  place,  presentment  should  be  on  the  day  of  maturity,  for  if 
not,  the  holder  will  have  to  make  good  any  loss  to  the  maker  or  accejitor 
resulting  from  the  delay  ;  (2)  otherwise,  demand  of  payment  at  any  time 
during  the  running  of  the  statute  of  limitations  is  sufficient. 

3d.  Bills  payable  on  demand  must  be  presented  during  business  hours 
on  the  next  business  day  following  their  delivery,  if  the  drawee  is  in  the 
same  place  as  the  payee;  if  in  a  different  place  they  must  be  sent  by  the 
regular  mail  of  the  day  following  i-eceipt  to  some  one  in  the  place  of 
the  drawee,  and  the  person  to  whom  it  is  sent  has  the  secular  day  follow- 
ing the  one  in  which  the  paper  has  reached  him  by  due  course  of  mail 
in  which  to  present  it.  This  is  the  general  rule  as  to  reasonable  time  in 
such  cases,  but  circumstances  may  vary  it. 

4th.  Checks  (1)  as  between  drawer  and  payee  must  be  presented  for 
payment  in  accordance  with  the  rule  given  in  the  last  paragraph,  or  the 
drawer  will  be  discharged  to  the  extent  of  the  damage  caused  to  him  by 
the  delay,  but  no  further.  (2)  As  to  an  indorser,  the  indorsement  is  con- 
sidered a  new  drawing,  and  the  same  time  rule  holds,  but  with  a  differ- 
ence in  the  effect  if  presentment  is  not  made  within  the  said  time.  An 
indorser  is  entirely  discharged  by  such  failure.  (3)  As  between  drawer 
and  any  indorsee  or  holder,  the  presentment  must  be  made  within  the 
same  time  as  it  would  have  to  be  by  the  payee  himself,  and  with  the 
same  effect  in  case  of  failure.  That  is,  the  drawer  is  absolutely  respon- 
sible only  during  the  day  following  receipt  of  the  check  by  the  payee,  or 
by  his  agent,  to  whom  it  is  duly  forwarded  as  above,  and  no  matter  how 
many  times  the  check  may  be  indorsed  or  transferred,  this  time  cannot 
be  enlarged. 

5th.    Note  payable  on  demand  is  regarded  by  the  best  writers  as  a  con- 
tinuing security,  especially  if  given  for  a  loan  or  payable  "  with  interest," 
and  the  rules  of  the  last  two  paragraphs  do  not  apply ;  but  it  will  be  a 
496 


PRESENTMENT   FOR   PAYMENT.  §  259 

question  for  the  jury  on  all  the  facts  whether  the  presentment  was  rea- 
sonable or  not.  (Sharswood's  Byles,  388.)  The  authorities,  however,  are 
in  irreconcilable  conflict,  and  the  question,  when  it  arises  in  any  par- 
ticular State,  should  be  examined  in  the  light  of  the  decisions  in  that 
State. 

6th.  Grace.  (1)  Non-negotiable  paper  has  no  grace.  (2)  Bills  pay- 
able "  at  sight"  are  the  subject  of  great  conflict.  The  weight  of  author- 
ity is  in  favor  of  grace ;  reason  is  not  involved ;  it  is  a  mere  matter  of 
formal  law,  which  may  be  settled  equally  well  either  way,  the  only  thing 
of  importance  being  to  settle  it.  (3)  All  other  bills  of  exchange  and 
negotiable  notes  have  grace,  except  those  expressly  payable  without  it 
and  those  payable  on  demand  or  in  which  no  time  is  named  (in  the  last 
case  the  law  implies  that  they  are  on  demand).  (4)  Three  days'  grace  is 
the  usual  rule,  but  it  may  be  varied  by  local  usage,  or  by  statute,  enlarg- 
ing, diminishing,  or  entirely  cutting  it  off. 

7th.  The  fundamental  rule  is  that  presentment  must  be  made  in  rea- 
sonable time  under  all  the  circumstances,  and  the  above  are  merely  cases 
in  which  the  law  has  determined  what  shall  be  considered  reasonable  time 
in  those  circumstances.     See  Excuse. 

(h)  Where.  —  (1)  If  the  paper  names  a  place  of  payment,  presentment 
for  payment  must  be  made  there.  (2)  If  several  j)laces  are  named,  the 
holder  may  elect,  and  a  presentment  at  either  is  good.  (3)  When  no 
place  of  payment  is  named,  the  place  of  dating  is  prima  facie  the  seat  of 
the  contract ;  but  the  real  place  of  performance,  controlling  the  place  of 
date  except  as  to  bona  Jide  parties  for  value  without  notice,  is  the  place 
of  delivery,  as  to  the  State  whose  law  is  to  govern  the  contract.  As  to 
the  particular  house  or  spot  at  which  demand  should  be  made,  if  under  the 
principles  of  private  international  law,  the  place  of  performance  is  in, 
the  State  where  the  maker  or  acceptor  has  his  domicil,  and  the  paper  is 
payable  generally,  demand  should  be  made  at  his  place  of  business  or 
residence  (whether  he  is  there  or  not  it  is  good),  or  upon  him  personally 
(demand  on  the  street  or  in  the  barn-yard  has  been  held  good).  So,  if 
between  the  time  a  note  is  made  or  a  bill  accepted,  and  the  maturity  of 
the  same,  the  maker  or  acceptor  removes  into  another  State,  the  holder  is 
not  obliged  to  go  out  of  his  State  in  order  to  make  demand  at  the  new 
domicil,  but  may  fulfil  his  duty  by  making  demand  at  the  payor's  last 
residence  or  place  of  business  in  that  State.  If  the  removal  is  to  another 
place  in  the  same  State,  the  holder  must  follow  to  that  place. 

(c)  Bj/  Whom.  —  Any  bona  Jide  holder,  or  his  agent  duly  authorized 
(by  parol  or  writing),  may  demand  payment;  for  example,  a  notary. 

If  the  holder  is  dead,  his  personal  representatives  or  their  authorized 
agent  may  present. 

(c?)  On  Whom.  —  Presentment  for  payment  should  be  made  to  the 
party  ivho  is  to  pay,  or  to  his  authorized  agent.  It  is  his  duty  to  provide 
some  one  to  attend  to  his  business,  and  demand  on  his  clerk,  or  wife,  or 

VOL.  I.  —  32  497 


§  260  COLLECTION   IN   GENERAL. 

other  person  most  likely  of  those  present  at  the  place  of  demand  to  be 
his  agent  for  such  purpose,  is  sufficient  in  his  absence.  And  if  no  one  is 
found  at  the  place  of  payment,  the  paper  may  be  treated  as  dishonored. 

If  there  are  several  joint  promisors  not  partners,  demand  should  be 
made  upon  each. 

If  the  joint  promisors  are  partners,  demand  on  any  one  is  enough,  even 
though  the  firm  is  dissolved. 

If  the  payor  is  dead,  demand  should  be  made  upon  his  personal  repre- 
sentative, if  one  has  been  appointed  ;  if  not,  then  at  the  proper  ^a/ace,  and 
the  bill  treated  as  dishonored. 

(e)  How.  —  The  bill  or  note  must  be  in  possession  of  the  party  making 
demand,  and  ready  to  be  delivered,  and  this  fact  must  be  clearly  indi- 
cated to  the  maker,  drawee,  or  acceptor  (which  is  best  done  by  actual 
exhibition  of  it,  which  the  party  who  is  to  pay  has  a  right  to  demand  in 
order  that  he  may  be  assured  that  he  is  paying  to  the  proper  person,  and 
that  the  paper  will  be  delivered  to  him  on  payment).  But  any  circum- 
stance which  renders  this  manner  of  presentment  useless  excuses  its 
absence,  as  if  the  payor  refuse  to  honor  the  demand  on  other  grounds. 

When  a  bill  or  note  is  payable  at  a  particular  place,  as  a  business  house 
or  at  a  bank,  it  is  sufficient  demand  if  the  paper  is  present  in  the  bank  at 
the  proper  time. 

§  260.  Protest,  or  formal  steps  taken  to  fix  the  liability  of  drawer  or 
indorser,  and  supply  reliable  evidence  of  dishonor.  —  (a)  What  Paper; 
ih)  When;  (c)  Where;  (of)  By  Whom;  (e)  How. 

(a)  What  Instruments.  —  In  England  and  the  United  States  the  general 
rule  is  that  only  in  case  oi  foreign  hills  is  protest  necessary,  but  in  many 
States  statutes  provide  that  inland  bills  and  promissory  notes  may  be 
protested ;  and  it  has  been  held  at  common  law  that  there  is  no  good 
reason  for  making  a  distinction  between  foreign  bills  and  notes  payable 
in  another  State  which  have  been  indorsed. 

A  check  drawn  in  one  State  and  payable  in  another  is  a  species  of  for- 
eign bill,  and  should  be  protested  to  charge  an  indorser,  and  inland  checks 
may  be  protested  under  the  statutes  above  mentioned  as  inland  bills. 

(b)  When.  —  (1)  Protest  should  be  made  when  the  instrument  above 
named  as  requiring  it  is  dishonored  by  non-acceptance  or  non-payment. 
(Absence  from  residence  or  place  of  business,  leaving  no  one  to  pay,  is 
dishonor  in  case  of  presentment  to  acceptor  for  payment;  but  absence 
when  a  bill  is  presented  for  acceptance  is  no  dishonor,  for  the  drawee  may 
•have  had  no  notice  of  the  bill.  If  a  bill  has  been  presented  for  accept- 
ance and  refused,  no  presentment  for  paymer.t  or  protest  for  nonpay- 
ment is  necessary  except  in  case  of  acceptance  supra  protest.)  (2)  The 
"  noting  "  must  be  done  upon  the  day  of  maturity  o'f  the  paper;  but  the 
"extension  "  or  complete  certificate  of  protest  may  be  filled  out  at  any 
subsequent  time.     (See  "  How  "  below.) 

(c)  Where.  —  For  non-acceptance,  it  should  be  at  the  place  of  present- 

498 


NOTICE   OP   DISHONOR.  §  261 

ment  for   acceptance.     For  nonpayment,  it  should  be  at  tlie  place  of 
payment. 

(d)  By  Whom.  —  It  shonld  be  made  by  a  notary  public  if  one  can  be 
found,  otherwise  by  some  respectable  person  of  the  place  where  the  pa])er 
is  dishonored,  with  proper  witnesses,  though  the  latter  are  probably  not 
necessary. 

(e)  How.  —  (1)  The  bill  or  note  must  be  presented  for  acceptance  or 
payment,  as  the  case  may  be,  by  the  nolary  (or  other  person  making  the 
protest)  in  person  (so  that  his  testimony  may  not  be  hearsay).  (2)  Dur- 
ing the  very  day  on  which  the  presentment  is  made  by  him,  he  must 
"note  the  protest,"  i.  e.  make  a  minute  on  the  bill  or  in  his  book  of 
registry,  consisting  of  the  date,  the  refusal,  the  charges  of  protest,  and 
his  initials.  (3)  The  "  extension  "  or  complete  certificate  of  protest  may 
be  made  at  any  time  from  a  "  noting"  properly  made  on  the  day  of  ma- 
turity of  the  paper.  (4)  The  certificate  should  state  the  time,  place,  and 
manner  of  presentment,  to  whom  and  by  whom  it  was  made,  and  the 
facts  of  demand  and  dishonor.  (It  is  also  usual  to  state  the  reasons  given 
for  refusal,  and  the  name  of  the  party  ordering  protest;  but  these  are  not 
essentials.)  (5)  The  certificate  should  be  authenticated  by  the  notarial 
seal;  courts  take  judicial  note  of  this,  and  such  seal  is  prima  facie  evi- 
dence of  the  authenticity  of  the  certificate.  If  not  under  notarial  seal,  it 
must  be  proved  that  the  certificate  was  properly  made,  and  that  it  is  suf- 
ficient without  seal  in  the  State  where  made.  (G)  The  certificate,  is  prima 
facie  evidence  of  the  facts  stated  in  it  so  far  as  they  come  within  the 
notary's  official  duty  in  making  presentment,  demand,  and  protest. 
See  (4).     Giving  notice  is  not  within  this  scope. 

§261.  Notice  of  Dishonor.  —  (a)  When;  {b)  By  Whom  ;  (c)  To 
Whom  ;   {d)  How  and  What. 

(a)  When.  — (1)  The  act  to  be  done  by  the  notifier  may  be  done  at 
once  after  dishonor,  without  waiting  till  the  close  of  business  hours  on 
the  day  of  payment.  (2)  But  notice  given  or  sent  before  dishonor  is  pre- 
mature. (3)  Personal  notice  may  be  given  at  any  time  up  to  the  close  of 
the  day  after  dishonor  and  before  the  close  of  business  hours,  if  given  at 
the  place  of  business;  or,  if  at  the  dwelling,  then  any  time  before  the  usual 
hours  of  rest.  (4)  Notice  by  mail  must  be  dejiosited  in  time  to  go  by  some 
mail  of  the  next  business  day  following  dishonor,  unless  there  is  no  mail 
that  day  or  the  only  mail  is  closed  before  early  and  convenient  business 
hours  of  that  day  (seven  o'clock  being  the  probable  time),  in  which  cases 
the  letter  must  be  put  in  the  office  in  time  for  the  next  mail  after  the  said 
day  following  dishonor.  Kent  says  it  is  enough  to  mail  the  letter  on  said 
day  following,  though  not  in  time  to  go  by  any  mail  of  that  day;  but  the 
weight  of  authority  is  against  him.  See  Daniel,  §  1040;  1  Parsons 
N.  &  B.  508;  3  Kent,  106.  (5)  Each  party  who  receives  notice  has  the 
period  named  in  (4)  to  send  notice  to  his  predecessors,  measuring  the 
period  not  from  dishonor,  but  from  the  time  of  receiving  notice  himself, 

499 


§  261  COLLECTION   IN   GENERAL. 

with  the  proviso  that  notice  received  on  Sunday  or  other  non-business 
day  is  considered  as  received  upon  the  next  business  day,  and  need  not  be 
opened  until  then. 

(/;)  By  Whom.  —  (1)  Notice  must  be  given  by  the  holder,  or  by  some 
party  whose  liability  has  been  fixed,  or  by  the  agent  of  sucli  a  person. 
(If  the  holder  notifies  the  fourth  indorser,  and  he  the  third,  and  so  on, 
the  notices  all  enure  to  the  benefit  of  the  holder ;  and  if  the  holder 
notifies  all  the  indorsers,  and  the  third  pays  the  holder,  such  third  in- 
dorser is  substituted  to  the  rights  of  the  holder,  and  may  recover  of  the 
second  or  first  indorser,  though  the  third  had  not  sent  any  notices  him- 
self. Such  is  the  best  opinion.)  (2)  A  stranger,  or  a  party  who  has  been 
discharged  from  all  liability  on  the  paper,  cannot  notify,  and  ratification 
will  not  make  his  act  good.  (3)  If  the  holder  is  dead,  his  representative 
should  attend  to  giving  notice. 

(c)  To  Whom.  —  A.  (1)  The  party  primarily  liable,  the  maker  of  a 
note  or  acceptor  of  a  bill,  is  not  entitled  to  notice  of  dishonor ;  it  is  his 
duty  to  provide  for  payment  anyway.  No  party  to  non-negotiable  paper 
has  a  right  to  notice.  The  protection  of  these  rules  of  mercantile  law 
has  been  extended  as  yet  only  to  the  favorites  of  commerce.  One  who 
transfers  paper  by  mere  delivery,  without  indorsement,  as  collateral 
security,  is  not  entitled  to  notice,  and  will  not  be  released  from  the  debt 
secured,  except  so  far  as  he  can  show  that  he  has  been  damaged  by  failure 
to  present,  &c.  (2)  The  drawer  of  a  bill,  and  any  indorser  of  a  bill  or 
negotiable  note,  is  entitled  to  notice  of  dishonor.  — B.  (3)  Notice  to  the 
agent  of  the  drawer  or  indorser  authorized  to  receive  it  is  sufficient. 
(4)  If  the  party  to  be  notified  is  a  partnership,  notice  to  one  partner  is 
sufficient.  (5)  If  bankrupt,  notice  to  either  himself  or  his  assignee  would 
probably  be  good ;  but  it  is  safest  to  notify  both.  (6)  If  dead,  and  the 
notifier  knows  it,  notice  should  be  sent  to  his  "  legal  representative,"  and 
notice  to  one  of  several  executors  or  administrators  is  sufficient ;  if  he  has 
no,legal  representative,  notice  sent  to  the  residence  of  the  deceased  is  suf- 
ficient. (7)  If  dead,  and  the  notifier  does  not  know  it,  and  his  igno- 
rance is  not  the  result  of  negligence,  a  notice  addressed  to  the  deceased 
is  good. 

{(J)  What  and  How.  —  (1)  The  notice  must  carry  information  that  cer- 
tain specified  paper  is  dishonored,  and  that  the  person  notified  is  looked  to 
for  payment.  The  latter  clause  explains  why  it  is  that  mere  knowledge 
of  dishonor  not  communicated  by  one  entitled  to  call  for  payment  is  not 
notice.  Of  the  two  elements  of  notice  such  a  communication  only  con- 
tains one.  (2)  Notice  maybe  verbal  or  written;  and  although  the  single 
statement  that  a  bill  is  dishonored  coming  from  the  proper  source  is  suffi- 
cient, as  the  intent  to  hold  the  person  notified  is  inferred,  or  the  state- 
ment that  the  person  is  looked  to  to  pay  a  bill  is  sufficient,  as  carrying  the 
inference  that  it  is  dishonored,  yet  it  is  better  that  the  notice  should  be 
in  writing,  and  contain  a  clear  statement  identifying  the  paper,  and  an- 

500 


WAIVER   OF   DEMAND    AND    NOTICE.  §  262 

Bouncing  that  it  has  been  presented  and  dishonored,  and  that  the  holder 
or  notifier  looks  to  the  person  notified  to  pay  said  paper.  (3)  It  makes 
no  difference  how  notice  be  sent,  whether  by  messenger  or  mail,  if  it 
actually  reaches  the  party  in  time.  (4)  A  special  messenger  is  always  a 
proper  method  of  sending  notice.  (5)  The  mail  may  be  used  whenever  the 
party  to  be  notified  resides  or  does  business  in  a  different  place  from  that 
where  the  notifier  resides  (but  see  6  y,  below),  or  where  the  bill  or  note  is 
payable  ;  also  where  the  said  places  are  not  different,  if  there  is  a  postal 
delivery,  and  the  letter  is  put  in  the  office  early  enough  to  go  to  its  destina- 
tion the  same  day  by  the  regular  carriers.  What  is  the  test  as  to  differ- 
ence of  place  is  a  question  on  which  authorities  differ,  some  holding  that 
the  post-office  is  to  be  used  only  for  transportation,  not  for  deposit,  and 
therefore  all  who  get  their  mail  at  the  same  post-office  are  deemed  to 
live  in  the  same  place;  others,  among  them  the  United  States  Supreme 
Court,  say  that  where  the  person  to  be  notified  has  no  place  of  business 
or  residence  in  town,  but  lives  three  or  four  miles  out,  the  post-office 
may  be  used,  though  the  notifier  gets  his  mail  at  the  same  office.  The 
letter  should  be  addressed  to  the  proper  party  at  the  post-office  at  or 
nearest  to  his  place  of  business  or  his  residence,  as  the  notifier  elects,  unless 
the  party  gets  his  mail  at  some  other  office,  and  then  the  address  should  be 
to  it.  Whenever  it  is  proper  to  use  the  mail,  a  notice  properly  addressed 
and  mailed  in  proper  time  fixes  the  liability,  whether  it  is  ever  received 
or  not,  for  the  post-office  is  agent  of  the  addressee.  (6)  (z)  When  the 
parties  live  in  the  same  place,  which  is  also  the  place  of  payment  or  ac- 
ceptance, as  the  case  may  be,  the  notice  must  be  personal,  verbal,  or  writ- 
ten; or  a  written  notice  must  be  left  at  the  dwelling  (or  boarding-house) 
or  place  of  business  of  the  one  to  be  notified;  and  if  the  party  is  not  found 
at  such  place,  it  is  sufficient  to  leave  the  notice  with  any  one  on  the  prem- 
ises ;  if  such  place  is  closed,  notice  is  excused,  (y)  It  is  held  by  good 
authority,  that,  in  case  the  party  to  be  notified  resides  at  the  place  of 
payment,  personal  service  must  be  made,  although  the  notifier  resides 
elsewhere.  (See  Bowling  v.  Harrison,  6  How.  248;  co/i/ra,  Philipe  v. 
Harberlee,  4.5  Ala.  608.)  (z)  If  the  parties  reside  in  the  same  place,  but 
the  place  of  acceptance  or  payment,  and  therefore  of  protest,  is  elsewhere, 
the  mail  may  be  used.  These  rules  make  the  matter  of  personal  service 
depend  on  the  identity  of  the  domicil  of  the  party  to  be  notified  with  the 
place  of  acceptance  or  payment,  as  the  case  may  be  ;  and  this  identity  is 
determined  as  in  (.5). 

§  262.  What  excuses  Non-Presentment  or  Want  of  Notice.  — 
(1)  Anything  which  obstructs  or  suspends  commercial  communication  be- 
tween the  parties,  as  ivar  between  the  nation  of  the  holder  and  that  of  the 
acceptor,  or  between  the  nation  of  the  holder  and  that  of  the  drawer,  will 
interfere  with  and  excuse  notice,  or  any  accident,  or  epidemic,  or  revolu- 
tion, or  positive  prohibition  of  intercourse,  or  great  fire,  or  other  obstruc- 
tion of  commerce.     Necessity  excuses  all  things;  and  the  holder  is  only 

601 


§  262  COLLECTION    IN    GENERAL. 

required  to  use  reasonable  and  ordinary  cai'e  and  diligence,  and  if  it  ap- 
pears that  any  calamity,  as  a  storm,  actually  prevented  due  diligence  from 
making  tlie  presentment  or  giving  due  notice,  the  failure  is  excused  until 
the  obstruction  ceases.  So  in  case  of  a  check,  if  the  drawee  bank  is  re- 
strained from  paying  out  money  by  order  of  court,  presentment  and 
notice  are  excused.  (2)  When  there  is  no  person  legally  liable  primarily, 
as  when  the  acceptor  or  maker  is  dead,  and  no  representative  apjjointed, 
presentment  is  excused,  though  some  cases  say  it  mvist  even  then  be  made 
at  the  residence  of  the  deceased,  and  notice  must  be  given  as  if  dishon- 
ored in  all  such  cases.  (3)  When  due  diligence  cannot  find  out  the  resi- 
dence or  place  of  business  of  the  party  to  whom  presentment  should  be 
made  or  notice  given,  the  duty  is  suspended  until  such  time  as  the  neces- 
sary facts  can  be  discovered.  But  when  the  maker  or  acceptor  cannot  be 
found,  the  bill  is  to  be  treated  as  dishonored,  and  notice  given  to  the 
drawer  and  indorsers.  Notice  is  excused  by  innocent  ignorance  of  the 
address  of  the  one  to  be  notified,  not  by  failure  to  find  the  one  to  whom 
presentment  should  be  made.  (4)  When  the  holder  or  his  agent  is  pre- 
vented by  sickness,  or  by  the  shortness  of  time  between  the  transfer  of  the 
paper  to  him  and  its  maturity,  presentment  and  notice  are  excused,  in  the 
former  case  as  to  all  parties,  in  the  latter  as  to  the  immediate  transferrer, 
until   such   time   as  reasonable   diligence   can    overcome   the   difficulty. 

(5)  When  the  maker  or  acceptor  has  absconded,  no  demand  is  neces- 
sary; but  notice  must  be  given.     (Massachusetts  contra,  as  to  demand.) 

(6)  Any  express  or  implied  waiver  of  demand  or  notice  is  an  excuse,  as 
if  the  drawer  or  an  indorser  agrees  to  waive  notice,  or  so  acts  as  to  induce 
the  holder  to  believe  that  he  waives  it,  and  so  estops  himself,  it  is  an 
excuse  as  to  such  drawer  or  indorser.  (7)  A  promise  to  pay  or  acknowledg- 
ment of  liability  by  drawer  or  indorser  after  maturity,  and  with  knowledge 
that  proper  demand  and  notice  have  not  been  given,  is  a  waiver.  And  a 
part  payment  after  maturity  is  such  an  acknowledgment.  Part  payment 
of  a  check  before  maturity  is  a  waiver  of  demand  and  notice.  (8)  If  the 
drawer  have  no  reasonable  expectation  that  the  bill  will  be  honored,  or 
that  he  will  be  able  to  secure  funds  to  meet  it,  it  is  not  necessary,  as 
against  him,  to  present  or  notify;  but  as  against  innocent  indorsers 
the  usual  formalities  are  necessary.  A  declaration  by  the  drawer  that  the 
paper  will  not  be  honored  excuses  presentment  and  notice.  So,  if  the 
drawer  of  a  check  have  no  funds,  or  insufficient  funds,  or  withdraws  his 
deposit,  or  orders  the  bank  not  to  pay  the  check,  no  presentment  and 
notice  is  necessary  as  to  him,  —  he  can  suffer  no  loss  by  its  absence  ;  but 
as  to  an  indorser  such  facts  are  no  excuse,  unless  he  knew  of  the  drawer's 
fraud,  and  so  participated  in  it.  (9)  If  any  party  has  received  money 
(or  perhaps  security,  though  this  is  the  subject  of  conflict)  to  pay  the 
paper  from  the  party  who  is  ordinarily  primarily  liable,  as  against  him 
demand  and  notice  are  excused  altogether  ;  for  he  is  now  the  one  who 
should  pay  the  bill  in  the  first  place. 

502 


WAIVER   OF   DEMAND    AND   NOTICE.  §  263 

§263.  No  Excuse. — The  loss  of  the  paper,  or  the  fact  that  the 
drawee  or  maker  is  dead  or  has  removed,  or  that  he  is  insolvent,  or  that 
the  drawer  or  indorser  has  been  appointed  executor  or  administrator  to 
the  maker  or  acceptor,  or  that  no  damage  has  actually  resulted  to  the 
drawer  or  indorser,  will  not  excuse  failure  to  present  and  give  notice. 
But  in  case  of  a  check,  the  drawer  is  discharged  only  so  far  as  actually 
damaged. 


503 


§264 


CHAPTER   XYII. 

THE  LIABILITY  OF  A  BANK  FOR  THE  NEGLIGENCE  OF  ITS  CORRE- 
SPONDENT, OR  OF  A  NOTARY,  OR  OTHER  AGENT  IN  COLLECTIONS. 
ALSO    OF   "  COLLECTION   AGENCIES." 

§  264.  Analysis. 

§§  265,  266.     Notary. 

Bank  not  liable  for,  generally,  if  it  uses  due  care  in  selection. 
In  some  States  it  is  liable,  if  it  permanently  employs  him. 
In  some  States  bank  is  not  liable  for  his  default  in  official  duty. 
In  others,  bank  is  liable  for  official  default  of  notary,  as  well 
as  for  negligence  in  a  matter  which  might  have  been  done 
by  any  ordinary  agent. 
§  266.  Care  in  selecting  notary. 

§  267.  Collection  Agencies. 

Hoover  v.  Wise,  and  other  cases. 
Correspondent. 
Liability  for. 
§  268.  Great  conflict  of  opinion.     Question  stated. 

§  269.  Special  agreement  governs,  and  may  render  a  bank  not  liable 

for  the  acts  of  its  sub-agent. 
§  270.  Usage  may  decide. 

§  27L  Bank  is  everywhere  liable  if  it  does  not  select  its  agents  with 

due  care. 
It  is  not  due  care  to  send  paper  to  the  drawee  for  collection. 
§  272.  New  York  holds  the  first  bank  responsible, 

§  273.  On  the  ground  that  the  contract  covers  all  the  means  em- 

ployed. 
§  274.  Massachusetts  holds  the  bank  not  responsible, 

§  275.  On    the  grounds  that   usage  gives  authority  to  employ  sub- 

agents,  which  are  therefore  the  agents  of  the  holder,  and 
not  of  the  first  bank,  and  that  there  is  no  sufficient  consid- 
eration for  the  bank  to  undertake  the  risk  of  its  correspond- 
ent's negligence. 
§  276.  Discussion  of  the  question  from  the  ground  up  tends  to  support 

the  New  York  rule. 
§§272,277-280.     Cases   affirming  the   liability:   England,  New  York,  United 
States,  Ohio,  Indiana,  Michigan,  New  Jersev,  Minnesota. 

504 


LIABILITY  FOR  NOTARY.  §  265 

§§  274, 281-287.  Authorities  denying  the  liability :  Massachusetts,  Connecticut, 
Kansas,  Illinois,  Iowa,  Maryland,  Wisconsin,  Missouri,  Ten- 
nessee, Louisiana,  Pennsylvania,  Kentucky,  Nebraska ;  C.  J. 
Marshall  and  Chancellor  Walworth. 

§  265.  Liability  for  Negligence  of  Notary.  —  In  Mississippi, 
the  bank  is  not  liable  if  the  paper  is  given  to  a  notary  in 
time  for  him  to  discharge  his  duties.^  In  those  States 
which  do  not  hold  a  bank  for  the  negligence  of  its  corre- 
spondent, the  same  reasons  would  prevail  against  its  lia- 
bility for  a  notary's  default  ;2  unless  the  bank  makes  a 
particular  notary  its  permanent  employee,  as  in  a  Missouri 
case,  where  the  bank  appointed  him  to  act  for  it  for  a  year, 
and  took  a  bond,  as  from  one  of  its  own  officers.^  This  is 
the  doctrine  also  in  England,  New  York,  Ohio,  Alabama, 
Indiana,  and  one  United  States  decision. 

Louisiana  on  the  same  facts  holds  the  bank  not  respon- 
sible. So  Massachusetts,  Maryland,  Mississippi,  Connecti- 
cut, Pennsylvania,    Georgia,   and  Iowa  hold.* 

In  New  York,  the  bank  is  liable  for  the  negligence  of  its 
notary  in  giving  notice  of  dishonor,  for  that  is  not  a  duty 
peculiarly  belonging  to  a  notary,  but  may  be  performed  by 
any  agent  of  the  bank;  but  for  default  in  anything  pertain- 
ing to  his  official  duty,  as  protest,  the  bank  is  not  liable.^ 

^  §  265.  Tiernan  v.  Commercial  Bank,  7  How.  (Miss.)  648  ;  Agricul- 
tural Bank  v.  Commercial  Bank,  7  Sm.  &  M.  (Miss.)  592;  Bowling  v. 
Arthur,  34  Miss.  41. 

2  Warren  Bank  v.  Suffolk  Bank,  10  Cush.  (Mass.)  582;  Citizens' 
Bank  v.  Howell,  8  Md.  530.  This  view  was  taken  in  Smedes  v.  Bank  of 
Utica,  20  Johns.  (N.  Y.)  372. 

8  Gerhardt  v.  Boatman's  Savings  Inst.,  38  Mo.  60 ;  Van  Wart  v. 
Woolley,  3  Barn.  &  C.  439;  Allen  v.  Merchants'  Bank,  22  Wend. 
(N.  Y.)  215;  Reeves  v.  State  Bank,  8  Ohio  St.  465;  Branch  Bank  v. 
Knox,  1  Ala.  148;  Bank  of  Mobile  v.  Huggins,  3  Ala.  206;  American 
Express  Co.  v.  Haire,  21  Ind.  4  ;  Taber  v.  Perrofc,  2  Gall.  565. 

*  Baldwin  v.  Bank  of  Louisiana,  1  La.  An.  13;  Hyde  v.  Planters'  Bank, 
71  La.  560.  See  Warren  Bank  v.  Suffolk  Bank,  10  Cush.  (Mass.)  582; 
Citizens'  Bank  v.  Howell,  8  Md,  530  ;  Bowling  v.  Arthur,  34  Miss.  41  ; 
East  Haddam  Bank  v.  Scovil,  12  Conn.  303 ;  Bellemire  v.  Bank  of  United 
States,  4  Whart.  (Pa.)  105;  May  v.  Jones,  88  Ga.  311  (1891);  First 
National  Bank  v.  German  Bank,  107  Iowa,  513. 

6  Allen  V.  Merchants'  Bank,  22  Wend.  (N.  Y.)  215 ;  Downer  v.  Madi- 

605 


§  265  THE   LIABILITY   OP    A    BANK. 

This  distinction  is  not  recognized  in  the  cases  cited 
above  from  Maryland  and  Louisiana,  and  probably  not  in 
Massachusetts.^ 

In  South  Carolina'''  and  in  New  Jersey  a  bank  is  held  re- 
sponsible for  its  notary/  and  in  Kansas^  a  sub-agent  was 
held  liable  for  its  notary's  default,  though  in  that  State 
there  is  no  liability  for  a  correspondent. 

In  the  United  States^*'  courts  and  in  Ohio,^^  a  bank  is 
liable  for  the  negligence  of  its  correspondent,  but  not  for 
the  default  of  a  notary,  for  he  is  an  independent  officer 
whose  duties  are  prescribed  by  law,  and  whom  the  bank 
must  employ.  The  bank  agrees  to  collect  if  possible;  and 
if  not,  "to  hand  it  to  a  reputable  notary  in  season.  We 
think  this  may  be  said  to  be  the  natural  import  of  the  act  of 
delivery  by  the  one  and  taking  by  the  other,  especially  in  a 
jurisdiction  where  the  notary  can  only  act  as  an  independent 
officer."  "The  bankers  were  no  more  liable  than  they 
would  have  been  for  the  unskilfulness  of  a  lawyer  of  re- 
puted ability  and  learning,  to  whom  they  might  have 
handed  the  notes  for  collection  in  the  conduct  of  a  suit 
brought  upon  them." 

In  Tennessee,  a  bank  is  not  responsible  for  the  neglect  of 
its  correspondent's  notary.^ 

Niccolls,  in  Illinois,  sent  to  Britton's  banking  firm  at 
Natchez,  Mississippi,  for  collection,  a  note  dated  at  Natchez, 


son  Co.  Bank,  6  Hill  (N.  Y.),    648 ;    Ayrault  v.  Pacific  Bank,  47  N.  Y. 
574. 

«  See  Warren  Bank  v.  Suffolk  Bank,  10  Cush.  (Mass.)  582,  and  Mass. 
Pub.  Stat.  c.  77,  §  22. 

T  Thompson  v.  Bank,  3  Hill  (S.  C),  77. 

*  So  held  where  notices  of  protest  had  an  indorsee's  name  "Darcey," 
instead  of  "  Davey."  Davey  v.  Jones,  42  N.  J.  Law,  28  (1880)  ;  Titus  v. 
Mechanics'  National  Bank,  35  X.  J.  Law,  588  (1871)  ;  Paterson  Bank  v. 
Butler,  7  Hal.  (N.  J.)  268. 

9  Bank  v.  Ober,  31  Kans.  599. 

10  Britton  v.  Niccolls,  104  U.  S.  757. 

"  Bank  v.  Butler,  41  Ohio  St.  519. 

12  Bank  of  Louisville  v.  First  National  Bank  of  Knoxville,  8  Baxter 
(Tenn.),  101  (1874). 
506 


LIABILITY   FOR  NOTARY.  §  266 

informing  the  firm  of  the  maker's  residence,  but  only  in- 
structing the  firm  to  cause  the  note,  if  not  paid  on  present- 
ment, to  be  protested,  and  notice  to  be  sent  to  the   u.  s. 
indorser.      The  firm  duly  put  the  note  in  the  hands    Nkcoiis!'' 
of  a  reputable  notary  at  Natchez,  who,  although    Bank  not  lia- 

•  T  1  1  •  1  .  ble  for  no- 
knowing  that  the  maker  resided  on  his  plantation  tary's  de- 
fifteen  miles  distant  and  had  no  place  of  business  in  p^onJ^ing 
Natchez,  merely  inquired  for  him  at  the  post-office,  the  law  of  the 

'  •'         ^  ^  ,      '     place  of  the 

city  hall,  and  court-house,  and,  not  finding  him,  collection, 
protested  the  notes  for  non-payment.  Held,  that  the  banking 
firm  was  not  liable  for  the  notary's  neglect  of  duty,  — 
the  Supreme  Court  of  Mississippi,  in  Bowling  v.  Arthur, 
34  Miss.  41,  holding  that  the  notary  is  the  agent  of  the 
holder.  ^^ 

§  266.  A  Bank  must  use  Due  Care  in  selecting  the  Notary.  — 
Ordinarily,  a  bank  which  has  to  employ  a  notary  public 
would  be  authorized  to  assume  that  any  person  bearing 
the  governmental  commission  of  office  was  a  proper  per- 
son to  employ.  It  has  been  held  that  this  official  char- 
acter is  prima  facie  evidence  of  satisfactory  care  in  selection.  ^ 

In  fact,  it  probably  amounts  to  this,  that  the  bank  is  war- 
ranted in  putting  confidence  in  a  public  officer  of  whom  it 
has  no  actual  knowledge,  without  making  that  especial  in- 
quiry about  him  which  it  would  be  bound  to  make  if  he 
was  simply  a  private  individual  bearing  no  credentials,  and 
unknown  to  the  bank  officers.  But  if  a  bank  knows  as  matter 
of  fact,  or  ought  to  know,  that  a  particular  notary  is  for  any 
reason  a  man  unfit  for  the  business  and  trust  reposed  in  him, 
the  committal  of  paper  to  his  hands  would  be  an  act  of  care- 
lessness and  negligence  in  the  performance  of  its  duty,  for 
the  results  of  which  it  could  be  held  to  answer.  The  stand- 
ard of  fitness  is  not  of  course  uniform  and  absolute;  we 
cannot  pretend  to  say  what  it  may  be  in  all  the  various 
States  of  the  Union,  but  we  have  some  knowledge  of  what  it 
is  in  Mississippi.  The  court  there  declared  that  it  was  not 
sufficient  proof  of  a  notary's  unfitness  to  show  that  he  was  a 

"  Britton  v.  Niccolls,  104  U.  S.  757  (1881). 
1  §  266.    Stacy  v.  Dane  County  Bank,  12  Wis.  629. 

507 


§  2G7  THE   LIABILITY   OF   A    BANK. 

man  of  habitually  dissipated  character;  but  that  it  must  be 
shown  ^Hhat  he  was  drunk  at  the  time  he  took  the  7iote."  ^ 

The  fact  tliat  a  notary  is  cashier  of  and  a  stockholder  in  a 
bank,  does  not  disqualify  him  for  protesting  a  bill  held  by 
the  bank.  3 

§  267.  Collection  Agency  Cases.  —  Before  considering  the 
question  of  a  bank's  liability  for  its  correspondent,  we  must 
distinguish  that  class  of  cases  in  which  an  agency  undertakes 
to  collect  in  distant  places,  through  its  own  permanent  em- 
ployees located  in  such  places,  and  who  are  as  truly  its  ser- 
vants under  its  control  and  in  its  pay  as  the  officers  or  regular 
employees  in  the  principal  location.  These  agencies  advertise 
in  this  style,  "Collections  made  in  all  parts  of  the  United 
States  and  Canada,"  and  do  the  business  for  a  compensation 
whose  proportion  to  the  sum  collected  and  work  done  will 
base  a  reasonable  inference  that  the  company  undertakes  the 
risk  as  a  matter  of  contract.  In  such  cases  the  company  has 
been  held  for  the  negligence  of  its  employees  or  agents  in 
other  places,  by  the  courts  ^  of  Pennsylvania,  Alabama,  Indi- 
ana, and  by  the  United  States  Supreme  Court. 

In  Hoover  v.  Wise,  C.  gave  certain  notes  to  such  an 
agency  (W.)  in  New  York.  W.  sent  them  to  lawyers  in 
Nebraska,  and  it  was  held  that  the  latter  were  agents  of 
W.,  not  of  C.  The  decision  rested  mainly  on  the  ground  of 
the  Pennsylvania  cases  quoted  in  the  last  note;  but  although 
distinguishable  easily  from  the  cases  on  the  general  ques- 
tion of  responsibility  for  a  correspondent,  the  court  referred 
to  some  of  the  cases  affirming  this  liability  in  New  York  and 
Ohio,  and  then  displayed  its  research  by  remarking,  "There 
are  doubtless  cases  to  be  found  holding  the  contrary  of  these 
views,  but  the  principle  they  decide  is  nevertheless  well  estab- 
lished," while  at  that  time  the  fact  was  that  the  overwhelm- 

2  Bowling  V.  Arthur,  34  Miss.  41. 

3  Moreland's  Assignee  v.  Citizens'  Savings  Bank,  97  Ky.  217  (1895). 

1  §  267.    Bradstreet  v.  Everson,  72  Pa.  St.  124  ;  Morgan  v.  Tener,  83 
Pa.  St.  305;  Lewis  v.  Peck  &  Clark,  10  Ala.   142  ;  Pollard  v.  Rowland, 
2  Blackf.  (Ind.)  22  (1826)  ;  Hoover  v.  Wise,  91  U.  S.  308.    See  Wilkinson 
V.  Griswold,  12  S.  &  M.  (Miss.)  669 ;  Cummins  v.  Heald,  24  Kans.  600. 
508 


LIABILITY   FOR   CORRESPONDENT.  §  268 

ing  authority  of  the   States,  backed  by  a  clear  opinion  of 
C.  J.  Marshall,  denied  that  principle. 

The  dissent  by  Justices  Miller,  Clifford,  and  Bradley  was 
very  strong,  showing  that,  even  if  the  principle  of  the  bank 
cases  cited  by  the  court  were  admitted,  it  did  not  apply  to 
the  case  at  bar;  for  when  a  note  is  given  to  a  bank  to  collect 
it  is  indorsed  to  the  bank,  and  made  payable  to  it,  so  that 
it  can  sue  in  its  own  name ;  but  here  the  note  was  not  in- 
dorsed to  W.,  who  therefore  had  no  control  of  the  suit, 
while  C.  could  exercise  full  control  in  regard  to  the 
proceedings. 

§  268.  Liability  for  a  Correspondent.  —  We  must  now  ap- 
proach a  topic  wherein  will  be  encountered  a  diversity  of 
opinion  which  is  utterly  irreconcilable.  Positions  directly 
adverse  to  each  other  have  been  assumed  with  much  obsti- 
nacy. Beyond  this  honest  discrepancy,  a  further  vexatious 
complication  is  introduced  by  the  use  in  some  decisions, 
delivered  by  high  tribunals,  of  such  dubious  language  that  it 
is  positively  impossible  to  know  precisely  upon  which  side  to 
rank  them,  or  even  whether  they  really  ought  to  be  ranked 
upon  either  side,  and  should  not  rather  be  formed  into  a 
group  and  class  by  themselves.  This  confusion  grows  out 
of  the  process  of  transmission  through  banks,  situated  in 
various  different  places,  of  paper  which  is  payable  in  a  town 
other  than  that  in  which  the  holder  resides,  and  in  which 
the  bank  of  deposit  transacts  business.  The  question  con- 
cerns the  duty  and  liability  of  the  several  banks  preceding 
in  the  chain  of  transmission  the  last  one  which  has  to  effect 
the  actual  collection.  Thus,  if  A.  living  in  Portland  holds 
a  note  payable  in  New  York  and  deposits  it  in  his  bank  in 
Portland  for  collection,  the  bank  in  Portland  may  be  sup- 
posed to  forward  it  to  its  coi'respondent  bank  in  Boston, 
which  in  turn  will  forward  it  to  its  correspondent  bank 
in  New  York  City,  where  finally  the  collection  is  to  be 
made.  The  question  then  is,  whether  or  not  the  Portland 
bank  has  so  far  fulfilled  and  discharged  its  duty  to  A.  by 
the  due  and  sufficient  transmission  of  the  paper  on  its  course 
for  collection  that  it  is  thereby  freed  and  absolutely  relieved 

509 


§  270  THE   LIABILITY    OP   A    BANK. 

from  all  liability  for  defaults  subsequently  occurring  in  Bos- 
ton or  in  New  York ;  or  whether,  on  the  other  hand,  the 
Boston  and  New  York  banks,  and  any  agent  employed  by 
the  last  bank  in  the  business  of  collection,  are  all  sub-agents 
of  the  Portland  bank,  in  such  a  sense  that  the  law  of  agency 
rendering  it,  as  principal,  liable  to  answer  for  any  and  all 
their  defaults,  will  govern  in  the  case. 

§  269.  Special  Agreement.  —  If  there  is  an  express  contract 
upon  the  matter  of  the  first  bank's  responsibility,  of  course 
the  question  will  be  governed  by  it,  and  if  the  character  of 
the  contract  and  the  consideration  is  such  as  to  indicate 
such  an  intent,  the  first  bank  will  be  held  liable,  even  in 
those  States  where  upon  the  ordinary  contract  it  is  not  held. 
For  example,  in  Pennsylvania,  if  a  bank  receives  a  reward 
for  collecting  beyond  the  expense,  and  mere  nominal  charge 
for  service  in  forwarding,  and  employs  a  Virginia  bank  to 
collect  the  note,  the  Pennsylvania  bank  will  be  responsible 
for  any  negligence  of  the  Virginia  bank.^ 

Where  a  collection  is  placed  in  the  hands  of  a  bank  with 
authority  to  employ  another  bank  to  collect  it,  the  second 
bank  becomes  the  sub-agent  of  the  customer  of  the  first,  for 
the  reason  that  the  customer  authorizes  the  employment  of 
such  agent  to  make  the  collection.  2     See  §  272  et  seq. 

The  exchange  which  is  usually  charged  by  banks  for  the 
transmission  of  money  from  one  place  to  another  is  not  a  suf- 
ficient consideration  to  support  an  implied  undertaking  to 
answer  for  the  default  of  the  correspondent  selected  to  make 
collections  for  customers  according  to  the  course  of  business 
of  banks.  ^ 

§  270.  Usage  may  determine  the  question.  If  the  law  has 
not  been  already  settled  by  judicial  determination,  so  as  to 
exclude  any  subsequent  evidence  of  usage  to  subvert  it,  the 
bank  may  absolve  itself  from  liability  for  the  acts  of  agents 
other  than  itself,  or  the  customer  may  fix  such  liability  upon 
the  bank,  by  showing,  respectively,  that  such  is  the  estab- 

1  §  269.    Mechanics'  Bank  v.  Earp,  4  Rawle  (Pa.),  384. 

2  Beach  v.  Moser,  4G  Pac.  202  (1S9G). 

8  First  National  Bank  v.  Sprague,  34  Neb.  318  (1892). 
510 


LIABILITY   FOR   CORRESPONDENT.  §  272 

lished  usage  and  understood  custom  in  the  place  where  the 
bank,  the  extent  of  whose  duty  and  liability  is  in  question, 
is  situated.  But  the  evidence  must  show  a  usage  having  the 
strictly  legal  traits ;  it  must  be  a  real  bona  fide  usage,  an 
actual  practice,  a  general  understanding,  not  the  mere  opin- 
ion of  either  merchants  or  bankers.^ 

§  271.  A  Bank  is  everywhere  held  liable  if  it  is  itself  negligent 
in  the  Selection  of  its  Correspondent.  —  See  chapter  preceding. 

"When  the  Bank  has  used  Due   Care,  and  the   Matter  is   not  de- 
termined by  Usage  or  Special  Agreement. 

§  272.  The  New  York  Rule  is  that  the  first  bank  is  respon- 
sible for  the  negligence  of  its  correspondent  and  its  agents ;  ^ 
they  are  agents  of  the  first  bank  (B.).     There  is   ,^  ,.^    ^. 

Jo  V       y  Modification 

no  privity  between  them  and  the  holder  (C),  and  of  New  York 
the  latter  cannot  hold  them  directly  except  he 
may  sue  the  correspondent  (M.)  for  money  had  and  re- 
ceived, in  case  M.  had  notice  of  B. 's  insolvency  before  he 
(M)  received  payment  on  the  note,  and  that  no  dealings  oc- 
curred between  M.  and  B.  that  could  constitute  M.  's  posses- 
sion of  the  note  a  hona  fide  holding  for  value  without  notice, 
and  that  C.  was  the  owner  of  the  note.^ 

The  New  York  rule  is  held^  in  England,  Ohio,  Indiana, 

1  §  270.  Allen  v.  Merchants'  Bank,  22  Wend.  (N.  Y.)  215  ;  Warren 
Bank  v.  Suffolk  Bank,  10  Cush.  (Mass.)  583  ;  Jackson  v.  Union  Bank, 

6  Har.  &  J.  (Md.)  146. 

1  §  272.  Allen  v.  Merchants'  Bank,  22  Wend.  (N".  Y.)  215;  Ayrault 
V.  Pacific  Bank,  47  N.  Y.  570  ;  Indig  v.  Brooklyn  City  Bank,  16  Hun 
(N.   Y.),  203.     See  Montgomery  Co.    Bank  v.   The   Albany  City  Bank, 

7  N.  Y.  459;  Bank  of  Clarke  County  v.  Gilman,  81  Hun  (N.  Y.),  486; 
St.  Nicholas  Bank  v.  State  National  Bank,  128  N.  Y.  26. 

2  Wicks  V.  Hatch,  62  N.  Y.  535 ;  Wilson  v.  Smith,  3  How.  763 ;  Strong 
V.  Stewart,  9  Heisk.  (Tenn.)  137;  Reeves  v.  State  Bank,  8  Ohio  St. 
465. 

8  Van  Wart  v.  Woolley,  3  Barn.  &  C.  439  ;  Mackersy  v.  Ramsays, 
9  C.  &  F.  818 ;  Reeves  v.  State  Bank  of  Ohio,  8  Ohio  St.  465 ;  American 
Express  Co.  v.  Haire,  21  Ind.  4;  Tyson  v.  State  Bank,  6  Blackf.  (Ind.) 
225 ;  Simpson  v.  Waldby,  63  Mich.  439  (30  N.  W.  199)  ;  Titus  v.  Mechan- 
ics' National  Bank,  35  N.  J.  Law,  588;  Stressguth  v.  National  German- 
American  Bank,  43  Minn.  50  ;  Exchange  National  Bank  v.  Third  National 

511 


§  27-4  THE   LIABILITY   OF   A    BANK. 

Michigan,  New  Jersey,  Minnesota,  and  by  the  United  States 
Supreme  Court. 

§  273.  Those  authorities  which  hold  that  the  bank  first 
receiving  the  paper  is  answerable  for  the  conduct  of  any 
Grounds  of  ^ud  all  the  subsequent  agents,  be  they  banks  or 
biHu^oftii'st  ii^taries,  base  their  decision  upon  the  old  and 
bank.  strict   principle   in  the   law   of   agency,    that   the 

first  agent  is  liable  for  the  acts  of  all  the  sub-agents  em- 
ployed by  him.  They  urge  that  the  bank  is  employed  to  per- 
form the  task  of  collection  in  any  manner  that  it  may  see  fit, 
trammelled  by  no  restrictions  or  directions  whatsoever  as  to 
the  persons  or  corporations  whose  services  it  shall  employ, 
if  it  does  not  itself  wish  to  attend  to  the  whole  transaction. 
This  task  is  declared  to  be  that  which  the  bank  undertakes 
to  do.  If  it  chooses  to  use  the  medium  of  sub-agencies,  it 
selects  those  which  it  prefers,  and  is  free  to  trust  them  more 
or  less,  and  to  instruct  them  as  it  chooses.  They  are  di- 
rectly its  own  agents  and  employees,  and  both  law  and 
justice  demand  that  it  should  answer  for  their  conduct  to 
its  own  principal.  New  York  (and  the  other  decisions 
affirming  the  liability  are  only  reflections  of  New  York 
light)  bases  its  ruling  upon  the  ground  that  a  co7itraet  to 
do  the  business  covers  all  the  means  employed,  and  upon 
the  assumption  that,  when  a  note  is  given  to  a  bank  to 
collect,  it  is  a  contract  to  do  the  whole  business  and  not 
merely  to  forward,  which  is  assuming  the  very  thing  to  be 
proved,  and  upon  no  argument  except  the  oft  exposed  fallacy 
of  "sufficient  reason,"  which  runs  thus:  "There  is  no  rea- 
son (known  to  me)  why  this  should  not  be  so,  therefore  it  is 
so,"  — which  simply  applies  to  the  universe  the  limitations 
of  the  mind  of  the  speaker.  (See  Mill's  System  of  Logic, 
p.  464,  and  compare  Senator  Verplanck's  argument  in  the 
leading  New  York  case  below.) 

§  274.    The  Massachusetts  Rule  is,^  that  when  the  first  bank 

Bank,  112  U.  S.  276;  Taber  v.  Perrot,  2  Gall.  565;  Hyde  v.  First  Na- 
tional Bank,  7  Biss.  156 ;  Kent  v.  Dawson  Bank,  13  Blatchf.  237. 

1  §  274.    Fabeus  v.  Mercantile  Bank,  23  Pick.  (Mass.)  330 ;  Dorches- 
512 


LIABILITY   FOR   CORRESPONDENT.  §  274 

transmits  the  note  with  proper  instructions  to  a  reputable 
and  proper  agent,  either  in  the  place  where  the  collection  is 
to  be  made,  or  in  the  place  nearest  thereto  where  it  has  a  cor- 
respondent or  agent  whom  it  deems  fit  to  employ  for  the  pur- 
pose of  forwarding,  it  has  done  its  duty,  and  is  not  responsible 
for  the  negligence  of  the  correspondent  or  its  agents. 

This  rule  is  adopted  in  Connecticut,^  Kansas,^  Illinois,* 
lowa,^  Maryland,^  Mississippi,'''  Missouri,^  Tennessee,^  Wis- 
consin, ^^  Louisiana,^!  Pennsylvania,  ^^  Kentucky,  ^^o  ]\Tq_ 
braska,^*  and  in  the  decision  of  the  United  States  Supreme 
Court  in  the  case  of  the  Bank  of  Washington  v.  Triplett,^^ 
C.  J.  Marshall  delivering  the  opinion,  and  in  the  strong 
dissent  of  Chancellor  Walworth  in  Allen  v.  Merchants' 
Bank  i*  in  New  York. 

ter  &  M.  Bank  v.  New  England  Bank,  1  Cush.  (Mass.)  177;  see  Darling 
V.  Stanwood,  14  Allen  (Mass.),  504. 

2  Lawrence  v.  Stonington  Bank,  6  Conn.  521 ;  East  Haddam  Bank  v. 
Scovil,  12  Conn.  303. 

3  Bank  i'.  Ober,  31  Kans.  599. 

4  ^tna  Ins.  Co.  v.  Alton  City  Bank,  25  111.  243;  Waterloo  Milling  Co. 
V.  Kuenster  &  Co.,  158  111.  2.59,  affirming  Waterloo  Milling  Co.  v.  Kuen- 
ster  &  Co.,  58  111.  App.  61.     See  §  287. 

^  Guelick  v.  National  Bank,  56  Iowa,  434. 

6  Citizens'  Bank  v.  Howell,  8  Md.  530 ;  Jackson  v.  Union  Bank, 
6  Ilarr.  &  J.  (Md.)  146. 

''  Tiernan  v.  Commercial  Bank,  7  How.  648 ;  Agricultural  Bank 
V.  Commercial  Bank,  7  Sm.  &  M.  (Miss.)  592 ;  Bowling  v.  Arthur,  34 
Miss.  41. 

^  Daly  V.  Butchers  &  Drovers'  Bank,  56  Mo.  94. 

9  Bank  of  Louisville  v.  First  National  Bank,  8  Baxter  (Tenn.),  101 ; 
Bank  v.  Cummings,  89  Tenn.  618  (1890).     See  §  287. 

10  Stacy  V.  Dane  Co.  Bank,  12  Wis.  629. 

11  Hyde  v.  Planters'  Bank,  17  La.  560 ;  Baldwin  v.  Bank  of  Louisiana, 
1  La.  An.  13. 

12  Merchants'  Bank  v.  Goodman,  109  Pa.  St.  422 ;  and  see  Mechanics' 
Bank  v.  Earp,  4  Rawle  (Pa.),  384,  and  Bellemire  v.  U.  S.  Bank,  4  Whart. 
(Pa.)  105. 

1-"  Farmers'  Bank  and  Trust  Co.  v.  Newland,  97  Ky.  470  (1895). 
i^"-  First  National  Bank  of  Pawnee  City  v.  Sprague,  34  Neb.  318  (1892.) 
'3  1  Pet.  (U.  S.)  25. 

14  22  Wend.  (N.  Y.)  215 ;  and  see  Smedes  v.  Bank  of  Utica,  20  Johns. 
(N.  Y.)  373. 

VOL.  I.  — 33  513 


§  275  THE   LIABILITY   OF   A    BANK. 

§  275.  First,  although  it  is  a  well-settled  rule  that  an 
agent  is  in  general  liable  for  the  sub-agents  employed  by 
him,  it  is  also  well  settled  that  there  is  an  excep- 
the  Mass.  tiou  to  tlic  rulc  whenever  there  is  authority,  ex- 
doctnne.  pressly  glvcn,  or  fairly  implied  from  the  usage  of 

trade,  or  the  exigencies  of  the  case,  to  employ  such  sub- 
agent.  ^ 

"If  there  exists  in  relation  to  the  business  a  known  and 
established  usage  of  substitution,  the  principal  would  be 
held  to  have  expected  and  authorized  such  substitution," 
and  "  a  substitute  appointed  by  an  agent,  who  has  this 
power  of  substitution,  becomes  the  agent  of  the  original 
principal,  and  may  bind  him  by  his  acts,  and  is  respon- 
sible to  him  as  his  agent. "  '^ 

Now  in  the  case  oE  collection,  the  usage  to  forward  to  a 
sub-agent  is  well  established,  and  the  parties  must  be  pre- 
sumed to  contract  in  reference  to  it.  The  customer  expects, 
or  ought  to  expect,  that  the  bank  will  pursue  the  ordinary 
course  of  business  in  such  matters;  this  usual  course  is  well 
known  to  be  simply  the  transmission  to  another  agent  in 
good  repute,  and  this  is  all  the  hank  or  the  customer  can  be 
supposed  to  contemplate  as  that  duty  of  which  the  accurate 
performance  is  guaranteed  by  the  corporation. 

Ordinarily,  when  there  is  any  commission  paid  for  collec- 
tion, it  is  a  very  small  one  ;  but  probably  in  the  great  majority 
Theconsid-  of  cascs  the  busiucss  is  wholly  gratuitous,  and  the 
wHi'noV'^  ^'^  consideration  is  only  that  slight  and  indirect  one 
inference^f  which  ariscs  from  the  anticipation  of  enjoying  for 
intent  to  as-     ^  fcw  davs  the  usc  of  the  money  collected  or  from 

sume  the  " 

risk.  the  manifestation  of  a  willingness  to  oblige  cus- 

tomers. Such  considerations  may  well  be  regarded  as  suQi- 
cient  for  the  mere  task  of  transmission;  but  it  is  impossible 
that  they  should  be  sufficient  to  sustain  an  agreement  to  be 
further  responsible  for  the  solvency  and  good  conduct  and 
thorough  performance  of  their  duties  on  behalf  of  all  subse- 
quent banks  and  notaries,  or  other  agents  whom  it  may  be 

1  §  275.    Story  on  Agency,  §§  201-214. 
^  1  Parsons  on  Contracts,  72,  73. 

614 


LIABILITY    FOR    CORRESPONDENT.  §  276 

necessary  to  employ.  Such  an  insurance  would  call  for  a 
high  premium.  It  is  incredible  to  suppose  that  the  bank 
for  a  very  small  possible  remuneration,  much  more  for  a 
wholly  contingent  return  in  any  shape,  assumes  so  great 
a  risk. 

In  cases  where  the  compensation  is  such  as  to  base  an 
inference  that  it  was  intended  to  cover  something  more 
than  the  mere  service  rendered,  or  where  there  is  no  clear 
authority  for  substitution,  the  contract  to  assume  the  risk 
may  be,  with  more  show  of  reason,  implied  by  the  law.  ^ 

To  this  it  may  be  added,  that  the  reasoning  of  the  affirma- 
tive cases  applies  as  well  to  a  notary  as  to  a  correspondent 
bank.  If  the  contract  to  collect  is  an  agreement  "  to  do  the 
husiness,^^  "to  employ  proper  means  by  whomsoever  used," 
then  a  bank  is  responsible  for  a  notary's  default;  and  yet 
this  is  denied  even  in  New  York,  the  stronghold  of  the 
affirmative,  upon  the  plea  that  a  notary  is  a  public  officer 
whose  duties  are  prescribed  by  law.  This,  however,  is  a 
mere  surface  distinction ;  a  bank  is  also  a  public  institu- 
tion, and  its  duties  are  just  as  truly  fixed  by  the  law,  and 
a  bank  is  no  more  obliged  to  select  any  paticular  notary 
than  it  is  to  choose  a  particular  bank  for  its  correspondent. 

§  276.  Discussion  of  the  Question  of  Liability  for  Correspond- 
ent. —  If  we  try  to  stand  off  and  take  a  comprehensive  view 
of  this  much  trodden  ground,  and  endeavor  to  distinguish 
the  footsteps  of  justice  from  those  of  other  things  that  have 
the  power  of  leaving  their  impressions  on  the  sands  of  time, 
it  will  be  clear  at  once,  that,  so  far  as  any  argument  can  he 
based  upon  the  principles  of  contract,  the  negative  must  re- 
ceive our  approbation.  i 

That  parties  contract  in  reference  to  established  usage 
affecting  the  sul)ject  matter,  that  the  intent  of  those  who 
make  the  agreement  is  to  govern,  and  that  this  intent  is  to 
be  collected  from  their  words  and  acts  viewed  in  the  light  of 
the  circumstances,  are  principles  too  nearly  and  plainly  re- 

8  See  the  agency  cases  above,  and  Bank  of  Kentucky  i\  Adams  Express 
Co.,  93  U.  S.  174;  Loomis  ly.  Simpson,  13  Iowa,  532;  Abbott  v.  Smith, 
4  Ind.  452  ;  Ellis  v.  Turner,  8  T.  R.  531. 

515 


§  276  THE   LIABILITY   OF   A   BANK. 

lated  to  justice  herself  to  allow  us  to  doubt  their  lineage  for 
a  moment. 

The  reasoning  of  §  275  seems  therefore  conclusive,  if  we 
confine  ourselves  to  an  a  posteriori  view  of  a  transaction  of 
the  class  we  are  considering  in  the  light  of  contract. 

(rt)  Turning  to  the  general  principles  upon  which  one 
may  be  justly  held  for  the  defaults  of  others,  aside  from 
any  contract  to  be  so  responsible,  we  have  to  note  that 
the  aim  of  the  law  is  to  secure  the  public  good  by  encour- 
aging and  developing  such  conduct  and  qualities  as  experi- 
ence shows  to  be  beneficial  to  the  community,  and  preventing 
and  exterminating  such  conduct  and  qualities  as  experience 
and  the  nature  of  things  show  to  be  detrimental  to  society. 
Thus,  good  faith,  prudence,  foresight,  increase  of  wealth, 
are  invaluable,  and  the  law  is  one  means  brought  to  bear 
by  the  social  body  upon  each  individual  to  secure  such  con- 
duct from  him  as  accords  with  those  qualities  and  objects, 
while  fraud,  imprudence,  lack  of  foresight,  and  waste  of 
wealth  in  any  individual  being  detrimental  to  others,  these 
others  in  the  shape  of  the  State  seek  through  law  to  repress 
these  qualities  in  the  individual,  and  to  prevent  conduct  of 
which  they  are  the  sources.  The  law  is  only  a  captain  in 
the  great  army  of  forces  warring  upon  human  savagery  and 
striving  to  elevate  the  race,  by  repression  and  elimination 
of  what  is  evil  in  it,  and  development  of  what  is  good  in  it. 
It  is  a  part  of  the  effort  put  forth  by  each  individual,  and  by 
each  combination  of  individuals,  to  control  all  other  things 
and  p£rsons  to  the  fulfilment  of  his  or  their  desires. 

In  the  case  of  class  legislation  good  and  evil  are  inter- 
preted in  reference  to  the  benefit  or  disadvantage  of  the 
ruling  class,  but  in  the  common  law  the  question  is  be- 
tween an  individual  and  the  whole  mass  of  the  community 
beside.  Now  if  the  evil  and  the  good  were  found  chemically 
pure,  if  there  were  no  gold  with  the  dirt,  if  a  man  of  impru- 
dence had  never  any  beneficial  quality  mingled  with  his  evil 
dispositions,  the  problem  would  be  simple,  the  blood  of 
society  could  be  purified  quickly  and  easily  by  exterminat- 
ing all  individuals  exhibiting  detrimental  qualities;  but  as 
516 


LIABILITY   FOR   CORRESPONDENT.  §  276 

this  is  not  the  case,  as  good  and  evil  are  mingled  in  each 
person,  there  arises  a  necessity  for  that  proportion  between 
repression  and  evil,  or  encouragement  and  good,  which  men 
call  justice;  for  if  care  is  not  taken  to  repress  an  individual 
only  in  proportion  to  the  evil  tendency  manifested,  the  re- 
pression acts  upon  his  good  qualities.  And  if  A.,  having 
certain  beneficial  qualities,  receives  more  encouragement 
than  B.,  having  equally  beneficial  qualities,  the  excess 
really  amounts  to  so  much  scope  and  encouragement  to  A.'s 
detrimental  qualities  as  well  as  his  good  ones. 

One  method  adopted  in  the  common  law  to  secure  this 
equivalence  betwen  repression  and  evil  is  like  one  of  those 
chosen  by  nature  in  the  development  of  life;  viz.  to  throw 
the  loss  arising  in  any  transaction  upon  the  one  who  has  in 
the  course  of  the  actions  producing  the  loss  manifested  in 
greater  degree  such  qualities  as  it  is  desirable  to  eliminate. 

This  is  imperfect;  for  in  case  both  A.  and  B.  have  been 
guilty  of  detrimental  contributory  conduct,  the  loss  should 
be  divided,  and  in  some  States  this  is  done  in  cases  of  negli- 
gence, but  usually  the  common  law  refuses  to  interfere  at  all 
when  both  parties  are  substantially  in  fault,  which  leaves 
the  loss  on  the  unlucky  one,  and  serves  in  many  cases  prac- 
tically to  enable  a  rascal  to  profit  by  his  badness,  and 
although  it  is  true  the  law  cannot  waste  time  and  money  to 
benefit  another  rascal,  still  it  might  very  well  refuse  to  allow 
either  one  to  retain  the  benefit,  i.  e.  consficate  it  for  the  pub- 
lic good. 

Now  apply  this  test  of  equivalence  to  the  question  of  the 
degree  of  responsibility  to  which  any  individual  can  be  justly 
held. 

If  B.'s  conduct  is  in  itself  neither  detrimental  nor  bene- 
ficial, in  an  appreciable  degree,  to  the  community,  as,  for 
example,  the  keeping  of  dangerous  wild  animals,  he  may 
very  properly  be  held  absolutely  for  all  loss  that  may  ensue 
to  C.  without  C's  fault,  whether  B.  was  careless  or  not. 
This  is  the  zero  line. 

If  B.'s  conduct  is  in  its  very  nature  detrimental,  then  in 
proportion  to  its  tendency  to  produce  evil  consequences,  and 

517 


§  276  THE  LIABILITY   OF  A   BANK. 

in  the  proportion  that  a  tendency  to  subsequent  evil  action 
is  manifested  by  such  conduct,  society  should  take  measures 
to  prevent  B.  from  producing  further  evil  individually,  or 
through  the  laws  of  inheritance,  and  thus  results  the 
criminal. 

If,  in  the  third  place,  B.'s  conduct  is  in  its  nature  bene- 
ficial, as  commercial' transactions  in  general  are,  but  in  the 
course  of  the  business  B.  makes  some  error  of  judgment,  or 
loss  occurs  through  the  neglect  or  fault  of  one  selected  by 
B.  to  aid  in  the  matter,  it  is  clear  that  the  law  of  equiva- 
lence or  justice  will  not  allow  B.  to  be  held  responsible  for 
a  degree  of  care  and  foresight  beyond  that  required  of  C.  in 
other  matters  of  business  alike  beneficial  in  their  nature.  It 
is  clearly  unjust  for  C.  and  his  class  to  say  to  B.  and  his 
class,  "  If  you  suffer  loss  from  my  lack  of  foresight  or  judg- 
ment, in  any  case  where  I  have  conducted  myself  as  a  man 
of  ordinary  care  and  prudence  would  in  the  management  of 
his  own  affairs  under  the  same  circumstances,  you  will  have 
to  bear  the  loss  yourself,  for  you  cannot  expect  me  to  be 
superior  to  the  average  in  my  business ;  but  if  we  suffer  loss 
from  your  error,  or  that  of  any  one  selected  by  you,  you  will 
have  to  answer  to  us  absolutely,  even  though  you  have  been 
more  careful  than  the  most  careful  of  men  usually  are  in 
their  own  business  of  similar  nature  and  danger."  A  per- 
fect fulfilment  of  the  law  of  equality  would  require  that,  if 
one  is  to  be  held  absolutely  responsible  for  the  result  of  their 
actions,  all  should  be.  If  one  is  to  be  held  only  to  such 
care  as  a  man  of  ordinary  prudence  and  foresight  exercises 
in  his  own  affairs  of  similar  moment  and  danger,  all  should 
be  required  to  come  up  to  the  same  standard,  and  no  one 
punished  for  not  going  higher. 

(6)  But  perfect  justice  is  unattainable ;  we  have  to  choose 
between  injustices,  and  it  is  never  safe  to  conclude  that  a 
certain  course  is  not  a  proper  one,  and  truly  the  most  just 
course,  because  we  are  convinced  it  does  not  perfectly  accord 
with  the  law  of  equality ;  we  must  further  inquire  whether 
the  alternate  course  does  not  involve  still  greater  injustice ; 
and  in  the  case  before  us,  the  law  may  very  properly  say  to 
518 


LIABILITY   FOR   CORRESPONDENT.  §  276 

B.,  Your  business  is  of  such  an  intricate  nature,  and  ex- 
tends over  so  wide  a  tGrritor}^  and  the  sources  of  our 
information  are  so  peculiarly  within  your  own  grasp,  that 
it  is  very  difficult  in  any  case  that  may  arise  to  determine 
the  question  whether  you  have  exercised  due  care  or  not, 
while  in  0. 's  case  it  is  a  much  simpler  question.  Practi- 
cally, therefore,  the  only  way  to  be  sure  of  your  exercising 
proper  care  is  to  make  you  responsible  any  way,  and  so  give 
you  the  strongest  motive  for  care,  which  rule,  although  it 
may  work  some  injustice  to  you,  is  like  to  work  less  injus- 
tice to  the  whole  community  than  an  arrangement  by  which, 
owing  to  the  difficulty  of  proving  your  negligence,  you  would 
often  escape  the  consequences  of  actual  fault;  while  in  C. 's 
case  such  a  departure  from  the  exact  line  is  not  necessary, 
for  the  relative  simplicity  of  the  problem  in  his  case  makes 
it  easy  to  apply  the  standard. 

Moreover,  litigation  is  expensive,  and  it  must  be  one 
object  of  the  law  to  waste  as  little  as  possible  of  the 
wealth  of  the  community  in  judicial  inquiry.  Now  the 
degree  of  care  which  a  prudent  man  would  exercise  in  your 
business  is  by  its  nature  and  importance  very  high,  and 
though  strict  justice  to  you  would  not  warrant  imposing 
an  absolute  responsibility  on  you,  yet  as  we  have  to  choose 
between  this  slight  injustice  to  you  of  putting  the  line  of 
your  liability  a  little  higher  than  that  of  your  neighbors, 
and  the  greater  injustice  to  the  community  of  exposing  them 
to  tedious,  inconvenient,  and  expensive  litigation,  first  here 
to  determine  the  question  of  your  care  and  then  perhaps  in 
some  distant  city  with  which  the  plaintiff  has  no  connec- 
tion, we  are  compelled  to  select  the  first  course,  Avhich, 
though  it  puts  a  pressure  upon  you  beyond  the  equal  line, 
has  the  merit  of  being  a  pressure  in  the  direction  of  prog- 
ress and  the  development  of  still  greater  prudence  and 
foresight  (both  on  your  part  and  on  the  part  of  your  cor- 
respondents, for  they  can  much  more  surely  be  held  to 
account  by  you  than  by  C),  while  the  other  path  would  lead 
to  the  encouragement  of  fraud  and  the  waste  of  time  and 
money  in  intricate  inquiry. 

519 


§  276  THE   LIABILITY   OF   A    BANK. 

(<?)    Or,    coming   again   upon   contract   ground,    although 
looking  hack   at  a  completed  transaction,   it  is  impossible 
to  conclude  that  the  parties  intended  that  the  bank  should 
assume  the  risk  of  losing  the  amount  of  the  note  or  bill,  yet 
if  we  turn  and  look  forward,  considering  the  effect  of  the 
decision  to  be  given  not  as  to  the  justice  between  the  parties 
in  the  case  giving  rise  to  the  litigation,  but  as  to  the  future 
of  the  business,  we  may  well  say  to  the  bank,  On  the  whole 
the  best  and  most  convenient  arrangement  in  such  matters 
would  be  that  you  should  take  the  responsibility,  and  make  a 
reasonable  charge  for  your  risk ;  you  have  intimate  relations 
with  these  persons  selected  by  you  in  distant  cities,  you  can 
much  more  easily  hold  them  to  account,  than  a  private  per- 
son here ;  your  knowledge  of  your  correspondents  is  an  in- 
tricate matter,  and  the  question  of  your  care  a  difficult  one, 
which  to  save  cost  it  is  well  to  exclude  from  the  law;  there- 
fore, unless  you  make  an  express  agreement  to  the  contrary, 
we  shall  in  future  consider  this  to  be  the  law,  and  you  can 
conduct  yourself  accordingly.       To  accomplish  our  purpose 
of  establishing  this  as  the  law,   we  must  decide  this  case 
against  you  for  a  precedent,   although,   if  we  had  not  the 
future  in  mind,  but  only  decided  upon  the  facts  of  this  case, 
the  judgment  would  be  the  other  way. 

This,  we  believe,  makes  pretty  clear  the  sources  of  the 
conflict  on  this  question,  and  while  it  furnishes  a  solid 
basis  for  the  New  York  rule  in  reference  to  the  future 
good  of  society  upon  considerations  probably  felt  by  the 
judges  in  New  York  and  in  the  United  States  Supreme 
Court  (though  the  actual  grounds  of  their  decision  as  ex- 
pressed by  them  are  not  put  in  any  such  light  as  to  justify 
it),  the  discussion  discloses  the  invincible  reasoning  of  the 
negative  if  the  eye  is  turned  backward. 

The  same  arguments  apply,  though  with  less  force,  to  the 
case  of  a  notary. 

The  importance  of  uniformity  makes  this  question  seem 
eminently  fitted  to  test  the  value  of  the  suggestion  in  the 
last  paragraph  of  the  Preface  to  this  edition. 
520 


LIABILITY    FOR    CORRESPONDENT.  §  277 

§  277.  Cases  afSrming  the  Liability  of  a  Bank  for  the  Negligence 
of  its  Correspondent  Bank.  —  England. —  In  Van  Wart  v.  Wool- 
ley,i  — the  original  foundation  of  the  aihrmance  of  the  lia- 
bility of  the  first  bank  so  far  as  it  rests  on  authority,  — 
G.  in  America  drevv  a  bill  on  D,  in  London,  and  A.  sent 
it  to  C.  in  Birmingham  on  account  of  purchases  made  by  C. 
in  England  for  A.  in  America.  C.  put  it  into  the  hands 
of  B.,  his  bankers  in  Birmingham,  for  collection,  who  for- 
warded it  to  L.,  their  correspondent  in  London.  D.  refused 
to  accept,  and  L.  failed  to  protest  or  give  notice  of  non- 
acceptance.  C.  sued  B.  for  the  negligence  of  L.  Abbot, 
C.  J.,  said:  "Upon  this  state  of  facts,  it  is  evident  that 
the  defendants  (who  cannot  be  distinguished  from  and  are 
answerable  for  their  London  correspondent)  have  been  guilty 
of  a  neglect  of  the  duty  which  they  owed  to  their  employer, 
and  from  whom  they  received  a  pecuniary  reward  for  their 
services."  It  will  be  noticed  that  this  is  a  mere  assertion  of 
the  liability,  not  an  argument  for  it,  and  is  entitled  only 
to  the  weight  naturally  attaching  to  any  utterance  of  the 
learned  justice.  If  it  were  the  decision  of  a  schoolboy  it 
would  be  valueless,  for  it  lacks  the  innate  force  of  reason. 
And  when  we  go  further  into  the  case,  we  shall  find  that  the 
judge's  own  arguments  negative  his  conclusion  upon  this 
first  point.  Another  question  in  the  case  was  lioiv  much  C. 
could  recover  from  B.  If  C.  had  so  acted  as  to  relieve  A. 
from  liability  to  him  on  the  oi-iginal  debt  for  which  the  bill 
was  sent,  C.  was  damaged  to  the  full  amount  of  the  draft ; 
but  if  he  still  had  his  remedy  against  A.  on  the  debt,  he  was 
damaged  only  by  the  delay. 

(a)  The  court  said  C.  had  not  so  treated  the  draft  as  to 
absolve  A.  He  could  not  have  been  expected  to  present  the 
bill  himself.  ^'  It  must  have  been  understood  that  he  was  to  do 
this  through,  the  medium  of  some  other  person.  He  employed 
for  that  purpose  persons  in  the  habit  of  transacting  such  busi- 
ness for  himself  and  others,  and  upon  whose  punctuality  he 
might  reasonably  rely.  In  doing  this,  we  think  he  did  all  that 
was  incumbent  upon  him  as  between  him  and  A.  ;  that  he  is 
1  §  277.    3  Barn.  &  C.  439. 

521 


§  278  THE   LIABILITY   OF   A   BANK. 

personally  in  no  default  as  to  them,  and  is  not  answerable 
to  them  for  the  default  of  the  persons  whom  he  employed 
under  such  circumstances."  Now  A.  had  sent  the  bill 
without  indorsing  it,  and  was  therefore  not  entitled  to 
notice  as  indorser,  and  the  two  questions  in  the  case  were 
therefore  technically  somewhat  different;  but  fundamentally 
both  questions  amounted  simply  to  this:  Shall  a  person  (X.) 
be  held,  in  the  absence  of  express  agreement,  to  liability  to 
M.  for  loss  occasioned  to  him  by  the  negligence  of  another, 
not  the  servant  of  X.,  when  M.  knew  that  by  the  course  of 
business  and  usage  of  trade  X.  would  have  to  employ  some 
one,  and  X.  has  used  due  care  in  the  selection  of  such 
person  ? 

If  the  reason  given  in  Italics  was  sufficient  to  convince  the 
judge  that  substantial  justice  required  him  to  deny  such  lia- 
bility in  the  relation  between  C.  and  A.,  should  he  not  have 
at  least  given  some  reason  why  the  same  decision  was  not 
rendered  as  to  the  relation  between  C.  and  B.,  where  in  the 
nature  of  things  the  same  argument  applies  ? 

{b}  However  void  of  expressed  reason  Van  Wart  v.  Woolley 
is,  it  is  no  doubt  law  in  England.  In  Mackersy  v.  Ramsays,^ 
Lord  Cottenham  said:  "If  there  was  any  negligence  in  the 
conduct  of  the  parties  actually  employed  to  receive  the 
money,  it  could  only  affect  those  by  whom  they  were  so 
immediately  employed,  for  certainly  they  were  not  the 
agents  of  the  customer"  of  the  first  bank. 

§  278.  New  York.  —  The  next  case  in  line  is  that  of  Allen 
V.  Merchants'  Bank.i  ^  ]^\\\  of  exchange  payable  at  a  dis- 
tant place  was  deposited  in  the  defendant  bank  for  collec- 
tion. The  bank  forwarded  it  to  a  bank  in  that  place;  which 
second  bank  put  it  into  the  hands  of  a  notary  to  present  for 
acceptance.  His  failure  to  give  notice  of  the  refusal  to  ac- 
cept caused  a  loss.  The  first  trial  was  in  the  Supreme  Court, 
and  there  it  was  said  that  the  defendant  bank  undertook  only 
to  forward  to  proper  parties  for  collection;  that  if  the  bank 

2  Mackersy  v.  Ramsays,  9  C.  &  F.  818. 

1  §  278.    15  Wend.  (N.  Y.)  482  (Supreme  Court)  ;  22  Wend.  (N.  Y.) 
215  (reversal  in  Court  of  Errors). 
522 


LIABILITY   FOR   CORRESPONDENT.  §  278 

to  which  it  forwarded,  or  the  notary  employed  by  that  bank 
or  other  subsequent  party,  committed  a  default,  the  deposi- 
tor must  look  to  them ;  they  became  his  agents  directly,  and 
could  be  held  by  him;  but  this  defendant  bank  was  not  re- 
sponsible to  him  for  what  happened  after  the  forwarding. 
The  cause  was  carried  by  appeal  before  the  Court  of  Errors, 
and  the  decision  of  the  Supreme  Court  was  there  reversed. 
But  it  was  reversed  by  a  small  majority ;  fourteen  senators, 
as  we  understand  the  report,  voting  for  the  reversal,  and  ten 
being  in  favor  of  sustaining  the  decision  of  the  lower  court. 
The  case  excited  much  interest,  and  all  the  arguments  which 
could  be  conceived  on  behalf  of  either  side  were  gathered 
and   put    forward    in    their   most   forcible    shape.      Senator 
Verplanck  delivered  the  opinion  on  behalf  of  the  majority. 
Chancellor  Walworth  spoke  the  views  of  the  minority.     A 
cause  so   thoroughly    considered    was    regarded    as    conclu- 
sively settling  the  law  in  the  State  of  New  York.     Efforts 
were  made  in  subsequent  cases  to  obtain  an  overruling,  but 
they  were  of  no  effect.     All  subsequent  cases  ^  have  con- 
sistently upheld  the  doctrine  of  Senator  Verplanck  and  his 
thirteen  coadjutors,  and  the  question  can  be  no  longer  con- 
sidered an  open  one  in  New  York.     Though  it  should  per- 
haps be  added,  that  some  eminent  judges  —  while  they  have 
stated  that  they  considered  the  question  as  res  adjudicata, 
which  it  did  not  lie  with  them  again  to  open  —  have  used 
language  which  was  doubtless  intended  to  intimate  that  the 
adjudication  was  not  wholly  satisfactory  to  them. 

(a)  Senator  Verplanck  cites  Van  Wart  v.  Woolley  as 
authority,  and  pushes  aside  Washington  Bank  v.  Triplett, 
as  being  the  case  of  an  express  contract  for  transmission 
only,  and  not  for  collection,  which,  however,  we  shall  see, 
was  not  really  so. 

By  way  of  reasoning,  the  senator  remarks  that  a  mere 

2  Downer  v.  Madison  County  Bank,  6  Hill  (X.  Y.),  648  (by  implica- 
tion, supports  22  Wend.  215)  ;  Mont2;omery  County  Bank  v.  Albany  City 
Bank,  and  Montgomery  County  Bank  v.  Bank  of  State  of  New  York, 
7  N.  Y.  459;  Commercial  Bank  v.  Union  Bank,  19  Barb.  (X.  Y.)  391  ; 
1  Kern.  (N.  Y.)  203. 

623 


§  278  THE   LIABILITY   OP   A   BANK. 

representative  agency  ceases  with  the  personal  acts,  but 
an  agency  to  do  the  business  covers  all  the  means  em- 
ployed, and  there  is  no  reason  to  consider  a  deposit  for 
collection  in  another  State  as  less  an  undertaking  to  do 
the  business  than  one  to  collect  in  the  same  town;  and 
surely  a  bank  is  not  to  be  relieved  from  responsibility  for 
the  neglect  of  its  teller  in  New  York  City  on  the  ground  that 
he  was  carefully  selected,  although  the  customer  knew  the 
bank  must  collect  through  agents. 

(6)  In  this  matter  the  senator  fails  to  distinguish  between 
cases  where  the  one  employed  is  the  servant  or  permanent 
employee  of  the  bank,  and  cases  where  the  person  employed 
acts  independently. 

In  the  case  of  a  servant,  the  law  of  to-day  inherits  from 
the  times  of  slavery  the  rule  that  holds  the  master  respon- 
sible, and  it  is  too  firmly  fixed  to  be  easily  overturned;  but 
that  does  not  justify  extension  of  such  liability  to  cases  not 
within  the  iron  rule  of  precedent,  unless  a  good  reason  can 
be  found  for  so  doing. 

Assuming  that  a  contract  to  collect  through  a  corre- 
spondent is  not  a  case  of  personal  agency,  but  an  agree- 
ment to  do  the  business  that  "covers  all  the  necessary 
and  proper  means  for  the  accomplishment  of  the  object, 
by  whomsoever  used  or  employed,"  is  begging  the  very 
question  in  dispute.  Beside,  this  language  would  cover 
notaries  as  well  as  any  other  "means,"  and  yet,  as  we  shall 
see,  authority  is  almost  in  unison  that  the  bank  is  not  re- 
sponsible for  the  negligence  of  a  notary  in  respect  to  demand 
and  protest,  for  he  is  an  independent  agent  tvJiose  duties  are 
prescribed  hy  law,  and  the  hank  has  done  all  in  its  poiver  toivard 
the  undertakiny  when  it  selects  a  notary  with  reasonable  care. 

So  also  is  a  correspondent  bank  an  independent  agent, 
whose  duties  are  just  as  truly  prescribed  by  law ;  and  if  it 
be  said  the  notary's  good  conduct  is  secured  by  official  bond, 
the  answer  is,  that  this  is  not  the  ground  of  holding  the 
bank  free,  for  in  some  States,  Massachusetts  for  example, 
where  the  bank  is  not  held  for  the  negligence  of  its  notary, 
no  bond  is  required;  and  even  if  this  were  the  ground,  a  cor- 
524 


LIABILITY   FOR    CORRESPONDENT.  §  280 

respondent  bank  is  probably  on  the  average  fully  as  respon- 
sible financially  as  a  notary  and  his  sureties. 

The  senator's  argument  seems  wofully  deficient  in  that  it 
takes  no  note  of  the  element  of  control  in  determining  lia- 
bility, and  in  that  it  is  mere  assertion,  and  involves  the 
fallacy  of  "Sufficient  Reason"  (see  Mill's  System  of  Logic, 
p.  464),  that  because  he  sees  no  reason  why  a  certain  thing 
should  not  be  so,  therefore  it  is  so,  and  clashes  with  the 
whole  force  of  the  law  as  to  notaries. 

§279.  Ohio. — The  court  in  Ohio  acknowledged  itself, 
after  a  review  of  some  of  the  chief  authorities,  to  be 
"rather  bewildered  by  the  conflict  than  aided;" 
but  considering  the  question  an  open  one,  it  pre- 
ferred, on  the  whole,  to  follow  the  principle  finally  adopted 
in  New  York.i  This  court  also  took  the  ground  of  the  House 
of  Lords  in  Mackersy  v.  Ramsays,  though  here  there  was  no 
such  special  agreement  as  to  the  time  when  credit  was  to  be 
given  to  the  owner  as  there  had  been  in  that  case.  They  say 
that  payment  to  the  collecting  bank  is  payment  to  the  first 
bank,  and  so  soon  as  the  payment  is  received  by  such  col- 
lecting bank  the  first  bank  becomes  at  once  a  debtor  to  the 
owner  of  the  paper  to  that  amount. 

§  280.  United  States  Cases.  —  The  undertaking  to  collect 
is  not  merely  a  contract  to  send  to  a  suitable  agent,  but  is  an 
undertaking  to  respond  for  any  default  of  the  agent  selected.^ 
In  The  Exchange  National  Bank  v.  The  Third  National 
Bank,  the  United  States  Supreme  Court  decided  to  follow 
the  New  York  rule.  The  court  said:  The  bank's  "under- 
taking is  to  do  this  thing,  not  merely  to  procure  it  to  be 
done.  In  such  a  case,  the  bank  is  held  to  agree  to  an- 
swer for  any  default  in  the  performance  of  its  contract,  and 
whether  the  paper  is  to  be  collected  in  the  place  where  the 
bank  is  situated,  or  at  a  distance,  the  contract  is  to  use  the 
proper  means  to  collect  the  paper,  and  the  bank,  by  employ- 
ing sub-agents  to  perform  a  part  of  what  it  has  contracted  to 
do,  becomes  responsible  to  its  customer." 

1  §  279.   Reeves  v.  State  Bank,  8  Ohio  St.  465. 
1  §  280.    Kent  v.  Dawson  Bank,  13  Blatchf.  237. 

625 


§  280  THE    LIABILITY    OF    A    BANK. 

The  nature  of  the  contract  is  the  test.  If  it  is  for  imme- 
diate service  of  the  agent  and  for  his  faithful  conduct  as 
representing  his  principal,  the  responsibility  ceases  with  the 
limits  of  the  personal  service  undertaken,  but  where  the  con- 
tract looks  mainly  to  the  thing  to  be  done,  and  undertakes 
for  the  due  use  of  all  proper  means,  the  responsibility  ex- 
tends to  all  necessary  and  proper  means,  by  whomsoever 
used. 

Whenever  the  agency  is  an  undertaking  to  do  the  busi- 
ness, the  original  principal  may  look  to  the  immediate 
contractor  with  himself,  and  is  not  obliged  to  look  to 
inferior  or  distant  under-contractors  or  sub-agents  when 
defaults  occur  injarious  to  his  interests.  "On  any  other 
rule  no  principal  contractor  would  be  liable  for  the  de- 
fault of  his  own  agent,  where  from  the  nature  of  the  busi- 
ness it  was  evident  that  he  must  employ  sub-agents." 

(a)  This  is  simply  the  New  York  decision  over  again, 
Senator  Verplanck  verbatim  to  a  great  extent,  and  includes 
all  his  fallacies  and  some  others,  as  we  shall  see. 

The  last  sentence  quoted  and  in  fact  the  whole  opinion 
utterly  ignores  the  well  settled  rules  of  law,  that  where  an 
agent  has  authority,  either  expressly  given,  or  implied  from 
the  usage  of  trade,  or  the  course  of  his  own  dealings,  or  from 
the  exigencies  of  the  case,  to  employ  a  sub-agent,  and  does  so 
employ  one  who  is  tiot  his  own  servant,  there  is  a  privity  be- 
tween the  sub-agent  and  the  principal,  and  the  agent  is  not 
responsible  for  the  neglect  or  misconduct  of  the  sub-agent, 
unless  by  him  directed  or  ratified. 

The  parties  to  a  contract  are  presumed  to  contract  in 
reference  to  well  established  usage,  in  this  particular  as 
in  others, 2  The  very  question  is  whether  the  contract  to 
collect  can  be  fairly  construed  to  be,  by  the  understanding 
of  the  parties,  an  agreement  that  the  first  bank  shall  per- 
sonally or  by  its  servants  do  the  collecting  in  the  distant 
city,  or  whether,  considering  that  the  usage  of  trade  is  uni- 
versal and  well  established  lo  send  the  paper  to  some  corre- 
spondent bank  entirely  independent  of  the  first,  and  not  its 
2  Story  on  Agency,  §§  201,  217  a, 

526 


LIABILITY    FOR    CORRESPONDENT.  §  280 

servant  any  more  than  a  laAvyer  is  the  servant  of  his  client, 
and  considering  that  no  compensation  is  taken  by  the  first 
bank  at  all  commensurate  with  such  a  risk  as  that  of  loss 
by  negligence  of  the  sub-agents,  it  is  not  fairer  to  construe 
the  contract  intended  to  be  simply  one  of  transmission;  and 
if  so,  then  the  question  arises.  Is  there  good  reason  on  any 
other  grounds  for  extending  the  liability  of  the  first  bank 
beyond  the  consequences  of  its  oivn  lack  of  due  care  and  that 
of  its  servants  ? 

The  court  does  not  give  any  reason  for  its  decision  that 
will  stand  analysis  for  a  moment;  it  merely  says,  if  it  is  a 
contract  to  do  the  whole  business,  it  is  responsible  for  the 
sub-agents  it  emplo}S  to  do  part  of  what  it  has  contracted  to 
do,  and  then  assumes  that  it  is  such  a  contract,  whereas  all 
the  sense  of  the  matter  is  that  the  bank  docs  not  employ  the 
sub-agent  to  do  part  of  what  it  contracted  to  do  itself,  but 
that  in  the  light  of  usage  the  agreement  was  only  to  employ 
some  sub-agent  to  do  that  part  of  the  business. 

(h)   How  very  tissuey  the  opinion  is  we  shall  see  still  more 
clearly  on  noticing  the  manner  in  which  it  treats   Bank  of 
Washingon  v.   Triplett,  saying  of  it,   "The  question  under 
consideration  (here)  was  not  presented   in  1  Pet.    25;  for 
although  the  defendant  bank  in  that  case  was  held  to  have 
contracted  directly  with  the  holder  of  the  bill  to  collect  it, 
the  negligence  alleged  was  the  negligence  of  its  own  officers 
in  the  place  where  the  bank  was  situated."     But  on  turning 
to  the  Triplett  case  we  find  the  question  was  pre-    ^^^^^^ 
sented,    and  necessarily  presented,   and   was   de-    Washinfrton 
cidcd  clearly  against  the  decision   in   Exchange 
Bank  v.   Third   National   Bank,   and   the   court,   perhaps   in 
order  to  avoid  appearing  to  overrule  so  clear  a  decision  of 
C.  J.  Marshall,  disposes  of  it  in  the  above  rather  mislead- 
ing way. 

The  Bank  of  Washington,  the  defendant,  was  the  corre- 
spondent bank,  and  being  sued  by  Triplett,  the  owner  of  the 
draft,  who  had  given  it  to  the  Mechanics'  Bank  to  collect, 
the  first  question  necessarily  was  whether  the  Washington 
Bank  was  the  agent  of  the  Mechanics'  Bank  or  of  Triplett, 

527 


§  280  THE   LIABILITY   OF   A   BANK. 

for  agents  are  not  liable  for  nonfeasance  or  omissions  except 
to  their  own  principals;^  the  matter  was  one  of  contract, 
and  privity  was  necessary  between  Triplett  and  Bank  of 
Washington  in  order  to  hold  the  latter. 

(c)  The  defendant  in  fact  insisted  that  there  was  no 
privity  between  the  holder  and  itself,  that  it  was  not  the 
agent  of  Triplett  but  of  the  Mechanics'  Bank,  and  the  court 
said,  "The  deposit  of  a  bill  in  one  bank,  to  be  transmitted 
for  collection  to  another,  is  a  common  usage  of  great  public 
convenience,  the  effect  of  which  is  well  understood.  This 
transaction  was  unquestionably  of  that  character.  The  cus- 
tom to  indorse  a  bill  put  in  bank  for  collection  is  universal, 
and  the  Bank  of  Washington  had  no  more  reason  for  suppos- 
ing that  Triplett  had  ceased  to  be  the  real  holder  from  such 
indorsement  (in  blank)  than  for  supposing  that  the  cashier 
of  the  Bank  of  Washington  had  become  the  real  holder  by 
the  indorsement  to  him  (by  the  Mechanics'  Bank),  It  is 
the  customary  proceeding  for  collection  in  such  cases.  .  .  . 
The  court  is  decidedly  of  the  opinion  that  the  Bank  of  Wash- 
ington, by  receiving  the  bill  for  collection,  became  the  agent 
of  Triplett." 

(d)  We  see  that  C.  J.  Marshall  uses  the  words  "  for  trans- 
mission "  and  "for  collection"  interchangeably  in  regard  to 
the  same  transaction ;  and  indeed  the  facts  of  this  case  were 
the  same  as  in  all  the  other  cases,  and  the  use  of  the  word 
"transmission"  merely  expresses  the  view  the  court  takes 
of  the  facts,  and  we  see  that  the  court  does  emphatically  de- 
clare the  correspondent  bank  to  be  the  agent  of  the  holder. 
So  that  Exchange  Bank  v.  Third  National  Bank  really  over- 
rules C.  J.  Marshall,  and  with  no  reason  expressed  that  will 
bear  the  light,  though  it  is  probable  the  judges  had  some  rea- 
son which  did  not  shape  itself  into  words. 

The  cases  are  rather  unsatisfactory.  The  United  States 
is  based  on  New  York,  and  New  York  on  Van  Wart  v. 
Woolley,  plus  fallacy,  with  probably  a  feeling  of  public  con- 
venience and  policy  which  did  not  find  expression. 

8  Story  on  Agency,  §  130. 
528 


LIABILITY   FOR   CORRESPONDENT.  §  283 

Cases  Denying  the  Liability   of  a  Bank  for  the  Negligence   of 
its   Correspondent. 

§  281.  United  States.  —  The  authority  of  Chief  Justice 
Marshall  rests  upon  this  side  of  the  question;  see  his  deci- 
sion in  Bank  of  Washington  v.  Triplett,^  discussed  above, 
§  280  c. 

§  282,  New  York.  —  Although  the  actual  decision  was, 
by  four  votes  out  of  twenty-four,  that  the  first  bank  shall  be 
liable,  yet  the  weighty  dissent  of  Chancellor  Walworth  is 
entitled  to  notice  on  this  side  of  the  question.  His  argu- 
ments are,  — 

(1)  That  there  is  no  consideration  taken  by  the  principal 
bank  beyond  the  exchange  and  expenses  of  negotiation;  often 
the  whole  labor  and  expense,  except  the  mere  exchange,  is 
borne  by  the  bank  in  order  to  draw  business,  and  there  is  no 
consideration  taken  to  cover  the  risk  of  loss  of  the  whole 
amount  of  the  paper  by  the  negligence  of  a  correspondent, 
as  it  is  certainly  reasonable  to  suppose  there  would  be. if  any 
such  risk  was  contemplated  by  the  parties. 

(2)  The  loss  should  fall  on  the  owner,  who  has  impliedly 
authorized  the  employer  of  a  sub-agent,  by  entering  into  a 
contract  in  the  performance  of  which  such  employment  of  a 
sub-agent  is  an  established  usage,  and  not  providing  against 
the  inference  of  law  that  he  contracted  in  reference  to  such 
usage  by  any  express  term  in  his  contract. 

§  283.  Pennsylvania.  — ^In  Pennsylvania  the  law  is  strongly 
stated  against  the  liability  of  a  bank  for  its  correspondent. ^ 

"A  bank  with  which  a  check  is  deposited  by  a  customer 
for  collection,  under  an  agreement  that  the  depositor's  re- 
sponsibility as  indorser  is  to  continue  until  payment  is  ascer- 
tained by  the  bank,  is  bound  to  transmit  such  ciieck  to  an 
independent  agent  for  collection,  with  instructions  to  present 
the  same  for  payment,  and  if  payment  be  refused,  to  have 
the  same  protested  and  returned  at  once." 

The  agreement  to  transmit  for  collection  is  a  contract  be- 

1  §  281.    1  Tefc.  25. 

1  §  283.  :Mercliant3'  National  Bank  v.  Goodman,  109  Pa.  St.  422. 
VOL,  I.  —  34  529 


§  283  THE   LIABILITY    OF   A   BANK. 

tween  the  bank  and  its  customer;  the  valuable  considera- 
tion which  supports  the  agreement  as  a  contract  is  the  use  of 
the  money  to  be  collected  by  the  bank  as  long  as  it  shall  be 
allowed  to  remain  in  their  hands  after  it  is  collected.  This 
binds  the  collecting  bank  to  do  all  that  is  incumbent  on  them 
to  do ;  and  that  entire  duty,  as  we  have  said,  is  discharged 
when  the  check  or  draft  is  transmitted  to  a  responsible  sub- 
agent  to  collect  the  money.  The  agent  to  whom  the  instru- 
ment is  sent  to  make  demand  for  payment  then  becomes  the 
agent  of  the  depositor  or  indorser,  and  is  liable  to  such 
depositor  for  loss  arising  from  failure  on  his  part  to  per- 
form the  duty  which  is  incident  to  an  undertaking  to  collect 
the  money;  and  such  duty  is  not  discharged  when  anything 
but  money  is  accepted  as  payment,  in  the  absence  of  special 
authority  to  the  contrary. 

The  law,  as  we  have  stated  it,  is  well  settled  on  the 
authority  of  decided  cases  in  this  country. 

"  Triplett,  having  deposited  a  bill  with  a  bank  in  Alexan- 
dria to  be  collected  in  Washington,  the  Alexandria  bank 
forwarded  the  bill  to  the  Bank  of  Washington,  which  by 
negligence  failed  to  collect  the  bill."  By  transmitting  the 
bill,  as  directed,  the  bank  with  whom  it  was  deposited 
performed  its  duty,  and  the  whole  responsibility  of  the  col- 
lection devolved  on  the  bank  which  received  the  bill  for  the 
purpose.  To  the  same  effect  are  23  Pickering,  330 ;  1  Gush- 
ing, 182;  12  Conn.  303;  25  111.  247;  1  Otto,  308. 

In  Pennsylvania,  in  1834,  the  court  said:  The  undertaking 
of  the  first  bank  is  clearly  to  transmit  the  bills ;  that  this 
was  the  intention  of  both  parties  must  be  inferred  from  the 
transaction.  This  bank  is  used  simply  as  a  "medium  of 
communication."  If  the  plaintiff  contended  that  it  under- 
took "to  collect,''  that  was  a  material  fact  which  should  have 
been  passed  upon  by  the  jury.  Hence  the  banks  do  not 
stand  in  the  relation  of  principal  and  agent  towards  each 
other.  But  the  first  is  the  agent  for  transmission;  the 
second  is  the  agent  for  collection;  ergo,  the  first  is  not 
bound  to  answer  for  the  doings  of  the  second.^  In  1848 
2  Mechauics'  Bank  v.  Earp,  4  Rawle  (Pa.),  384. 
530 


LIABILITY  FOR  CORRESPONDENT.  §  286 

the  same  view  was  incidentally  adopted.^  In  Bellemire  v. 
United  States  Bank,*  the  same  ground  was  gone  over  in  both 
the  lower  and  the  highest  courts  of  the  State  with  the  same 
result.  The  ruling  in  Mechanics'  Bank  v.  Earp  was  delib- 
erately repeated  and  affirmed  as  being  the  law  in  Pennsyl- 
vania. It  was  urged  that  the  bank  had  undertaken  "the 
whole  business  of  collection,"  and  in  proof  of  this  it  was 
shown  that  the  paper  had  been  indorsed  over  to  the  bank  by 
an  unrestricted  indorsement.  But  the  court  considered  that, 
though  the  bank  was  holden  by  such  an  indorsement,  its 
situation  was  rendered  in  no  respect  peculiar  by  this  fact. 
It  was  invested  with  the  apparent  ownership  only  that  it 
might  have  authority  to  present  for  payment.  As  simple 
agent  it  was  held  only  to  act  in  good  faith  and  "according 
to  the  regular  and  accustomed  course  of  the  business ;  and 
was  not  responsible  though  such  action  might  not  prove  to 
be  to  the  best  advantage."  The  bank,  from  its  nature,  is 
obliged  to  employ  agents,  in  this  case  a  notary,  who  is  not 
alleged  to  have  been  incompetent.  The  owner  of  the  paper, 
in  omitting  to  desire  a  special  agent  to  be  employed,  con- 
sented to  let  the  matter  take  the  ordinary  course,  and  the 
bank  performed  its  duty  in  committing  the  paper  to  the 
hands  of  the  person  whom  it  employed  in  its  own  like 
concerns. 

§  284.  Iowa.  —  Where  the  holder  of  a  bill  of  exchange 
payable  at  a  distant  place  deposits  it  with  a  local  bank  for 
collection,  he  thereby  assents  to  the  course  of  business  of 
banks  to  collect  through  correspondents,  and  the  corre- 
spondent of  the  local  bank  to  which  the  bill  is  forwarded 
becomes  his  agent,  and  is  responsible  to  him  directly  for 
negligenee  in  failing  to  present  the  bill  for  payment  in  the 
proper  time.^ 

§  285.  Mississippi.  —  A  bank  receiving  a  draft  for  collec- 
tion at  another  place,  and  transmitting  the  draft  to  its  agent 

'  Wiugate  v.  Mechanics'  Bank,  10  Barr  (Pa),  104. 
*  1  Miles  (Pa.),  173  ;  4  Wliart.  (Pa.)  105. 

1  §  284.  Guelick  v.  National  State  Bank  of  Burlington,  56  Iowa,  434 
(1881). 

531 


§  286  THE   LIABILITY   OF   A    BANK. 

carefully  selected  at  the  acceptor's  residence,  is  not  liable 
for  the  agent's  neglect.  ^ 

In  this  case  the  court  followed  a  line  of  decisions  ^  in  the 
same  State,  and  referred  to  those  of  eight  States^  in  agree- 
ment with  its  conclusion.  The  chief  justice  dissented, 
quoting  cases,*  which,  as  we  have  seen,  have  no  bearing 
on  the  question,  because  in  each  of  them  the  sub-agent  was 
the  servant  of  the  agent  in  chief,  or  in  his  permanent  em- 
ploy and  under  his  control  and  direction,  really  one  of  his 
own  arms,  attached  to  the  main  body,  and  not  an  inde- 
pendent person,  and  in  most  of  them  the  express  terms  of 
the  contract  indicated  that  the  undertaking  was  to  do  the 
collecting  in  the  distant  place  through  its  oivn  branches  and 
permanent  agencies,  and  the  consideration  for  the  collection 
also  was  not  of  the  meagre  character  which  so  strongly  ex- 
cludes the  supposition  that  the  agent  intended  to  take  the 
risk  of  losing  the  principal. 

§  286.  Massachusetts.  —  In  Massachusetts  it  was  held,  in 
1848,  that  if  the  first  bank  selects  proper  sub-agents  for  ac- 
complishing the  transmission  and  making  the  collection,  it 
discharges  its  full  duty,  and  is  not  liable  for  their  default. 
If  tlxe  note  has  been  indorsed  over  to  it  generally,  it  may 
indorse  over  to  sub-agents  in  the  same  form,  and  need  not 
make  a  restricted  indorsement.  In  delivering  the  opinion, 
Judge  Wilde  said  that  the  final  decision  in  Allen  v.  Mer- 
chants' Bank  (supra^  "is  opposed  to  a  number  of  decisions 
of  great  authority,  and  is  not,  as  we  think,  well  founded  in 
principle."  ^ 

1  §  285.  Third  Natioual  Bank  of  Louisville  r.  Vicksburg  Bank,  61 
Miss.  112  (18S3). 

2  Hoover  v.  Wise,  91  U.  S.  308  (1875)  ;  Bradstreet  v.  Everson,  72  Pa. 
St.  121  (1872) ;  Morgan  v.  Tener,  83  Pa.  St.  305. 

3  Massachusetts,  Maryland,  Connecticut,  Missouri,  Illinois,  Iowa,  Ten- 
nessee, and  Wisconsin. 

4  Tiernan  v.  Commercial  Bank,  7  How.  648;  Agricultural  Bank  v. 
Commeicial  Bank,  7  Sm.  &  M.  (Miss.)  592;  Bowling  v.  Arthur,  34  Miss. 
41.     These  were  notary  cases,  but  the  reasoning  was  general. 

1  §  286.    Dorchester  &  Milton  Bank  v.  New  England  Bank,  1  Cush., 
(Mass.)  177;  Fabens  v.  Mercantile  Bank,  23  Pick.  (Mass.)  330. 
532 


LIABILITY   FOR   CORRESPONDENT.  §  287 

The  employment  of  a  sub-agent  is  justifiable,  because  this 
manner  of  conducting  business  is  the  usual  and  known 
custom,  and  "in  a  business  which  requires  or  justifies  the 
delegation  of  an  agent's  authority  to  a  sub-agent,  who  is  not 
his  own  servant,  the  original  agent  is  not  liable  for  the  errors 
or  misconduct  of  the  sub-agent  if  he  has  exercised  due  care 
in  the  selection."  ^ 

§  287.    Other  States.  —  In  Connecticut  the  court  said,   in 
the  first  case  which  they  were  called  upon  to  consider,  that 
of  Lawrence  v.  Stonington  Bank,^  that  the  trans- 
viittee  bank  was  the  attorney,  not  the  factor,  of 
the  transmitting  bank,   and  had   for  its  principal  not  the 
transmitting  bank  itself,  but  the  original  holder  and  deposi- 
tor of  the  paper;  whence  it  followed  that  the  defaults  of  each 
bank  in  the  order  of  succession  were  not  the  defaults  of  any 
predecessor  in  the  transmission,    but  of  the   original   cus- 
tomer and  principal  himself.      Later,    the   same   court  de- 
clared that  a  person  who  deposits  in  a  bank  a  note  which 
is  payable  elsewhere  must  know  that  all  the  bank  can  do  is 
to  send  it  on  to  a  reputable  correspondent;  and  if  the  bank 
docs  this,  it  should  be  therel)y  fully  exonerated.      It  would 
be  an  unreasonable  hardship  to  hold  the  bank  for  the  defaults 
of  such  further  agents.^     In  Louisiana  it  has  been 
held  that  the  bank  does  enough  if  it  gives  the  note 
to   its    regular  notary,    and   is   not  liable   for  his  default.^ 
In  Illinois  it  was  said  that  a  bank  was  not  liable 
for  the  default  of  the  sub-agent,  if  it  had  exercised 
due  diligence  in  the  selection.'*    The  same  doctrine  is  adopted 
by  a  fair  implication  in  the  ruling  in  the  Wis- 

.,,.        .,  .,'~  Wisconsin. 

cousin  case,  cited  m  the  margin. °     In  Maryland 

the  first  bank  is  not  regarded  as  liable  for  defaults  of  sub- 

2  Darling  ?'.  Stan  wood,  U  Allen  (Mass.),  50i. 

1  §  287.    6  Conu.  521. 

2  East  Haddam  Bank  v.  Scovil,  12  Conn.  303. 

•*  Hyde  v.  Planters'  Bank,  17  La.  560  ;  Baldwin  v.  Bank  of  Louisville, 
1  La.  An.  13. 

*  iEtua  Insurance  Co.  v.  Alton  City  Bank,  25  111.  2i3. 
6  Stacy  V.  Dane  County  Bank,  12  Wis.  629. 

533 


§  287  LIABILITY   FOR   CORRESPONDENT. 

agents,  whether  banks  or  notaries ;  but  it  is  fair  to 

say  that  the  first  decision  was  based  on  proof  of 

usage  in  the  State,  or  at  least  in  the  city  of  Baltimore.'' 

The  same  view  has  recently  been  directly  asserted 

Missouri.  .T,;r'  ••7  ihjt  r    n  •     1 

in  Missouri  ;^  and  the  tendency  of  the  court  might 
previously  have  been  inferred  to  be  in  favor  of  it,  from  the 
form  of  the  opinion  and  the  language  used  therein,  delivered 
in  the  case  of  Gerhardt  v.  Boatman's  Savings  Institution.^ 

«  Jackson  v.  Union  Bank,  6  Har.  &  J.  (Md.)  146  ;  Citizens'  Bank  v. 
Howell,  8  Md.  530. 

■f  Daly  V.  Butchers  &  Drovers'  Bank  of  St.  Louis,  56  Mo.  94, 
8  38  Mo.  60. 


534 


CHAPTER   XVIIL 

GENERAL   DEPOSIT. 

§  288.    Analysis.     §§  186,  565,  Title. 

A  deposit  of  loose  money  is  presumed  to  be  general. 

§  289.  The  relation  of  the  bank  to  the  depositor  of  good  money  is  that 

of  debtor  and  creditor.     Upon  crediting  the  deposit,  tiie  bank  is 

liable  to  the  depositor,  though  tlie  deposit  should  be  lost  or  stolen 

without  its  fault;   the  deposit  becomes,  in  every  sense,  its  prop- 

§  2896.  erty  ;  if  it  makes  a  payment  on  account  of  it,  it  is  its  own  money 

that  is  paid  ;  and  if  the  bank  becomes 
§  289  c.         Insolvent,  the  depositor  cannot  claim  in  preference  to  the  general 
creditors,  unless  the  deposit  was  not  fully  received,  or  the  receiv- 
ing was  a  fraud  upon  tlie  depositor.     §  629. 
(d)  Forged  paper  or  counterfeit  coin  is  nothing,  and  cannot  form  a  de- 
posit; though,  if  a  bank  is  negligent  in  not  discovering  a  forgery 
of  its  own  bills,  it  will  have  to  bear  any  resulting  loss,  in  the 
absence  of  fraud  on  the  depositor's  part.     §  659. 
Bills  of  an  insolvent  bank  are,  according  to  the  best  opinion,  re- 
ceived at  the  risk  of  the  bank,  if  there  is  no  fraud  or  concealment 
on  the  part  of  the  depositor.     §§  633,  662. 
Checks  on  the  depository  bank,  credited  as  cash,  create  the  rela- 
tion of  debtor  and  creditor,  and  the  title  passes  to  the  bank,  unless 
the  depositor  knew  the   check  was  not  good  for  lack   of  funds. 
§  565. 
Checks  on  other  banks,  notes,  bills,  &c.,  merely  credited  as  cash, 
without  further  agreement,  become  a  general  deposit  as  against 
the  depositor,  if  he  knows  they  are  so  credited ;  but  as  against  the 
bank  the  credit  is  conditional,  and  may  be  cancelled  if  the  paper 
is  not  paid  at  maturity  without  default.     §  565. 
Paper,  credited  as  paper,  is  not  a  general  deposit. 
§  289  d.        Fraud  or  concealment  on  the  part  of  the  depositor  will  vitiate  the 
contract  of  deposit,  and  make  it  voidable  at  the  option  of  the 
bank. 
§  289  e.  Suits  by  depositors. 

Writings  in  the  Course  of  Banking  Business. 
§  290.  Deposit  tickets,  pass-books,  books  of  the  bank,  and  their  effect. 

All  entries  and  written  statements  contained  in  the  above,  made  in 

§  291.  the  course  of  business,  are  merely  prima  facie  evidence,  and  are 

(c)        subject  to  control  by  parol.     The  books  of  the  bank  are  more 

§  295.  open  to  error  than  the  pass-books,  for  these  last  usually  contain 

original  entries  made  at  the  time  of  deposit,  while  the  books  of 

535 


§  289  GENERAL   DEPOSIT. 

the  bank  are  written  up  afterward  by  copying,  so  admitting  of 
more  chance  of  error. 

§  295/.  Parol  is  admissible  to  supply  the  place  of  a  record  in  tlie  books  of 
the  bank,  even  though  statute  law  requires  the  bank  to  keep  a 
record  of  transactions  of  the  nature  of  the  one  to  be  proved,  and 
this  has  not  been  done. 

§  295  e.         Entries  are  competent  evidence  of  the  nature  of  a  deposit,  as  gen- 
eral, special,  or  specific. 
Are  admissible  in  favor  of  bank.  §  295.     Or  against  it.  §  171  /. 

§§  290,  291.  Mistakes  may  be  corrected  by  either  party,  subject  to  the  rule  that 
each  party  must  bear  any  loss  resulting  to  the  otlier  by  reason  of 
acting  on  the  faith  of  an  entry  made  by  him,  or  his  negligent 
acquiescence. 

§  291.  No  by-law  of  the  bank  can  destroy  this  right  of  correction  in  the 

depositor.     Nothing  short  of  express  agreement  will  suffice. 

§  292.  Silence  may  estop  tlie  depositor  as  to  charges  actually  made  in  ac- 

count stated  to  him,  but  cannot  give  autliority  for  future  similar 
charges. 

§  295.  Tlie  name  in  the  bank-book  is  not  conclusive  as  to  the  ownership  of 

the  deposit. 
Proof  of  entries  should  be  by  the  entering  clerk,  if  possible. 

§  294.  Right  of  depositor  to  inspect  books  is  confined  to  such  portions  as 

concern  his  own  transactions  with  the  bank. 

§  294  a.        Right  of  others  to  know  the  state  of  a  depositor's  account  is  con- 

(1)  ceded  in  the  case  of  a  garnishee  creditor,  but  has  been  denied  as 

(2)  to  check-holders  and  as  to  third  persons  in  general.  This,  so  far 
as  concerns  a  check-holder  in  case  of  insufficient  funds,  is  ques- 
tionable. The  depositor  has  transferred  to  him  his  own  right  in 
the  deposit,  right  of  inquiry  and  all ;  it  is  his  (the  check-liolder's) 
deposit  on  presentation  of  the  check,  if  he  sees  fit  to  accept  it,  and 
he  may  not  be  able  to  decide  that  until  he  knows  the  amount. 

§296.    Certificate  of  Deposit.     (See  Analysis,  §  296.) 
§  309.   Interest  Accounts. 

A  general  deposit  bears  no  interest  except  by 

(1)  (b)  Agreement. 

(2)  Usage  or  course  of  dealing. 

(3)  After  unjustifiable  delay  or  refusal  of  payment. 

(6)  Usury  Laws  cannot  be  overcome  by  usage.     (So  it  is  said  by  the 
judges,  in  spite  of  the  fact  that  discounting  and  "  rests,"  which 
by  force  of  usage  have  claimed  and  secured  recognition  by  the 
law,  do  circumvent  the  usury  laws.) 
(d)  Death,  Insolvency,  or  Settlement  terminates  a  contract  as  to 
rate  of  interest  on  a  deposit,  and  thereafter  interest  is  calculated 
at  the  ordinary  rate  for  simple  debt. 
§  310.   Payment  of  Deposits.     (See  Analysis,  §  310.) 
§  327.  Appropriation  of. 

§  289.    Relation    of    the   Customer    on  a   Simple   Deposit  Ac- 
count. —  The  ordinary  relation  existing  between  a  bank  and 
536 


THE   BANK   IS    DEBTOR.  §  289 

its  customer,  if  not  complicated  by  any  further  transaction 
than  that  of  the  depositing  and  withdrawing  of  moneys  by 
the  customer  from  time  to  time,  is  simply  that  of  debtor  and 
creditor  at  common  law,i  whether  the  deposit  is  on  rj,.^^  ^^^^^  i^ 
demand  or  on  time.^     The  original  and  every  subse-   Ji=''''P  ^'"".^ 

'-'  •'  the  deposit, 

quent  deposit  bv  the  customer  is  in  strict  legal  effect    tiu.ugii  lust 

^  X  ^  1,11  o''  stulen. 

a  loan  by  the  customer  to  the  bank,  and  e.  converso 

every  payment  by  the  bank  to  or  on  account  of  the  customer 

is  a  repayment  of  the  loans  jyro  tanto. 

All  sums  paid  into  the  bank  on  general  deposit  by  the  same 
or  different  depositors  form  one  blended  fund.^  So  soon  as 
the  money  has  been  handed  over  by  the  payer,  it  is  at  once 
the  proper  money  of  the  bank,'*  It  enters  into  the  general 
fund  and  capital,  and  is  undistinguishable  therefrom.  There- 
after the  depositor  has  only  a  debt  owing  him  from  the  bank ; 
a  chose  in  action,  not  any  specific  money,  or  a  right  to  any 
specific  money .^ 

This  relation  of  debtor  and  creditor  is  not  changed  by 
reason  of  the  fact  that  the  depositor  "  purchases  "  from  the 
bank  two  drafts  on  another  bank,  and  pays  therefor  by  his 
check  against  his  deposit,  and  leaves  the  draft  at  the  bank. 
Such  a  transaction  does  not  constitute  the  bank  a  trustee  of 
the  drafts,  entitling  the  depositor  to  a  preference  over  general 
creditors,  the  bank  having  become  insolvent.^" 

(a)  A    bank    may  assume  the  functions  of   trustee,  quasi 

1  §  289.  Bank  of  Republic  v.  Millard,  10  Wall.  (U.  S.)  152;  Neely 
V.  Rood,  54  Mich.  134;  Perley  y.  Muskegon  County,  32  JNIich.  132  (1875); 
Commercial  Bank  v.  Hughes,  17  Wend.  (N.  Y.)  100;  Foley  v.  Hill, 
2  H.  L.  Cas.  (Eng.)  278. 

2  Williams  v.  Rogers,  14  Bush  (Ky.),776. 

2  Devayues  v.  Noble,  1  Mer.  (Eng.)  541;  Bodenham  v.  Purclias, 
2  Barn.  &  Aid.  (Eng.)  39  ;  Ilenniker  y.  Wigg,  4  Q.  B.  (Ad.  &  El.)  (Eng.) 
792;  Commercial  Bank  of  Albany  v.  Hughes,  17  Wend.  (N.  Y.)  94. 

*  Seward  County  Commissioners  v.  Cattle,  14  Neb.  144. 

6  Marine  Bank  v.  Fulton  Bank,  2  Wall.  252 ;  Thompson  v.  Riggs, 
5  Wall.  603;  National  Bank  of  Republic  v.  Millard,  10  Wall.  152  ;  ^tna 
National  Bank  v.  Fourth  National  Bank,  46  N.  Y.  82  ;  Carr  v.  National 
Security  Bank,  107  Mass.  45;  First  National  Bank  v.  Ocean  National 
Bank,  60  N.  Y.  278. 

6«  Jewett  V.  Yardley,  81  Fed.  920  (1897). 

537 


§  289  GENEEAL   DEPOSIT. 

trustee,  factor,  or  agent,  as  we  have  seen ;  ^  but  as  to  a  simple 
deposit  for  general  credit  all  efforts  to  hold  the  bank  to  the 
duties  of  these  relations  have  failed  both  in  England  and  the 
United  States,  the  courts  uniformly  holding  the  relation  to  be 
that  of  debtor  and  creditor^ 

It  follows  that,  the  act  of  deposit  having  been  once  consum- 
mated, nothing  short  of  payment  on  the  part  of  the  bank,  or 
some  act  of  the  depositor  himself,  will  suffice  to  exonerate 
it  from  the  indebtedness  it  has  assumed.  The  identical  bag 
of  coin  or  roll  of  bills  in  which  the  deposit  was  made  may 
be  stolen,  before  it  has  been  in  any  practical  manner  com- 
mingled with  the  funds  of  the  bank  ;  it  may  be  embezzled  or 
fraudulently  misapplied  by  an  officer  of  the  bank  ;  still  the 
indebtedness  of  the  bank  subsists,  entirely  unaltered  by  these 
circumstances.  Neither  the  intentional  nor  the  accidental 
segregation  of  the  specific  moneys  (unless  by  distinct  agree- 
ment with  the  depositor  a  "  special  deposit "  is  effected  ^)  will 

8  See  Grant  on  Bankers  and  Banking,  3d  ed.,  pp.  5,  11 ;  Crosskill  v. 
Bower,  32  Beav.  (Eng.)  86;  32  L.  J.  Ch.  (Eng.)  5i0;  Shiells  v.  Black- 
burne,  1  H.  Bl.  159  (per  Lord  Loughborough). 

■^  English  cases  :  Foley  v.  Hill,  2  H.  L.  Cas.  39  ;  Crosskill  v.  Bower. 
32  Beav.  86  ;  Carr  v.  Carr,  1  Mer.  541,  n. ;  Bishop  v.  Countess  of  Jersey, 
2  Drew.  143;  Devaynes  v.  Noble,  1  Mer.  541  ;  Bellamy  v.  Majoribanks, 
8  Eng.  L.  &  Eq.  517  ;  Sims  v.  Bond,  5  Barn.  &  Ad.  392 ;  2  Nev.  &  Man. 
60S;  Watts  v.  Christie,  11  Beav.  546;  Pott  i'.  Clegg,  16  M.  &  W.  321; 
In  re  Agra  &  Masterman's  Bank,  Ex  parte  Waring,  36  L.  J.  Ch.  151 ; 
Grant  on  Bankers  and  Banking,  p.  4.  American  cases  :  National  Bank 
V.  Eliot  Bank  (in  which,  however,  there  is  a  long  dissenting  opinion, 
delivered  by  Abbott,  J.),  20  Law  Rep.  (O.  S.)  138;  10  Monthly  L.  Rep. 
N.  s.  138;  Commercial  Bank  of  Albany  v.  Hughes,  17  Wend.  (N.  Y.) 
94;  Bullard  v.  Randall,  1  Gray  (Mass.),  605  ;  Chapman  v.  White,  2  Seld. 
(N.  Y.)  412;  Downes  v.  Phoenix  Bank,  6  Hill  (N.  Y.),  297;  Foster  v. 
Essex  Bank,  17  Mass.  479 ;  Bank  of  Northern  Liberties  v.  Jones,  42  Pa. 
St.  536 ;  Marsh  v.  Oneida  Central  Bank,  34  Barb.  (N.  Y.)  298  (citing 
many  authorities)  ;  Curtis  v.  Leavitt,  15  N.  Y.  9;  Bank  of  the  Repub- 
lic V.  Millard,  10  Wall.  152;  Bank  v.  Brewing  Co.,  50  Ohio  St.  151 
(1893)  ;  Clason  v.  City,  46  La.  An.  1  (1894) ;  Eshleraan  v.  Bolenius,  144 
Pa.  269  ;  Law's  Estate,  id.  499  ;  Harred  v.  Blackwell,  107  N.  C.  200 
(1890),  citing  Boyden  v.  Bank,  65  N.  C.  13 ;  Shipman  et  al.  v.  Bank,  126 
N.  Y.  318;  O'Connor  v.  Mechanics'  Bank,  124  N.  Y.  324  ;  Alston  v.  State, 
92  Ala.  124  (1890). 

8  Marine  Bank  v.  Fulton  Bank,  2  Wall.  252. 
638 


RELATING   TO   BANK   AND   DEPOSITOR.  §  289 

enable  the  bank  to  follow  them,  and  to  affect  its  customer 
with  their  fate.^ 

(b)  It  also  results  that  the  true  owner  of  a  general  deposit 
cannot  follow  a  payment  made  out  of  it,  for  it  is  the  money  of 
the  bank  that  is  paid.     §§  565,  567,  621. 

D.  drew  on  his  debtor,  H.,  and  sent  the  draft  to  bank  B. 
for  collection.     H.  paid  a  part  properly,  and  directed  the  bank 
where  the  firm  of  H.  and  S.  had  their  deposit  to    True  owner 
pay  the  remainder  from   this  deposit,  which  was    po-litcllfnot ' 
done.     Held,  that  neither  the  firm  nor  S.  could  re-    aS'tTst'^iona 
cover  from  D.     D.  did  not  receive  any  money  of   J''^'^  '^"^'^«''- 
the  firm,  for  the  money  on  deposit  in  the  bank  was  not  the 
firm's  money,  but  the  bank's.^'' 

(c)  The  relation  of  the  depositor  to  the  bank  being  that  of 
a  simple  creditor,  if  the  bank  goes  into  insolvency  the  deposi- 
tor has  no  right  to  any  preference  ;  but  shall  come   insolvency. 
in  like  any  other  ordinary  creditor."     But  if  a  de-   gf£'g^^'" 
posit  is  never  really  received  by  the  bank,  it  may   hours  kept 

■r  J  J  '  J      separate,  &c. 

be  recovered  by  the  owner  as  against  the  credit-   See  §§  565, 

621. 

ors  of  the  bank  upon  its  failure  ;  as  where  the  de- 
posit was  kept  separate  and  not  credited,  it  being  paid  in  after 
banking  hours  on  the  day  before  failure  ^^  (the  bank  did  not 
again  open  after  receis^ing  the  deposit).  But  where  it  has 
been  customary  to  make  deposits  after  banking  hours  and 
treat  them  as  proper  deposits,  and  a  deposit  is  received  as 
usual,  subsequent  insolvency  cannot  affect  the  case.^^  And 
even  insolvency  (actual  but  not  yet  avowed)  at  the  time  of 
receiving  a  deposit,  whether  known  or  not  to  the  officers  of 
the  bank,  will  not  prevent  the  property  from  passing  to  the 
bank,  unless  the  reception  of  it  amounts  to  a  fraud  on  the 
depositor.     (§  629.) 

(d)  If  the   deposit  be  made   in  forged   paper  or  in    base 

9  Concord  v.  Concord  Bank,  16  N.  H.  26;  Commercial  Bank  of  Al- 
bany V.  Hughes,  17  Wend.  (N.  Y.)  94. 

10  Davis  V.  Smith,  29  Minn.  201  (1882). 

11  In  re  Franklin  Bank,  1  Paige  (N.  Y.),  249. 

12  Threlfal  v.  Giles,  cited  2  M.  &  Rob.  492 ;  Sadler  v.  Belcher,  id.  489. 
18  Ex  parte  Glutton,  1  Fonb.  167. 

639 


§  289  GENERAL   DEPOSIT. 

coin,  although  the  nominal  amount  be  duly  passed  to  the  de- 
positor's credit,  yet  no  indebtedness  shall  accrue  ; 

DepoMt  in  ^  .         '  -^        .  ' 

forgfed  paper  for  a  dcposit  made  in  such  material  is  not  a  pay- 
ment, and  can  in  no  wise  affect  the  relationship 
previously  existing  between  the  parties.  It  goes  absolutely 
for  nothing ;  and  as  it  is  a  familiar  rule  that  the  transfer  of 
such  worthless  stuff  could  not  discharge  a  debt,  so,  on  the 
other  hand,  it  is  equally  clear  that  it  cannot  create  one.^* 

If  a  bank  receives  its  own  pretended  bills,  it  cannot  ob- 
ject after  it  has  allowed  several  days  to  go  by,  for  it  should 
Forged  bills  kuow  its  own  bills.^^  This,  however,  is  not  in  ac- 
poshon^'  cord  with  the  best  views  on  this  subject,  unless  it 
§§  633,  659.  ]jQ  added  that  its  failure  to  discover  the  forgery  is 
through  negligence,  and  that  correction  of  the  error  would 
leave  the  depositor  in  a  worse  position  than  if  the  bills  had 
been  refused.  A  forged  promise  is  no  promise,  it  lacks  the 
consent  necessary  to  a  contract;  receiving  it  without  knowing 
the  facts  cannot  be  a  ratification,  and  the  only  other  ground  of 
holding  the  bank  is  neglect  and  damage. 

If  bills  of  another  bank  are  received  on  deposit,  and  it  turns 
Bills  of  insoi-  out  that  that  bank  is  insolvent,  the  best  view  is 
§§633,062.  that  the  loss  must  fall  on  the  bank,  whether  the 
insolvency  be  before  or  after  depositing  the  bills. 
Fraud  of  de-  -^^Y  fi'^ud  or  Concealment  on  the  part  of  the 
positor.  depositor   will  throw  the   loss  on    him  in  any  of 

these  cases. 

(e)  Suits  by  Depositor.  —  Though  the  items  on  general  de- 
posit constitute  a  running  account,  yet  it  is  not  of  such  a 
^.,,.  nature  that  a  bill  in  equitv  for  an  accounting  will 

Bill  in  equity       _  . 

will  not  lie      lie.     At  any  time  the  simple  striking  of  a  balance 

for  account.  .  „    ,    ,  . 

between  the  two  columns  oi  debits  and  credits  will 
show  a  sum  which  is  a  simple  debt ;  so  that  there  is  in  fact  no 

1*  Bank  of  United  States  v.  Bank  of  Georgia,  10  Wheat.  333  ;  Corbit  v. 
Bank  of  Smyrna,  2  Ilarr.  (Del.)  235;  Gloucester  Bank  v.  Salem  Bank,  17 
Mass.  33;  Jones  v.  Ryde,  5  Taunt.  488;  1  Com.  Law,  1G6;  jMarkle  v. 
Hatfield,  2  Johns.  (N.  Y.)  455;  Young  v.  Adams,  6  Mass.  182;  Wilson 
V.  Foree,  6  Johns.  (N.  Y.)  110. 

15  Bank  of  the  United  States  v.  Bank  of  Georgia,  10  Wheat.  338. 

5-10 


BANKING   RECORDS.  §  290 

ground  on  which  an  accounting  can  be  demanded  in  equity. 
An  ordinary  action  of  debt  v/ill  lie  on  behalf  of  the  depositor, 
and  if  the  bank  answer  payment  or  discharge,  it  is  matter  of 
common  law,  where  the  remedy  for  either  party  is  perfect. 
Neither,  as  has  been  stated,  is  there  a  fiduciary  relation  of 
any  nature  whatsoever  between  the  parties  which  could  justify 
recourse  to  equity.  Suit  will  lie  on  the  common  money  counts. 
This  has  been  conclusively  settled  by  the  sound  decision  given 
by  the  House  of  Lords  in  the  case  of  Foley  v.  Hill.^^ 

It  has  been  said  that  the  bank  is  debtor  to  the  depos- 
itor for  the  balance  of  his  deposit  account.  But  though  the 
relationsliip  between  the  bank  and  the  depositor  is  in  nearly 
all  respects  that  of  simple  debtor  and  creditor,  yet  the  usages 
of  the  banking  business  have  introduced  certain  special  rules. 
For  example,  the  usage  of  banks  to  make  payments  only  in 
response  to  checks,  drafts,  or  notes  made  payable  at  the 
bank  of  the  promisor,  has  given  rise  to  the  rule  that  ordi- 
narily an  action  cannot  be  maintained  by  a  depositor  against 
a  bank  to  recover  the  amount  of  his  deposit  until  a  formal 
demand  has  been  made.  The  bringing  an  action  does  not 
amount  to  a  demand  in  such  cases.  ^^     (§  322.) 

But  if  it  appears  that  demand  would  have  been  useless,  as 
where  the  bank  denies  that  there  ever  was  a  deposit,  suit 
may  be  brought  without  prior  demand. ^^ 

§  290.  Deposit  Tickets,  Pass-Books,  Bank-Books,  and  their 
Effect.  — Summary:  Mistakes  in  bank  accounts  are  common, 
by  charging  unreal  payments,  or  excessive  payments,  or  omit- 
ting proper  credits,  or  incorrect  figuring,  and  the  writing  up  of 
a  bank-book  or  return  of  vouchers  does  not  preclude  inquiry 
into  the  correctness  of  the  account  rendered. ^ 


16  2  H.  L.  Cas.  28. 

i'^  Chemical  Natioual  Bank  v.  Bailey,  12  Blatchf.  480 ;  Pa^ne  v.  Gard- 
ner, 29  N.  Y.  140. 

18  Miller  v.  Bank,  172  Pa.  197. 

1  §  290.  First  National  Bank  v.  Whitman,  94  U.  S.  346;  INIechanics' 
Bank  r.  Earp,  4  Rawle  (Pa.),  384;  Bucklin  v.  Chapin,  1  Lans.  443;  Fol- 
lansbee  v.  Parker,  70  111.  11;  Bullock  v.  Boyd,  2  Edw.  Ch.  (N.  Y.)  293; 
Bruen  v.  Hone,  2  Barb.  (N.  Y.)  586 ;  Schneider  v.  Irving  Bank,  1  Daly 

541 


§  290  GENERAL   DEPOSIT. 

A  bank-book  is  prima  facie  evidence,  but  no  more,^  and  is 
open  to  explanation  by  parol  evidence,  or  it  is  not  a  contract. ^ 
As  between  the  bank  and  its  depositor,  the  entry  of  debits  in 
the  pass-book  and  striking  a  balance  are  a  statement  of  ac- 
count, and  the  delivery  of  the  book  to  the  depositor  and  its 
retention  by  him  without  objection  make  it  a  stated  account, 
and  a  retention  for  many  months  and  drawing  out  the  exact 
balance  shown  on  the  book  afPord  clear  evidence  of  a  settled 
as  well  as  a  stated  account,  and  prima  facie  establishes  the 
accuracy  of  the  items.  ^ 

If  the  depositor  acts  on  faith  of  the  account  in  a  manner 
he  would  not  have  done  but  for  faith  in  its  correctness,  the 
bank  is  bound,*  or  if  the  depositor  neglects  to  make  such 
examination  as  a  prudent  man  would  make  of  his  accounts, 
and  the  bank,  acting  in  good  faith  or  omitting  to  act  by  rea- 
son of  his  silence,  puts  itself  in  such  position  that  correction 
would  injure  it,  the  depositor  is  bound. ^ 

A  pass-book  or  other  book  of  account  is  not  negotiable,  and 
^     ,    ,        cannot  be  rendered  so  by  any  agreement  of   the 

Pass-book  .  J  J       o 

not  negoti-      parties   that   the    balance   shall    be  payable    "to 

able.  ,        ,,  r. 

order.  "^ 

An  assignment  of  a  deposit  slip  is  not  an  assignment  of 
the  debt  acknowledged  thereby.^" 

A  deposit  ticket  may  be  controlled  by  parol.  It  is  not  a 
contract,  but  a  memorandum  or  "note  to  help  the  memory. "^ 

(X.  Y.),  500;  French  r.  Eastern  Trust  and  Banking  Co.,  91  Me.  485 
(1898). 

2  Featherston  v.  Norris,  7  S.  Car.  472;  s.  c.  14  S.  Car.  624;  State  ex 
rel.  Van  Wyck  v.  Isorris,  15  S.  Car.  241;  Union  Bank  v.  Knapp,  8  Pick. 
(Mass.)  96;  Davis  v.  Lenawee  County  Savings  Bank,  53  Mich.  163;  Tal- 
cott  V.  National  Bank,  53  Kans.  480  (1894). 

8  Clark  V.  National  Bank  of  City  of  New  York,  11  Daly  (N.  Y.),  239; 
Shipman  et  al.  v.  Bank,  126  N.  Y.  318. 

*  Skyring  v.  Greenwood,  4  Barn.  &  Cr.  281 ;  Heane  i;.  Rogers,  9  Barn. 
&  Cr.  .577  ;  Hume  v.  Bolland,  1  C.  &  M.  130. 

^  Dana  v.  National  Bank,  132  Mass.  156;  Leather  Manufacturers' 
Bank  V.  Morgan,  117  U.  S.  96. 

6  Witte  u.  Vincenot,  43  Cal.  325  ;  Stewart  v.  State,  42  Tex.  242. 

^     First  National  Bank  v.  Clark,  134  N.  Y.  368. 

'  Weisinger  v.  Bank.  10  Lea  (Tenn.),  330. 

642 


PASS   BOOK.  §  291 

It  {?,  prima  facie  evidence  of  the  bank's  liability  though  the 
deposit  is  not  credited  on  its  books. ^ 

§  291.  Bank-Books,  or  Pass-Books.  —  Expanded  statement: 
The  custom  is  probably  universal  in  this  country  for  every 
depositor  with  a  bank  to  have  his  bank-book,  so  called.  In 
England  the  same  thing  is  called  a  "passage-book  "  or  "pass- 
book." It  is  hardly  necessary  to  describe  anything  so  famil- 
iarly known.  Instead  of  this  book,  private  bankers  sometimes 
give  simple  receipts ;  or,  more  frequently,  only  render  to  their 
customers,  from  time  to  time,  balanced  accounts. 

(a)  Ordinarily,  whenever  a  deposit  is  made,  the  bank-book 
is  presented  at  the  bank  counter  for  the  purpose  of  having 
the  amount  and  date  of  the  deposit  contemporane-    Balance  and 
ously  entered  therein  by  the  bank  clerk  or  teller.    acc"omit  " 
At  intervals,  also,  it  is  sent  into  the  bank  to  be   stated. 
balanced  by  the   proper  officer;   after  which  it  is  returned 
to  the  depositor,  customarily  accompanied  by  all  his  checks 
which  have  been  paid  by  the  bank  since  the  date  of  the  next 
preceding  balancing.     It  will  be  seen  that  the  chief  value  of 
the  book  is  that  the  depositor  may  have  a  species  of  check 
upon  the  bank,  and  may  use  it  as  evidence  upon  the  occur- 
rence of  any  dispute  and  lawsuit.     The  entries  in  the  bank- 
book, made  by  the  proper  officer,  bind  the  bank  as  admissions.^ 
Especially  the  balancing  of  the  book  is  conclusive  upon  the 
bank,  in  the  same  manner  as  an  account  stated. 

(5)  But  the  entry  of  credit  for  a  deposit  is  held  to  be  an 
original  entry  only  on  the  supposition  that,  as  in  the  ordinary 
course  of  business  above  described,  the  book  accom-    ^ 

Lntries  are 

panied  the  deposit,  and  the  entry  was  made  by  the   only  receipts 
teller  simultaneously  with  the  receipt  of  the  money,    de  evidence 
and  as  part  of  the  same  transaction.     For  if  the  ^s*^'"^'  ^" 
book  was  sent  to  be  written  up  afterwards  from  the  books 
or  memoranda  in  possession  of  the  bank,  the  entries  are  not 
original,  and  may  be  examined  into.^     But  the  entry  of  the 

8  American  National  Bank  v.  Presnall,  48  Pac.  556  (1897). 

0  §  291.  Wasson  v.  Lamb,  120  Ind.  515 ;  Arnold  v.  Hart,  176  111.  442 
(1898). 

1  Manhattan  Co.  v.  Lydig,  4  Johns.  (N.  Y.)  377. 

543 


§  291  GENERAL   DEPOSIT. 

credit  is,  after  all,  only  a  receipt.  It  is  prima  facie  evi- 
dence against  the  bank,  and  binds  it  like  any  other  form 
of  acknowledgment  or  receipt. ^  But  apparently  it  binds  no 
more;  and  as  a  receipt  it  is  open  to  explanation  by  evidence 
aliunde.  So  that,  if  the  bank  succeeds  in  showing  clearly  that 
the  entry  is  a  mistake,  it  will  no  longer  be  binding. ^  If  the 
correctness  or  incorrectness  of  the  entry  be  disputed  between 
the  customer  and  the  bank,  a  question  of  fact  is  thereby  made 
for  the  jury.* 

A  deposit  is  deemed  to  be  made  at  the  time  it  is  credited 
in  the  pass-book  by  the  cashier,  although  not  entered  on  the 
books  of  the  corporation  until  some  days  later.*" 

(c)  But  the  most  difficult  questions  arise  in  considering 
to  what  extent  the  bank-book  can  be  regarded  as  binding 
Also  as  upon  the  depositor.     In  the  simple  case  of  an  er- 

posito?,and  roneous  entry  by  the  receiving  teller,  of  course 
can  be  con-      ^\^q  customcr  may  insist  upon  correction.     Even 

trolled  by  •  i 

parol.  where,  when  making  his  deposit,  he   also  hands 

in  with  it  the  ordinary  memorandum  stating  what  sums  he 
is  depositing,  and  the  receiving  teller's  entry  corresponds 
with  this  memorandum,  he  may  afterward  be  allowed  to  show 
that  both  his  memorandum  and  the  entry  were  wrong,  and 
gave  him  credit  for  too  small  a  sum.  For  the  bank  is  in  fact 
liable  for  precisely  the  amount  of  money  it  receives.  It  is 
the  act  of  receiving  which  by  itself  creates  and  perfects  the 
debt,  and  which  alone  need  be  shown.  The  receipt  therefore 
io  open  to  correction  in  favor  of  the  depositor,  if  it  be  errone- 
ous. The  actual  fact  of  the  real  deposit  is  alone  absolutely 
conclusive. 

(c?)  This  rule  of  law  is  rigid,  and  can  only  be  dispensed 
with  by  the  express  agreement  of  the  parties.     It  cannot  be 

2  Union  Bank  v.  Knapp,  3  Pick.  (Mass.)  96;  Commercial  Bank  of 
Scotland  v.  Khind,  1  Macq.  H.  L.  Cas.  643;  Shaw  v.  Dartnell,  6  Barn.  & 
C.  57. 

8  Shaw  V.  Picton,  4  Barn.  &  C.  715;  French  v.  Eastern  Trust  and  Bank- 
ing Co.,  91  Me.  485  (1898). 

*  Snead  v.  Williams,  9  L.  T.  n.  s.  Exch.  115. 

*"■  Wasson  v.  Lamb,  120  Ind.  514. 

544 


PASS   BOOK.  §  291 

infringed  or  modified  by  reason  of  any  orders  or  by-laws  of 
the  bank.^     When,  however,   the  book  has   been   no  by-law 
balanced  by  the  bank  officer,  has  been  returned  to   f.^ol^^thls'*^'^ 
the  depositor  together  with  his  checks,  and  has  been    "S^t- 
retained  by  him  for  any  length  of  time  without  objection,  the 
matter  becomes  less  clear  upon  principle,  and  the  decisions 
are,  perhaps,  not  wholly  harmonious.     The  object  which  the 
bank  declares  itself  to  have  in  view  is  to  put  the  depositor 
in  the  way  promptly  to  discover  and  demand  correction  of 
any  mistake  existing  in  its  account  with  him. 

(e)  Accordingly,  it  has  been  held  in  England  that  the 
silence  of  the  customer  for  a  reasonable  time  after  receiving 
back  his  books  and  checks  would  be  deemed  an 
admission  on  his  part  of  the  correctness  of  the  in'^accomu'^^ 
balance.^  It  is  not  that  his  right  to  have  the  book  ^^'''^'^• 
amended  to  agree  with  the  fact  has  been  modified ;  but  that 
he  has  lost  that  right  altogether  by  reason  of  his  own  laches 
in  failing  to  demand  the  amendment  earlier. 

And  where  a  depositor  receives  an  account  stated  from  a 
bank  and  acquiesces  in  its  correctness  for  six  years,  he  loses 
his  right  to  object  that  a  check  charged  to  him  was  charged 
by  mistake.^" 

In  Union  Bank  v.  Knapp,  supra,  the  bank-book  was  said  to 
be  0.  transcript  of  the  books  of  the  bank,  and  so,  if  not  ob- 
iected  to,  to  operate  as  a  mutual  acknowledgment  „  , 

.  ,      .  T      T  -i-»  Balance  con- 

of  the  parties  as  to  their  money  dealings.  But  the  elusive  after 
construction  which  this  remark  ought  to  receive  ^^ 
from  the  circumstances  of  the  case,  and  the  course  of  rea- 
soning adopted  by  the  court,  both  go  to  show  that  the  judges 
did  not  mean  to  adopt  the  English  rule.  The  case  really 
arose  and  was  decided  under  the  Statute  of  Limitations. 
They  say  that  the  balance  struck  goes  into  the  new  account 
as  a  single  item,  and  as  such  is  taken  out  of  the  statute ;  but 
that  it  is  taken  out  as  a  solid  amount;  that  the  several  items 
going  to  make  it  up  are  not  taken  out  of   the  statute  and 

5  Mechanics  &  Farmers'  Bank  v.  Smith,  19  Johns.  (X.  Y.)  115. 
•»  Devaynes  v.  Noble,  1  Mer.  541. 
6«  Penn  Bank's  Estate,  152  Pa.  65. 
VOL.  I.  —  35  545 


§  291  GENERAL    DEPOSIT. 

cannot  be  iniiuired  into.  Since  the  court  thus  take  the  pains 
to  say  that  the  items  shall  not  be  looked  into  after  six  years 
from  the  date  of  the  balancing,  which  must  then  be  regarded 
as  conclusive,  it  must  be  inferred  that  they  do  not  mean  to 
regard  the  book  or  the  balancing  as  a  conclusive  "  mutual  ac- 
knowledgment "  of  the  items  at  times  prior  to  the  lapse  of 
that  period.  In  Watson  v.  Phoenix  Bank,'  the  depositor's 
bank-book  was  said  to  be  no  better  evidence  than  the  books 
of  the  bank.  That  is  to  say,  it  is  a  mere  account  drawn  up 
by  bank  officers  and  not  reinforced  by  a  presumption  of  cor- 
rectness growing  out  of  its  possession  by  the  depositor.  The 
best  rule,  as  it  is  the  most  just,  seems  to  be  the  one  laid  down 
in  the  New  York  cases.  In  Weisser  v.  Denison/  the  ruling 
Silence  of  was  Substantially,  that,  if  the  depositor  had  not  ex- 
casts'th^J  amined  and  objected  to  the  account  stated  in  his 
burden  of        l^QQ^i  within  a  reasonable  time  after  it  had  been 

proof  upon 

him-  balanced  and  returned  to  him  with  the  checks,  his 

silence  could  at  most  only  be  j^rvna  facie  evidence  against 
him,  and  would  throw  the  burden  of  proof  upon  him,  instead 
of  leaving  it,  where  it  would  otherwise  rest,  with  the  bank, 
to  prove  its  payments. 

(/)  So  the  depositor  was  allowed  to  show'  that  certain 

checks  charged  against  him  in  the  account  were  forgeries, 

though  a  considerable  time  had  elapsed  since  he 

In  case  of  ^  '■  ^ 

forgery,  the     received  back  his  book.     Johnson,  J.   said,  that, 

depositor  is  i       •  ,.    ,  i         i         i  i      i  i 

now  held  to  in  contemplatioii  of  law  the  book  was  balanced 
care"an"d  diii-  and  the  checks  returned  to  him  for  his  protec- 
mTki'ng^ex-  ^iou,  uot  for  that  of  the  bank.  This  law  certainly 
trief '476-  l^ears  hardly  upon  the  bank,  which,  in  performing 
473.    '  the  task  of  writing  up  the  book  and  in  returning 

the  checks,  which  are  its  own  sole  vouchers  for  the  pay- 
ments made  by  it  on  the  depositor's  account,  has  its  own 
protection  from  precisely  these  tardy  disputes  partially  in 
view,  as  it  may  reasonably  expect  that  any  ordinarily  careful 
man  will  not  long  delay  to  see  that  the  balance  is  correct, 
and  that  the  checks  returned  and  purporting  to  be  his  are  in 

7  8  Met.  (Mass.)  217. 

8  10  N.  Y.  68.     See  also  Shipman  et  al.  v.  Bank,  126  N.  Y.  318. 

546 


ERRORS   IN    ACCOUNTS.  §  291 

fact  genuine.  The  language  used  by  one  of  the  judges  inti- 
mates that  if  in  the  interval  the  bank  had  suffered  any  injury, 
which  it  might  have  escaped  or  avoided  had  it  received  cor- 
rection in  due  season  from  its  depositor,  then  the  rights  of 
the  parties  might  be  affected  by  this  fact  also.  This  last- 
named  case  has  been  cited  with  approval,  and  followed,  in 
Illinois.  A  depositor's  clerk  drew  checks,  wrongfully  sign- 
ing the  depositor's  name,  which  were  all  duly  honored  by  the 
bank.  The  process  was  continued  several  months,  during 
which  time  the  bank-book  was  several  times  written  up,  re- 
turned to  the  depositor,  and  by  him  sent  back  to  the  bank  to 
be  again  written  up,  as  in  the  ordinary  course  of  business. 
He  meantime  did  not  detect  the  fraud  for  about  six  months, 
apparently  because  he  intrusted  the  comparing  of  the  bank- 
book to  this  same  clerk.  The  court  said  that  these  facts  did 
not  conclude  him  as  against  the  bank ;  that  the  writing  up 
the  pass-book  and  returning  the  checks  were  for  the  protec- 
tion of  the  depositor,  not  of  the  bank ;  and  the  depositor's 
failure  to  examine  them  was  not  such  neglig'ence  as  to  exon- 
erate the  bank  from  liability  to  make  good  to  him  the  amount 
of  checks  improperly  paid  and  charged  to  him.^ 

In  Manhattan  Co.  v.  Lydig,^*^  it  was  said  that,  though  the 
depositor  should  not  be  allowed  to  open  the  whole  account, 
yet  after  the  lapse  of  only  a  moderate  time  without  objection 
by  him  he  might  still  be  allowed  to  falsify  certain  particular 
items.  Whether  this  right  ought  to  be  allowed  to  exist  for 
so  long  a  time  as  the  six  years  of  the  Statute  of  Limitations 
may  well  be  questioned.  Probably  such  time  as  the  courts 
should  consider  reasonable,  upon  consideration  of  the  nature, 
course,  and  amount  of  the  dealings  between  the  parties,  would 
be  held  conclusive  against  the  depositor.  For  after  he  has 
passed  many  successive  balancings,  for  many  months  or  years, 
having  meantime  had  multitudinous  transactions  with  the 
bank,  it  might  fairly  be  deemed  an  unreasonable  hardship  if 
he  could  still  be  allowed  to  go  back  and  litigate  to  correct 
an  error  which  he  has  so  long  had  the  means  of  correcting, 

9  Manufacturers'  National  Bank  v.  Barnes,  65  111.  69. 
w  4  Johns.  (N.  Y.)  377. 

547 


§  293  GENERAL   DEPOSIT. 

and  which  the  bank  might  justly  presume  that  any  ordi- 
narily careful  person  could  not  fail  to  have  corrected  long 
since. 

The  weight  of  reason  and  authority  is  now  strongly  in  favor 
of  the  rule  that  the  depositor  must  answer  to  the  bank,  under 
the  general  principles  of  estoppel  and  responsibility  for  loss 
caused  by  negligence,  for  any  damage  resulting  to  the  bank 
by  reason  of  its  having  acted  or  omitted  to  act  upon  faith  of 
the  depositor's  silence,  when  he  might  have  discovered  the 
fraud,  forgery,  or  mistake  by  reasonable  care  in  examining 
his  accounts  with  the  bank.     (§§  470-473.) 

§  292.  Silence  may  estop  the  Depositor  as  to  Charges  and 
Commissions  of  the  Bank.  —  A  different  description  of  case  is 
where  there  is  no  claim  to  correct  a  mistake  in  the  bank- 
book, but  use  is  sought  to  be  made  of  it  in  order  to  conclude 
the  depositor  as  to  a  course  of  dealing,  or  an  implied  agree- 
ment between  himself  and  the  bank.  The  extent  to  which 
the  book  may  be  used  for  this  purpose  is  illustrated  by  the 
following  case.,  A  depositor  had  largely  overdrawn  his  ac- 
count, and  the  banker  in  writing  up  the  bank-book  at  the  end 
of  a  period  of  six  months  had  made  certain  charges  in  the 
way  of  interest  and  commissions  for  his  advances,  and  had 
explained  the  same  to  the  agent  of  the  depositor  (the  deposi- 
tor himself  being  too  ill  to  attend  to  his  affairs).  It  was  held 
that  the  lapse  of  several  months,  without  complaint  made  on 
behalf  of  the  depositor,  was  conclusive  evidence  of  his  acqui- 
escence in  the  charges  made.  But  it  was  also  held  that  it 
was  no  evidence  of  his  acquiescence,  or  agreement  to  acqui- 
esce, in  similar  charges  continued  thereafterward  during  an 
ensuing  period  of  six  months.^ 

§  293.  Bank-book  not  conclusive  as  to  Title  to  the  Deposit. 
—  It  has  been  held  in  England,  that  the  name  in  the  bank- 
book is  not  conclusive  as  to  the  person  with  whom  the  bank 
contracted.  If  money  be  deposited  by  A.  in  his  own  name, 
B.  may  recover  from  the  bank  by  showing  that  the  deposit 
was  in  fact  made  upon  his  account, —  that  he  was  the  princi- 

1  §  292.   Williamson  v.  Williamson,  L.  R.  7  Eq.  542 ;  and  see  Mosse 
V.  Salt,  32  Beav.  269. 
548 


RIGHT   TO   INSPECT  BOOKS.  §  294 

pal  and  the  real  lender,  creditor,  or  depositor.  But  the  evi- 
dence to  this  effect  must  be  very  clear  and  explicit.  ^  See 
§  565. 

§  294.     Right  to  inspect  Books  and  inquire  into  Account.  — 

It  has  been  said  that  "  on  all  proper  occasions  "  a  depositor 
has  a  right  to  inspect  the  books  of  the  bank,  and  that  for  this 
purpose  the  officers  having  charge  of  the  books  ^  are  agents 
of  both  parties.  What  would  be  regarded  as  "  proper  occa- 
sions "  was  not  intimated  ;  and  certainly  such  a  request,  made 
without  notice  by  the  depositor  or  invitation  by  the  bank, 
would  not  improperly  be  regarded  by  the  bank  officers  as  an 
unwarrantable  intermeddling.  The  depositor  not  being  in  any 
respect  responsible  for  the  conduct  of  the  affairs  of  Depositor's 
the  bank,  not  being  a  stockholder  therein,  or  not  fiSto'his 
applying  to  examine  in  that  character,  might  rea-  own  accounts, 
sonably  be  refused  an  inspection  of  all  its  private  affairs.  It 
must  be  supposed  that  the  right  to  examine,  if  fully  consid- 
ered and  passed  upon,  would  be  confined  to  such  portions  of 
the  books  as  relate  to  the  accounts  and  dealings  of  the  bank 
with  the  individual  applicant;  also  that  the  "proper  occa- 
sions "  would  be  very  narrowly  defined.  If  the  depositor  has 
reason  to  think  that  there  is  an  error  in  his  account,  as  shown 
on  the  bank-book,  he  may  reasonably  demand  an  inspection 
at  the  first  convenient  hour;  but  the  reason  of  the  privilege, 
and  doubtless  the  privilege  accordingly,  should  be  confined  to 
such  an  examination  only  as  would  suffice  to  prove  or  refute 
the  suspicion  of  error,  and  could  not  extend  to  the  accounts 
of  other  customers  or  to  the  general  business  of  the  institu- 
tion. It  might  be  highly  injurious  to  the  welfare  of  the  cor- 
poration and  to  the  interests  of  all  concerned  to  have  its 
condition  and  affairs  subject  to  inspection,  and  therefore  to 
publication  and  gossip.  Indeed,  the  bank  might  be  commit- 
ting a  positive  wrong,  for  which  it  might  be  held  to  answer 
in  damages,  if  it  should  allow  one  person  to  examine  the 
accounts  of  others. 

1  §  293.    Sims  v.  Bond,  5  Barn.  &  Ad.  389. 

1  §  294.    Union  Bank  v.  Knapp,  3  Pick.  (Mass.)  96 ;  Watson  v.  Phoe- 
nix Bank,  8  Met.  (Mass.)  217. 

549 


I  294  GENERAL   DEPOSIT. 

(rt)  "When  Bank  may  reveal  the  State  of  a  Customer's  Ac- 
count to  Another.  —  It  has  been  laid  down  that  a  banker 
has  no  right  to  reveal  the  state  of  his  account  with  his  cus- 
tomer. ^  Though  in  the  case  cited  it  has  also  been  doubted 
whether  an  action  for  damages  can  be  maintained  by  the 
customer  against  the  banker  unless  specific  injury  can  be 
shown.  But  this  case  is  a  very  unsatisfactory  precedent, 
since  in  it  the  question  whether  or  not  the  relation  between 
banker  and  customer  created  this  duty  of  secrecy  on  the  part 
of  the  former  concerning  the  balance  of  the  latter  appears, 
for  some  unaccountable  cause,  to  have  been  loft  to  the  de- 
cision of  the  jury.  They  found  that  the  relationship  did 
create  such  a  duty,  and  the  court  allowed  their  finding  to 
remain  undisturbed.  In  another  English  case  it  has  been 
held  that,  where  a  check  is  presented,  and  the  banker  has 
funds  of  the  drawer,  but  not  sufficient  to  meet  this  check, 
the  banker  has  no  right  to  disclose  to  the  holder  of  the 
check  the  amount  of  such  deficiency,  and  so  to  enable  the 
holder  to  pay  in  the  balance  to  the  drawer's  credit  and  then 
procure  the  check  to  be  paid.^ 

It  may   be   very  proper  to  deny  the  general  right  of  a 
banker   to  disclose   the  state  of   an  account  to  satisfy  an 
inquiry,  to  the  possible  great  disadvantage  of  his 
er'srigiu of     customer  (as,    if   the  latter  were   thought   to   be 
inqui'-y-  embarrassed  and  his  account  overdrawn,  his  credit 

might  be  damaged  by  the  appearance  of  his  account,  though 
a  fuller  statement  of  his  arrangements  with  the  bank  would 
"wear  a  different  aspect). 

It  is  no  part  of  the  business  of  a  bank  to  constitute  itself 
a  bureau  of  information,  or  headquarters  for  reporters  and 
gossips.  But  the  case  of  a  check-holder  when  the  funds  are 
insufficient  seems  very  different;  he  has  a  right  to  whatever 
unincumbered  funds  of  the  drawer  are  in  the  hands  of  the 
bank,  a  right  superior  to  any  right  of  the  depositor,  and 
if  the  disclosure  in  such  case  be  a  harm  to  the  depositor  it 
is  his  own  fault  alone,  for  he  drew  the  check  and  author- 

2  Hardy  v.  Veasey,  3  L.  R.  Ex.  107. 
«  Foster  v.  Bank  of  London,  3  F.  &  F.  214. 
550 


RIGHT   TO   INSPECT   BOOKS.  §  294 

ized  the  inquiry.     One  to  whom  the  depositor  has  passed  his 
interest  in  the  deposit  should  have  the  same  right  to  know- 
its  condition  as  the  depositor  possessed.     As  to  the  depositor, 
there  can  be  no  doubt  that  the  bank  should  state  the  amount 
on  hand,  and  give  the  holder  an  opportunity  to  decide  what 
course  he  will  pursue;  and  though  the  strict  contract  of  the 
bank  with  the  depositor  may  perhaps  be  only  to  pay  if  it  has 
sufficient  funds,  it  is  a  public  institution,  receiving  valuable 
franchises  from  the  State,  and  owes  in  return  a  duty  to  the 
public  to  conduct  its  business  in  such  a  manner  as  not  to 
cause  damage  to  those  who  have  dealings  with  it,  by  refusal 
to  do  so  simple  and  costless  an  act  as  to  state  the  true  con- 
dition of  the  deposit  against  which  a  check  is  drawn.     In- 
deed, it  seems  clear  to  us  that  the  duty  of  the  bank  can  be 
placed  on  firmer  ground.     It  would  have  no  right  to  say  to 
a  depositor  inquiring  as  to  his  account,  with  a  check  in  his 
hand,  "  We  agreed  to  pay  your  checks  if  the  funds  were  suffi- 
cient; but  your  check  is  too  large,  and  we  will  have  nothing 
to  do  with  it,  nor  inform  you  of  the  true  amount."     Well, 
then  when  the  depositor  gives  H.  the  check  for  value,  he 
(substantially  and   according  to   the  best   opinion    legally) 
transfers  the  whole  deposit  (if  less  than  the  check)  to  the 
holder  (subject  to  his  acceptance),  and  therefore  the  holder 
has  the  same  right  of  inquiry  of  the  bank  and  as  against  the 
bank  as  the  depositor. 

It  is  unquestionable  that  a  banker  summoned  as  a  witness 
—  a  fortiori  summoned  as  garnishee  —  must  declare  the  bal- 
ance of  his  customer  at  any  given  date.  The  fact  or  knowledge 
cannot  be  regarded  as  a  "confidential  communication."  ^ 

And  if  a  general  creditor  has  a  right  to  know  the  state 
of  the  account  in  this  way,  when  he  inquires  in  the  manner 
provided  by  law  for  making  his  demand  upon  the  deposit,  why 
has  not  such  a  special  creditor  as  a  check -holder  an  equal 
right,  when  he  makes  his  demand  in  the  way  provided  by 
law  for  his  kind  of  demand  on  the  deposit,  namely,  present- 
ment of  his  check? 

*  Loyd  V.  Freshfield,  2  Car.  &  P.  325;  and  see  Forbes's  Case,  41  L.  J. 
Ch.  467. 

551 


§  295  GENERAL   DEPOSIT. 


Note  upon  the  Use  of  Bank-Books  as  Evidence. 

§  295.  The  books  of  the  bank  are  admissible  in  evidence  on  its  behalf.^ 
The  reason,  as  laid  down  in  a  well-known  Massachusetts  case,  is  that 
depositors  have  a  right  "  on  all  proper  occasions  "  to  inspect  the  books  of 
the  bank,  and  therefore  the  officers  having  charge  of  these  books  are  the 
agents  of  both  parties  in  this  portion  of  their  employment.  Also,  because 
the  depositor's  own  bank-book  is  a  transcript  of  the  books  of  the  bank, 
and  in  effect  operates  as  a  mutual  acknowledgment  between  the  parties 
as  to  their  money  dealings.^  This  line  of  reasoning  will  hardly  commend 
itself  as  perfectly  satisfactory.  Practically  speaking,  the  right  of  the  de- 
positor to  examine  the  books  of  the  bank  must  be  exceedingly  limited, 
and  the  "  proper  occasions  "  could  hardly  be  supposed  to  occur  often 
enough  to  make  the  book-keepers  really,  and  in  any  reasonable  sense  of 
the  phrase,  the  agents  of  the  depositor.  They  are  in  no  manner  under 
his  supervision,  nor  would  it  be  possible  for  him  daily  to  examine  their 
entries,  even  if  the  courts  should  hereafter  feel  able  to  assert  the  occa- 
sional right  of  examination  above  declared  to  exist,  when  that  question 
shall  be  directly  raised.  Other  authorities,  though  content  to  admit  the 
books  in  evidence,  yet  lay  down  a  doctrine  contrary  to  that  advanced  in 
the  Massachusetts  opinion,  and  say  that  the  depositor  is  7iot  bound  by  the 
books  of  the  bank,  since  the  persons  who  keep  those  books  are  in  no  sense 
his  agents,  but  are  the  employees  of  the  bank  only.  It  is  true  that  the 
Massachusetts  judges  did  not  declare,  and  did  not  intend  to  declare,  that 
the  depositor  would  be  absolutely  concluded  by  the  books  of  the  bank  ; 
yet  their  reasoning  was  only  a  proper  basis  for  this  conclusion.  The  dis- 
cussion of  the  comparative  merits  of  the  different  courses  is,  however, 
rendered  rather  unprofitable  by  the  fact  that  they  lead  to  the  same  ulti- 
mate conclusion,  and  that  this  is  too  unquestionably  sound  to  suffer  from 
any  criticism  of  the  reasoning  which  has  led  up  to  it.  Either  directly  or 
by  implication,  too  many  authorities  combine  to  assert  the  admissibility 
of  the  books  of  the  bank  to  leave  the  rule  in  any  doubt.2 

The  entries  in  the  books,  when  produced,  must  be  verified  and  sworn 
to  by  the  clerk  who  made  them  if  possible.  But  if  he  is  inacessible, 
proof  that  the  entries  are  in  his  handwriting  will  suffice.^ 

1  §  295.  Bagley  v.  Roberson,  57  Ga.  145 ;  Union  Bank  v.  Knapp, 
3  Pick.  (Mass.)  96  ;  Watson  v.  Phoenix  Bank,  8  Met.  (Mass.)  217  (follow- 
ing and  relying  upon  the  preceding). 

2  Johnson  v.  Farmers'  Bank,  1  Harr.  (Del.)  117;  Meighen  v.  Bank, 
25  Pa.  8t.  288  (by  implication ;  the  books  were  introduced  and  the  theory 
on  which  they  were  kept  was  allowed  to  be  explained  in  that  case)  ; 
Town  of  Concord  i'.  Concord  Bank,  16  N.  H.  26. 

3  Union  Bank  v.  Knapp,  3  Pick.  (Mass.)  96;  Watson  v.  Phoenix  Bank, 
8  Met.  (Mass.)  217;  Johnson  v.  Farmers'  Bank,  1  Uarr.  (Del.)  117. 

552 


BANK-BOOKS   AS   EVIDENCE.  §  295 

(a)  So,  too,  the  cashier  of  the  bank  is  competent  to  prove  the  amount  of 
a  deposit  in  favor  of  the  bank  ;  certainly,  if  the  bank  releases     p^^of  of 
him  from  any  possible  liability  he  may  be  under  to  it  for  any     entries, 
mistake  or  misconduct  of  his  own  in  the  matter ;  and  perhaps  so,  even  if 
the  bank  does  not  thus  release  him.* 

But  if  the  entry  was  actually  made  by  a  clerk,  it  is  said  that  the  clerk 
should  be  summoned  in  person;  for  though  it  is  true  that  the  cashier  has, 
as  a  part  of  his  official  function,  the  charge  of  the  books  and  the  superin- 
tendence of  the  book-keeping,  yet  this  does  not  necessarily  imply  that 
personal  knowledge  of  particular  entries  which  is  necessary  in  order  that 
they  should  be  duly  proved.^  It  is  the  actual  maker  of  the  daily  entries 
who  is  needed.  An  examined  copy  of  the  books  is,  by  itself,  inadmis- 
sible. But  it  has  been  said  that  perhaps,  if  supplemented  by  proof  that 
the  original  entries  were  made  by  an  officer  of  the  bank,  the  officer  him- 
self swearing  to  this  fact ;  or  if  this  be  impossible,  his  handwriting  being 
proved,  the  copy  might  in  a  case  of  sufficient  necessity  be  admitted.^ 

(b)  The  case  of  Watson  i'.  Phoenix  Bank,  adopting  the  views  above 
criticised,  which  were  laid  down  in  the  preceding  case  of  Union    Depositor's 
Bank  V.  Knapp,  says  that  the  depositor's  bank-book  is  no  bet-   ^°'^^- 

ter  evidence  than  the  books  of  the  bank.  Certainly,  if  the  doctrine  of 
the  last-named  case  is  correct,  this  is  an  unavoidable  corollary.  It  has 
been  stated  that  the  depositor  is  under  no  such  positive  obligation  to  ex- 
amine his  bank-book,  when  returned  to  him  after  its  posting  by  the  bank, 
and  to  correct  errors,  that  his  failure  promptly  to  demand  a  correctiou 
can  be  subsequently  construed  as  an  admission  of  correctness.  Neverthe- 
less, the  fact  that  he  has  the  opportunity  offered  him  to  do  this,  and 
that  any  man  of  ordinary  prudence  in  the  conduct  of  his  affairs  would 
do  it,  must  raise  a  certain  presumption  of  the  accuracy  of  the  entries  in 
the  bank-book  stronger  than  any  presumption  which  can  reasonably  arise 
in  favor  of  the  entries  in  the  books  of  the  bank;  for  these,  whatever  may 
be  the  legal  i-ight  of  the  depositor  to  examine  them,  he  in  point  of  fact 
never  does  see. 

(c)  Neither  is  it  correct  to  say  that  the  value  of  these  two  descrip- 
tions of  entries  is  equal,  on  the  theory  advanced  by  the  judge  in  Union 
Bank  r.  Knapp,  that  the  bank-book  is  a  "  transcript  "  of  the  books  of 
the  bank;  for  this  is  not  the  truth.  The  noting  of  the  checks  drawn 
—  that  is,  the  depositor's  debit  account  —  is  probably  made,  when  the 
bank-book  is  posted,  from  the  books  of  the  bank  ;  but  the  entries  of  de- 
posits, which  form  the  at  least  equally  important  credit  side  of  his  account, 
are  made  in  most  cases  by  the  receiving  teller  when  the  bank-book  and 

«  Johnson  v.  Farmers'  Bank,  1  Ilarr.  (Del.)  117. 
^  Williams  v.  Kelsey,  6  Ga.  365. 

*  Philadelphia  Bank  v.  Executors  of  Thos.  Officer,  12  Serg.  &  R.  (Pa.) 
49  ;  Ridgway  v.  Farmers'  Bank,  id.  256. 

553 


§   295  GENERAL   DEPOSIT. 

the  deposit  are  offered  to  biin  together,  and  the  book  is  at  once  returned. 
More  proba-  No  contemporaneous  entry  is  made  on  the  books  of  the 
take'^in^the^'  bank,  and  the  credit  does  not  appear  upon  them  until  at 
bank's  books  ^  later  hour  of  the  day   it  is  copied   on   to   them  from  the 

than  in  the  •'  ■■  _ 

pass-book.  depositor's  memorandum  of  his  deposit,  whicli  he  hands  to 
the  receiving  teller,  and  which  is  checked  as  correct  by  that  officer,  and 
retained  by  him  for  the  very  purpose  of  subsequently  making  up  or  en- 
abling the  book-keeper  to  make  up  the  entries  in  the  books  of  the  bank. 
There  are,  therefore,  obviously  much  greater  means  for  a  mistake  to  creep 
into  the  books  of  the  bank  without  observation,  than  for  the  same  mis- 
take to  appear  in  the  bank-book  of  the  depositor  without  his  observing 
it.  Hence  it  follows  that,  if  the  bank-book  of  the  depositor  does  operate 
as  an  acknowledgment  between  the  parties  (Union  Bank  v.  Knapp),  it  is 
certainly  entitled  to  greater  consideration  than  the  books  of  the  bank, 
which  could  have  the  same  operation  only  by  virtue  of  a  very  questionable 
legal  fiction. 

(d)  In  New  York  it  has  been  held  that  if  the  bank-book  accompanies 
New  York  ^he  deposit,  and  the  credit  is  given  in  the  book  at  the  very 
has  held  time  when  the  deposit  is  made,  it    then    becomes    an  origi- 

pass-book  ^      '■  ^  _ 

conclusive  nal  entry,  and  is  conclusive  upon  the  bank;  though  if  the 
UsuaUy  only  book  were  sent  to  be  written  up  afterwards  this  would  not  be 
prima  facie,  ^j^^  case."'  In  Maine,  it  has  been  declared  generally,  that  any 
credit  in  a  bank-book  may  at  any  time  be  corrected  by  parol  evidence, 
like  any  other  receipt.^  Clearly  the  credit  entries  in  the  bank-book 
are  simply  receipts,  neither  more  nor  less.  There  seems  to  be  no 
reason  why  they  should  not  be  open  to  correction,  equally  with  much 
more  formal  species  of  receipts,  even  though  the  deposit  and  the  entry 
be  contemporaneous. 

The  sound  rule  would  seem  to  be  that  the  depositor's  bank-book,  if  it 
has  been  returned  to  him,  and  he  has  not  within  a  reasonable  time  ob- 
jected to  it,  should  be  regarded  as  prima  facie  evidence  of  the  way  the 
account  stood  between  him  and  the  bank  at  the  date  of  the  last  balancing. 
It  settles  the  presumption  in  the  case,  and  leaves  the  onus  on  the  party 
disputing  it.  If  it  agrees  with  the  books  of  the  bank,  well  and  good  ; 
then  there  can  be  no  use  of  discussing  which  of  them  is  the  better  evi- 
dence, since  both  support  the  same  state  of  facts.  But  if  it  is  at  variance 
with  the  books  (unless  an  error  in  copying  into  it  the  entries  of  drafts 
drawn  can  be  shown),  the  probabilities  are  that  it  is  the  more  correct, 
especially  if  the  credits  have  always  been  made  at  the  time  the  deposits 
were  paid  in.  These  were  contemporaneous  entries,  whereas  the  entries 
in  the  books  were  copies.  The  entries  of  debits  or  of  checks  drawn  are 
copies  from  the  books,  and  a  mere  error  in  copying  ought  to  be  easily 
shown  and  explained.     Further,  both  parties  have  had  access  to  the  bank- 

7  Manhattan  Co.  v.  Lydig,  4  Johns.  (N.  Y.)  377. 

8  Lewis  V.  Eastern  Bank,  32  Me.  9. 

654 


BANK-BOOKS   AS   EVIDENCE.  §  295 

book.  The  bank  itself  has  made  it  up,  and  the  depositor,  unless  he  is  an 
exceptionally  careless  man,  has  examined  it,  at  least  with  sufficient  care 
to  see  that  the  balance  is  correct.  Every  presumption  arising  from  the 
actual  course  of  dealing  of  the  parties  favors  the  correctness  of  the  bank- 
book to  the  extent  above  asserted,  that  is,  in  respect  to  the  last  balanc- 
ing, when  the  depositor  has  since  that  time  had  it  in  his  hands  long 
enough  to  make  it  natural  to  suppose  that  he  has  examined  it.  No 
equally  strong  presumptions  arise  in  favor  of  the  books  of  the  bank. 
This  is,  however,  strictly  a  mere  presumption  that  is  claimed  in  favor  of 
the  bank-book,  which  may  of  course  be  at  any  time  refuted.  The  bank 
may  show  an  error  in  the  credits,  which  are  its  receipts,  or  an  error  or 
omission  in  the  debits,  which  only  purport  to  be  a  copy  from  its  books, 
and  are  not  an  original  instrument.  The  depositor  is  under  no  positive 
legal  obligation  to  examine  the  book  or  to  object  to  its  accuracy  within 
any  specific  time.  Therefore,  it  is  always  open  to  him  after  any  lapse  of 
time  to  object  to  it,  precisely  as  it  is  open  to  any  person  to  object  to  the 
accuracy  of  an  account  rendered  to  him  by  one  with  whom  he  has  financial 
dealings. 

(e)  An  entry  in  a  bank-book  was  as  follows:  "  1861,  Dec.  30th,  cash 
(coin)  $3000."     The  bank  had  at  the  time  ceased  to  pay  in 

•  ■,      1  1       ,  ■  1  ,1  ,       ,      r        ,  Entries  com- 

specie,  and  when  the  depositor  subsequently  drew  checks  tor  this  petent  evi- 
amount,  payable  in  gold  coin,  the  bank  refused  to  pay  in  coin,  nature°of  a  * 
and  offered  the  "  legal  tender  notes  "  of  the  United  States  gov-  "ieposit. 
ernment.  The  court  held  that  this  single  entry  was  competent  evidence  for 
the  plaintiff  (in  a  suit  to  recover  the  gold  coin  or  its  equivalent  in  "  legal 
tender  notes  ")  for  the  purpose  of  verifying  the  testimony  of  a  witness  con- 
cerning the  circumstances  of  the  dejaosit,  and  of  showing  the  nature  of  the 
particular  entry  made  by  the  bank  officer  at  the  time  as  indicative  of  the 
character  of  the  deposit  in  question  ;  also,  that  plaintiffs  were  not  bound 
to  put  in  evidence  all  the  other  entries  in  the  book,  but  that  it  was  suffi- 
cient if  the  book  was  placed  in  the  power  of  the  defendant  to  be  used 
as  evidence  for  any  legitimate  purpose;  also  that  plaintiff  might  exi^lain 
any  ambiguity  in  the  entry  itself  by  evidence  that  by  general  and  well 
known  usage  of  the  banks  of  that  city  an  entry  of  this  kind  imported  an 
agreement  to  return  the  deposit  in  kind,  but  that  such  usage  could  not 
be  proved  by  showing  a  few  particular  instances.^ 

Parol  evidence  is  admissible  to  explain  an  abbreviated  or  short  entry 
in  a  bank-book,  as  being  in  the  nature  of  a  cipher  or  technical  term.w 

(/)  That  a  matter  is  of  such  a  nature  that  it  ought  to  appear,  or  might 
naturally  be  expected  to  appear,  upon  the  records  or  the  books    Absence  of 
of  the  bank,  is  no  objection  to  a  substantiation  of  it  by  parol    record  does 
testimony.     This  rule  is  not  affected  by  the  fact  that  the  bank   elude. 


9  Chesapeake  Bank  v.  Swain,  29  Md.  483. 

"  Wingate  v.  Mechanics'  Bank,  10  Barr  (Fa.),  104. 


555 


I  295  GENERAL   DEPOSIT. 

Parol  may  be  offers  its  books  and  records,  in  which  no  such  matter  appears, 
though  Stat-  For  there  is  no  necessary  legal  obligation  upon  a  bank,  unless 
a^record!'^^^  by  virtue  of  express  imperative  legislation,  to  keep  any  record, 
or  a  thorough  record,  even  of  the  formal  votes  of  the  board 
of  directors.  And  though  express  legislation  should  in  any  case  require 
such  a  record  to  be  kept,  yet  the  requisition  would  probably  be  only 
directory  in  its  nature,  and  if  neglected  the  vote  would  still  remain 
equally  valid,  though  unrecorded.  So  also  authority,  sanction,  and  rati- 
fication, though  properly  the  subject  of  recorded  corporate  action,  may 
all  be  based  upon  conclusive  presumptions  of  law  growing  out  of  acts 
and  dealings  and  other  matters  wholly  independent  of  any  proceedings 
appearing  of  record  or  capable  of  so  appearing.  If  the  party  to  the  suit 
seeks  to  show  facts  and  circumstances  which  either  prove  a  vote  or  other 
corporate  action  to  have  been  had,  or  which  by  legal  implication  raise  in 
his  favor  a  presumption  of  such  vote  or  action,  the  effect  of  which  pre- 
sumption the  law  will  not  allow  the  corporation  to  evade  by  showing 
that  no  such  vote  or  action  was  taken,  he  may  do  so  by  any  means  in 
his  power.  He  cannot  be  shut  off  from  his  rights  because  the  means  of 
proving  them  are  not  furnished,  as  they  ought  to  be,  by  the  corporate 
records.  Hence  it  is  a  sound  rule  that  the  absence  from  corporate 
records  of  notice  of  a  fact,  which  if  it  existed  ought  to  be  stated  there, 
is  not  conclusive  of  the  non-existence  of  that  fact,  and  does  not  preclude 
positive  parol  testimony  offered  to  establish  it.^^ 

11  Concord  v.   Concord  Bank,    16  N.   H.    26;   Edgerley  v.   Emerson, 
3  Fost.  (X.  H.)  555. 


556 


CHAPTER  XIX. 

CERTIFICATES   OF   DEPOSIT. 

§  296.  Analysis. 
§  297.   Form.     §  51. 

May  vary  from  a  simple  receipt  to  a  full  express  promise  to  pay, 
with  words  of  negotiability. 
§  299.    Signature.     §  744. 

Of  the  cashier  is  sufficient,  though  a  statute  requires  the  bank's  con- 
§  297.  tracts  to  be  otherwise  signed. 

Nature  and  Effect. 

A  certificate  of  deposit  bears  a  close  resemblance  to  a  promissory 
note  on  demand,  and  is  by  some  courts  held  identical  with  such 
a  note,  so  that  suit  may  be  brought  upon  it  without  demand,  and 
§  298.  the  Statute  of  Limitations  runs  from  date  or  delivery,  whichever 

is  latest.     But  the  weiglit  of  reason  and  authority  is  to  the  effect 
that  it  is  intended  as  a  continuing  security,  and  that  the  bank  is 
not  in  default  until  demand  is  made,  so  that  demand  is  necessary 
before  a  right  of  action  can  arise  to  set  the  statute  running. 
§  298.         If  there  are  no  words  of  promise  in  the  instrument,  they  are  im- 
plied, though  a  New  York  case  holds  that  such  a  certificate  is  a 
simple  receipt  and  not  even  a  contract,  but  subject  to  control  by 
evidence  parol. 
Negotiability.     §  9,  n.  9,  §  374. 
§  299.  A  certificate  is  negotiable  if  it  contains  negotiable  words,  and  is 

payable  in  money. 
"  Currency  "  and  "  current  funds  "  are  considered  to  mean  money, 
though  tliere  are  cases  to  the  contrary. 
§  300.   Transfer  of  Certificate. 
By  indorsement. 
Without  indorsement. 
Statute  of  Limitations.    §  321. 
§  301.  Analysis. 

§  302.   Staleness. 

Thirty-one  days  does  not  make  a  certificate  stale. 
Six  years  has  been  held  to  do  so. 
§  303.         Seven  years  has  been  held  not  to  do  so. 

Payment  by     (§§  490,  637). 
§  304.         A  certificate  of  deposit  is,  like  a  check,  presumed  to  be  only  condi- 
tional payment. 

557 


§  297  CERTIFICATES   OF   DEPOSIT. 

§  305.  But  a  collecting  bank  may  take  its  own  certificates  in  payment  to 

tlie  absolute  discharge  of  the  debtor,  though  the  bank  becomes  in- 
solvent before  remitting  to  the  creditor ;  the  transaction  is  equiva- 
lent to  payment  of  the  certificate  and  repayment  of  the  money  to 
tlie  bank.  But  if  the  taking  is  a  fraud,  by  reason  of  the  condition 
of  the  bank  at  the  time  of  receiving  the  certificate  as  payment,  the 

§  305.  depositor  will  be  preferred  to  the  general  creditors  of  the  bank,  he 

having  ordered  the  bank  to  collect  and  remit. 

§  306.   Lost  Certificate.     §§  305  A,  649. 

§  307.   Interest  on  Certificate.     §  309. 

§  308.   Alternate  Certificate. 

Where  the  deposit  is  payable  to  the  order  of  S.  or  of  E.,  his  wife, 
if  S.  dies,  E.'s  power  is  revoked.  This  interpretation  has  been 
questioned. 

§297.  Form. — A  certificate  of  deposit,  or  the  written 
acknowledgment  of  the  bank  that  it  has  received  from  a 
certain  person  a  certain  sum  on  deposit,  is  an  instrument 
occasionally  issued.  Chiefly  it  is 'given  to  persons  not  regu- 
lar customers  of  the  bank  and  not  designing  to  become  such, 
but  who  have  for  some  reason,  and  on  some  isolated  occasion, 
desired  to  leave  a  sum  of  money  in  the  custody  of  the  bank. 
Sometimes,  though  more  rarely,  a  regular  customer,  having 
some  special  object  to  subserve,  may  desire  such  a  certificate. 
In  form  they  are  substantially  simple  receipts  of  the  bank,  in 
negotiable  form,  for  so  many  dollars,  and  so  are  only  evidence 
of  an  indebtedness,  like  the  bank-book. 

An  instrument  saying,  "Due  A.  A.,  trustee,  $4,000,  re- 
turnable on  demand.  It  is  understood  that  this  sum  is 
specially  deposited  with  us  and  is  distinct  from  the  other 
transactions  with  said  A.  A.,"  —  was  held  a  certificate  of 
deposit.^ 

So,  "Received  from  L.  -'^1,600  on  deposit,  in  national  cur- 
rency," was  held  a  certificate  of  deposit. ^ 

The  words  "  to  be  left  six  months  "  renders  the  instrument 
a  "time,"  and  not  a  "demand"  certificate,  maturing  at  the 
expiration  of  six  months. 2" 

A   certificate  of  deposit  as  follows:  "This  certifies  that 

1  §  297.    Smiley  v.  Fry,  100  N.  Y.  2G2. 

2  Long  V.  Straus,  107  Ind.  94. 

2«  Towle  V.  Starr,  67  Minn.  370  (1897). 
558 


ARE   THEY   PROMISSORY   NOTES?  §  298 

A.  B.  has  deposited  in  this  bank  -13,000  payable  to  the  order 
of  self  in  current  funds  on  return  of  this  certificate  properly 
indorsed;  this  deposit  not  subject  to  check;  with  interest  at 
six  per  cent  if  left  six  months  ;  no  interest  after  six  months," 
is  overdue  so  as  to  charge  purchasers  with  notice  of  equities 
after  the  expiration  of  six  months,  and  not  until  then. 2* 

A  certificate  payable  twelve  months  from  date,  but  "pay- 
able in  six  months  if  desired,"  is  due  in  twelve  months.  The 
privilege  of  payment  at  the  end  of  six  months  is  to  be  availed 
of,  only  at  the  election  of  the  payee  or  his  indorsee. ^'^ 

Ordinarily,  the  signature  of  the  cashier  to  the  certificate  is 
sufficient.  Though  it  is  a  contract  in  strict  law,  and  though 
statutes  often  designate  the  manner  in  which  "  con-    ^. 

,  -,  .        Signature. 

tracts  "  shall  be  signed,  yet  the  phrase  thus  used  in 
the  statutes  has,  by  sheer  force  of  necessity  and  common 
sense,  been  construed  by  the  courts  not  to  apply  to  those  in- 
struments which  by  the  daily  course  of  business  in  all  bank- 
ing institutions  the  cashier  alone  is  wont  to  execute,  and 
among  which  the  simple  receipt  and  promise  to  repay,  which 
constitute  a  certificate  of  deposit,  are  to  be  included.'^ 

§  298.  Nature  and  Effect.  — The  practical  ease  with  which 
the  holder  of  such  a  receipt  can  transfer  it  for  value  received, 
or  pledge  it  as  security,  has  led  to  considerable  litigation 
upon  such  instruments.  They  have  been  held  to  be  in  fact 
equivalent  to  promissory  notes.  ^  They  create  no  trust  rela- 
tion between  depositor  and  the  bank,  but  merely  that  of 
debtor  and  creditor,  i"  Usually  they  embody  an  express 
promise,  in  terms,  to  pay;  but  even  if  they  do  not,  they  are 

26  Kirkwood  v.  First  National  Bank,  40  Neb.  485  (1894). 

2^  Citizens'  Bank  v.  Jones,  121  Cal.  30  (1898). 

'  See  the  following  cases  :  Curtis  v.  Leavitt,  15  N.  Y.  19 ;  Barnes  v. 
Ontario  Bank,  19  N.  Y.  152;  State  Bank  v.  Kain,  1  Breese  (III.),  45; 
State  Bank  v.  Lock,  4  Dev.  (N.  C.)  533. 

1  §  298.  Cate  v.  Patterson,  25  Mich..  191 ;  Mills  v.  Barney,  22  Cal. 
240 ;  Curran  v.  Whitter,  65  Wis.  16. 

1"  Leaphart  v.  Bank,  45  S.  C.  563  (1895),  citing  Forgarties  and  Still- 
man  V.  State  Bank,  12  Rich.  (S.  C.)  518;  Buckley  r.  Bank,  39  S.  C.  291 ; 
Simmon  v.  Bank,  41  S.  C.  188;  Thomasson  v.  Bank,  45  S.  C.  570  (1895), 
citing  Leaphart  v.  Bank,  supra  :  State  v.  Shove,  96  Wis.  1  (1897). 

559 


§  298  CERTIFICATES   OF    DEPOSIT. 

yet  the  bank's  acknowledgment  of  its  indebtedness,  and  so 
are  of  nearly  the  same  effect  as  if  they  expressly  promised 
payment.  Substantially,  therefore,  they  resemble  promissory 
notes,  and  the  courts  have  always  inclined  to  regard  them  as 
such,  especially  when  they  are  made  payable  otherwise  than 
immediately  and  upon  demand.  But  this  is  not  a  necessary 
feature.2  If  they  are  payable  at  a  future  day  certain,  they 
arc  simply  promissory  notes,  neither  more  nor  less.  If  a 
bank  cannot  issue  its  negotiable  promissory  note,  neither  can 
it  issue  a  negotiable  certificate  of  deposit  of  this  description. 
If  the  note  would  be  void,  so  likewise  is  the  certificate. 

If  a  bank  cannot  lawfully  issue  promissory  notes,  it  cannot 
issue  certificates  of  deposit  payable  at  a  future  day  with  inter- 
est, and  their  illegality  affects  all  parties,  however  innocent.^ 

If,  however,  the  bank  is  empowered  to  issue  promissory 
notes  subject  only  to  the  restriction  that  it  shall  issue  none 
which  are  designed  to  pass  into  circulation  as  currency,  but 
only  such  as  become  necessary  in  the  ordinary  course  and 
conduct  of  its  affairs,  and  are  strictly  business  paper,  then  it 
may  issue  certificates  of  deposit,  whether  payable  on  demand 
or  otherwise,  subject  only  to  the  same  restriction.  By  reason 
of  the  ease  with  which  such  instruments  may  be  used  for  cir- 
culation, the  courts  have  often  been  rigid  in  scrutinizing 
them,  and  applying  the  strict  letter  of  the  law  to  them ;  but 
they  have  never,  that  we  have  found,  substantially  modified 
or  departed  from  the  general  principles  above  laid  down.'*    If 

2  Poorman  v.  Mills,  35  Cal.  118;  Beardsley  v.  AYebber,  104  Mich. 
88. 

8  Bank  of  Peru  v.  Farnsworth,  18  111.  563;  Bank  of  Orleans  v.  Merrill, 
2  Hill  (N.  Y.),  295;  Ontario  Bank  v.  Schermerhorn,  10  Paige  (N".  Y.), 
109 ;  Bank  of  Chillicothe  v.  Dodge,  8  Barb.  (N.  Y.)  233. 

4  Curtis  V.  Leavitt,  15  N.  Y.  19;  Leavitt  v.  Palmer,  3  Comst.  (N,  Y.) 
19  ;  Barnes  v.  Ontario  Bank,  19  N.  Y.  152  ;  Bank  of  Orleans  i,-.  Merrill, 
2  Hill  (N.  Y.),  295;  Southern  Loan  Co.  v.  Morris,  2  Barr  (Pa.),  175 
Craig  I'.  State  of  Missouri,  4  Pet.  433 ;  Miller  v.  Austen,  13  How.  218 
Kilgore  v.  Bulkley,  14  Conn.  3G2 ;  Laughlin  v.   Marshall,  19  111.  390 
Bank  of  Peru  v.  Farnsworth,  18  id.  563;  Lindsey  v.  McClelland,  18  Wis. 
481 ;  White  v.  Franklin  Bank,  22  Pick.  (Mass.)  181;  Bank  of  Chillicothe 
V.  Dodge,  8  Barb.   (N.  Y.)  233  ;  Bank  Commissioners  v.   St.  Lawrence 
Bank,  3  Seld.  (N.  Y.)  513;  Cate  v.  Patterson,  25  Mich.  191;  Pardee  v. 
560 


•    ARE   THEY    PROMISSORY    NOTES  ?  §  298 

the  certificate  be  in  law  a  promissory  note,  the  same  rules  as 
to  indorsements  in  blank,  the  right  of  the  holder  to  sue, 
grace,  presentment,*"  &c.,  which  govern  promissory  notes, 
will  also  govern  the  certificate.^ 

Massachusetts  distinguishes  a  certificate  of  deposit  from  a 
promissory  note  payable  on  demand,  because  the  certificate 
states  the  deposit  of  a  sum  of  money  by  the  person  certificate  of 
to  whom  it  is  issued,  and  more  especially  because  promissory* 
it  is  not  payable  until  demand  is  made  and  the  ^^^^  mereh'. 
certificate  is  either  returned  or  tendered.  It  says  also  that 
they  are  designed  to  circulate  as  money,  like  bills  of  the  bank, 
and  to  be  used  for  convenience  and  safety.  Such  a  certifi- 
cate is  therefore  said  not  to  come  within  the  language  of  the 
Massachusetts  Revised  Laws,  c.  73,  §  70,  making  a  promis- 
sory note  on  demand  in  the  hands  of  a  third  party  subject  to 
all  the  equities  between  the  original  parties.^ 

If  there  are  no  words  of  promise,  the  instrument  is  a  simple 
receipt ;  "^  and  in  this  case  it  was  held  that  it  was  not  a  written 
contract  within  the  rule  excluding  parol  evidence  to  contra- 
dict or  vary  it. 

But  in  Indiana  this  case  has  been  severely  criticised,  as 
based  on  no  authority,  and  as  inconsistent  with  the  holdings 
of  many  courts  to  the  effect  that  a  written  order  for  property 
is  a  contract  containing  a  promise  to  pay.^  The  law  imports 
into  the  order  a  promise  to  pay,  and  no  parol  evidence  of  a 
previous  or  concurrent  agreement  can  be  admitted  to  vary  it. 

Fish,  60  N.  Y.  265;  Miller  v.  Austen,  13  How.  (U.  S.)  218;  Poorman  v. 
Mills,  35  Cal.  118,  and  other  Californian  cases  therein  cited. 

<»  Towle  V.  Starr,  67  Minn.  370  (1897). 

6  Poorman  v.  Mills,  35  Cal.  118 ;  Pardee  v.  Fish,  60  N.  Y.  265;  Miller 
V.  Austen,  13  How.  (U.  S.)  218. 

6  Shute  ;;.  Pacific  National  Bank,  136  Mass.  487  ;  citing  Bellows  Falls 
Bank  v.  Rutland  County  Bank,  40  Vt.  377 ;  Munger  v.  Albany  County 
Bank,  85  N.  Y.  580;  Merchants'  Bank  v.  State  Bank,  10  Wall.  604. 

'  Hotchkiss  V.  Mosher,  48  N.  Y.  482. 

8  Long  V.  Straus,  107  Ind.  94;  Garmire  v.  State,  104Ind.  444;  Ander- 
son V.  State,  65  Ala.  553 ;  State  v.  Keeler,  80  N.  C.  472  ;  Commonwealth 
V.  Fisher,  17  Mass.  46 ;  United  States  v.  Book,  2  Cranch  C.  C.  294  ;  People 
V.  Shaw,  5  Johns.  (N.  Y.)  236 ;  State  v.  Morgan,  35  La.  An.  293 ;  Burke  v. 
State,  66  Ga.  157. 

VOL.  I.— 36  561 


§  299  CERTIFICATES   OF    DEPOSIT. 

It  seems  clear,  however,  that,  unless  there  is  in  the  instru- 
ment an  undertaking  to  pay,  it  is  not  a  promissory  note.^ 

§  299.  Negotiability  of  Certificates  of  Deposit.  —  A  certifi- 
cate of  deposit  may  or  may  not  be  made  negotiable.  It 
may  be  made  payable  to  A.  B.,  when  it  is  not  negotiable. 
It  may  be  made  payable  to  A.  B.  or  order,  when  it  is  nego- 
tiable by  indorsement.  It  may  be  made  payable  to  A.  B. 
or  bearer,  when  it  is  negotiable  by  simple  delivery. 

The  best  view  is  that  a  certificate  of  deposit  is  negotiable 
if  it  contains  words  of  negotiability,  as  to  A.  B.  or  order,  or 
Best  view  to  bearer, ^  though  Pennsylvania  does  not  agree  to 
no^tiabir'  ^^"^5  ^^^  ^  Certificate  bearing  interest,  and  payable 
Pa.  contra.  Q^\y  ^q  ^he  Order  of  the  depositor  on  return  of  the 
certificate,  was  held  to  be  only  a  special  agreement  to  pay  to 
any  one  presenting  the  certificate  and  depositor's  order,  and 
not  a  negotiable  note;^  and  a  holder  taking  by  indorsement 
after  attachment  of  the  fund  by  a  creditor  of  the  depositor 
takes  subject  to  the  attachment.^ 

(a)  It  has  been  held  that  if  it  be  expressed  as  payable  "in 
currency,"  or  "in  current  funds,"  or  the  like  phraseology,  it 
"In  current  is  uot  negotiable,  because  it  is  not  made  payable  in 
'"currency"  moncy,  but  in  that  which  at  the  time  of  payment 
held  not         jjjjj^y  Q^.  jjj^y  QQ^  \jQ  money.     A  tender  in  any  of  the 

8  1  Amer.  L.  Cas.  307. 

1  §  299.  Miller  v.  Austen,  13  How.  218:  O'Xeill  v.  Bradford,  1  Finn. 
(Wis.)  390;  1  Parsons  on  Bills,  26;  Frank  y.  Wessels,  64  N.  Y.  155; 
Pardee  v.  Fish,  60  N.  Y.  268;  Bellows  Falls  Bank  v.  Rutland,  40 
Vt.  377  ;  Laughlin  v.  Marshall,  19  111.  390 ;  Fultz  v.  Walters,  2  Mont. 
165 ;  Drake  v.  Markle,  21  Ind.  433  ;  Tripp  v.  Curtenius,  36  Mich.  494 
(1877);  Bank  of  Peru  v.  Farnsworth,  18  111.  563;  Lynch  v.  Goldsmith, 
64  Ga.  42;  Gregg  v.  Union  Co.  National  Bank,  87  Ind.  238;  National 
State  Bank  v.  Ringel,  51  Ind.  393;  Blood  w.  Northrup,  1  Kans.  28;  Piner 
V.  Clary,  17  B.  Mon.  (Ky.)  645;  Talladega  Ins.  Co.  v.  Woodward,  44 
Ala.  287;  Fells  Point  Savings  Institution  v.  Weedon,  18  Md.  528;  Poor- 
man  V.  Mills,  35  Cal.  118  ;  Brummagim  v.  Tallant,  29  Cal.  503;  Weltonw. 
Adams  &  Co.,  4  Cal.  37  ;  Mills  v.  Barney,  22  Cal.  240  ;  Howe  v.  Hartness, 
11  Ohio  St.  449;  Bean  v.  Briggs,  1  Iowa,  488. 

2  Patterson  v.  Poindexter,  0  Watts  &  S.  (Pa.)  227  ;  Charnleyu.  Dallas, 
8  Watts  &  S.  (Pa.)  353 ;  Gillespie  v.  Mather,  10  Pa.  28. 

8  Lebanon  Bank  v.  Morgan,  28  Pa.  St.  452. 
562 


NEGOTIABILITY.  §  299 

circulating  notes  of  the  banks  of  the  State  would  seem 
sufficient  to  satisfy  the  requirements  of  an  instrument  so 
worded ;  and  courts  will  not  consider  current  funds  to  be 
necessarily  either  money  or  equivalent  to  money.* 

In  Indiana/  Pennsylvania,^  and  North  Carolina,^  a  certifi- 
cate of  deposit  payable  "  in  current  funds  "  is  not  regarded 
as  payable  in  "  money,"  and  is  therefore  not  negotiable.  But 
the  better  opinion  is  that  "currency"  or  "current  funds" 
means  money  and  does  not  interfere  with  the  negotiability  of 
the  certificate. 

(6)  "Currency"  in  a  certificate  of  deposit  means  money, 
including  bank  notes,  which,  though  not  an  abso-  uQu^renc  " 
lute  legal  tender,  are  issued  by  authority  of  law,  beUi  to  mean 

IT  1       •         1    i^'  J.  money. 

and  are  in  actual  and  general  circulation  at  par 
with  coin.     Sach  certificates  are  negotiable.^ 

(c)  A  certificate  of  deposit  payable  in  current  "in current 
funds  is  negotiable.  9  *"°*^*-" 

In  an  Iowa  case  a  bank  having  for  collection  a  certificate 
payable  "in  current  funds"  protested  it  without  allowing 
grace,  thereby  discharging  the  indorser.  There 
were  in  evidence  two  customs :  (1)  to  regard  cur- 
rent funds  as  meaning  legal  tenders  and  national  bank  notes, 
thereby  making  the  certificate  negotiable,  and  as  it  was  pay- 
able one  year  after  date,  it  was  entitled  to  grace ;  (2)  a  local 
usage  of  the  banks  to  regard  such  certificates  as  payable 
without  grace.  It  was  held  that  the  bank  was  bound  to  know 
the  law,  but  was  not  held  to  knowledge  of  the  first  usage,  and 

*  Ford  V.  Mitchell,  15  Wis.  304,  and  cases  cited;  Piatt  v.  Sauk  County 
Bank,  17  id.  222;  Lindsay  r.  McClelland,  18  id.  481. 

5  National  State  Bank  of  Lafayette  v.  Ringel,  51  Ind.  393  (1875). 

6  McCorraick  v.  Trotter,  10  Serg.  &  Rawle  (Pa.),  94;  Wharton  v. 
Morris,  1  Dall.  125. 

7  Johnson  v.  Henderson,  76  N.  C.  227. 

8  Klauber  v.  Biggerstaff,  47  Wis.  551 ;  Drake  v.  Markle,  21  Ind. 
433. 

9  Citizens'  National  Bank  v.  Brown,  11  N.  E.  799  (Ohio,  June,  1887); 
Whiteman  v.  Childress,  6  Humph.  (Tenn.)303;  Kirkpatrick  v.  McCul- 
lough,  3  Humph.  (Tenn.)  171;  Simpson  r.  Moulden,  3  Cold.  (Tenn.) 
429. 

563 


R  301  CERTIFICATES   OF   DEPOSIT. 

that  the  second  usage  protected  it  from  the  charge  of  negli- 
gence brought  by  the  holder.  ^^ 

When  in  making  out  a  certificate  for  a  special  deposit  the 
teller  by  mistake  makes  it  payable  "  in  current  funds  "  instead 
of  "in  certain  notes,"  the  bank  is  only  liable  to  retire  the 
notes  constituting  the  special  deposit." 

§  300.  Transfer  of  Certificates.  —  A  certificate  of  deposit 
prima  facie  represents  an  undertaking  on  the  part  of  the  bank 
to  pay  the  depositor  on  demand,  and  a  transfer  of  the  certifi- 
cate will  transfer  all  the  rights  possessed  by  the  depositor 
against  the  bank  in  respect  to  the  deposit. ^  It  is  an  agree- 
ment to  pay  the  holder  of  the  certificate  properly  indorsed, 
and  the  bank  is  liable  to  a  bona  fide  holder  though  it  has 
already  paid  the  deposit  to  the  depositor. ^ 

S.,  who  owed  P.  $388,  made  a  deposit  of  $388  intended 
for  P.  ;  by  P.  's  consent  the  deposit  became  his,  with  com- 
plete title  by  indorsement  to  him  of  the  certificate  of 
deposit.^ 

A  third  person  may  become  the  owner  of,  and  have  a  right 
to  demand  payment  upon,  a  certificate  of  deposit  without  in- 
dorsement, even  though  it  be  payable  to  order.     As 

Ownership  '  ^  °  \.  Vrr      i  •  t  j 

may  exist  where  H.  deposited  money  of  \Y.,  his  wi±e,  and 
dorsement,"  took  a  Certificate  of  deposit  payable  to  H.  or  order, 
certiicVtels  which  he  gave  to  W.  without  indorsing.  W.  de- 
to  order.  sanded  payment  from  the  bank,  notifying  it  of  her 
right  to  the  fund,  and  H.  also  claimed  the  money.  It  was 
held  that  the  bank  must  pay  W.^ 

§  301.  statute  of  Limitations.  (See  §  321.)  — Runs  on  a 
certificate  of  deposit,  — 

10  Haddock  v.  Citizens'  National  Bank,  53  Iowa,  542  (1880).  See 
Mechanics'  Bank  v.  Merchants'  Bank,  6  Met.  (Mass.)  13,  where  a  usage 
of  Boston  banlcs  to  protest  post  notes  without  grace  was  admitted  to 
protect  a  bank. 

"  Niblack  v.  Cosier,  80  Fed    596  (1897). 

1  §  300.    Miller  v.  Austen,  13  How.  228. 

2  National  Bank  v.  Washington  County  National  Bank,  5  Hun  (N.  Y.), 
605. 

'  8  Phillips  V.  Franciscus,  52  Mo.  370  (1873). 
*  Cassidy  v.  First  National  Bank,  30  Minn.  86. 
564 


CERTIFICATES   OF    DEPOSIT.  §  302 

(1)  From  demand,  according  to  the  better  opinion,  it  be- 
ing intended  to  circulate  as  money,  so  far  as  to  make  it  a 
continuing  security,  and  the  very  nature  and  terms  of  the 
contract  making  the  deposit  payable  only  on  demand,  thus 
reversing  the  rule  that  applies  to  notes  ordinarily,  requiring 
the  maker  to  seek  out  the  creditor  and  pay  him;  and  it  may 
be  added  that,  since  the  best  authorities  hold  that  a  deposi- 
tor cannot  sue  the  bank  for  his  deposit  before  demand 
(except  in  special  cases),  and  that  the  statute  only  runs 
against  the  deposit  from  such  demand,  and  since  the  certifi- 
cate of  deposit  is  only  evidence  of  the  contract  which  exists 
in  every  case  of  deposit,  implied  if  not  expressed,  therefore 
it  should  be  subject  to  the  same  rules.  Merely  writing  down 
a  contract  does  not  change  its  nature.  The  bank  is  in  no 
default  until  demand  is  made. 

(2)  To  the  contrary,  there  are  some  cases  holding  that 
the  certificate  is  a  promissory  note,  and  subject,  along  with 
such  notes,  to  the  rule  that  no  demand  is  necessary  before 
suit,  and  that  the  statute  runs  from  the  date,  or  from  the 
delivery  (whichever  is  latest),  of  the  instrument. 

§  302.  Certificates  of  Deposit  and  the  Statute  of  Limitations. 
—  A  certificate  of  deposit  is  in  legal  effect  a  prom-  g^_  ^^^^  ^.^^ 
issory  note,   is  due  immediately,  and  no  demand   statute  runs 

•^  '  „     ^  .      .        .  from  date. 

is   necessary    to   set   the    Statute   of   Limitations 
running.  1 

(a)  In  the  case  cited  from  Michigan,  the  court  thought 
that,  as  a  certificate  of  deposit  is  a  promissory  note  payable 
on  demand,  the  principles  governing  such  notes  should  be 
applied.  It  did  not  then  perceive  the  effect  of  the  facts 
that  a  certificate  of  deposit  is  meant  to  circulate  as  money, 
and  is  evidently  intended  to  be  a  continuing  security,  <fcc.  ; 
but  in  a  later  case  the  Michigan  court  said  that,  if  second  view 
the  question  were  open,  it  should  decide  with  New   favored. 

1  §  302.  Mitchell  v.  Wilkins,  33  N".  W.  CMinn.)  910,  following  Cassidy 
V.  Bank,  30  Minn.  87;  Brummagira  v.  Tallant,  29  Cal.  503;  Curran  v. 
Witter,  31  N.  W.  705  (Wis.,  March,  1887);  Meador  v.  Dollar  Savings 
Bank,  56  Ga.  605;  Tripp  v.  Curtenius,  36  Mich.  494;  Curran  v.  Witter, 
68  Wis.  16;  Mitchell  v.  Easton,  37  Minn.  335. 

565 


§  302  CERTIFICATES   OF   DEPOSIT. 

York  that  a  certificate  of   deposit  did  not  become  due  till 
demand. 2 

(6)  Where  the  certificate,  as  is  not  unfrequently  the  case, 

states  that  the   amount  is  payable  "on  the  return   of   this 

certificate,"  or  on  its  presentment,  or  other  such 

The  two  1  .     1 

views.  phrase,  this  language  does  not  alter  the  legal  effect 

of  the  instrument.  As  a  promissory  note,  naming 
no  place  of  payment,  — for  a  heading  with  the  name  of  the 
bank  is  not  such  a  naming,  — its  maker,  the  bank,  is  bound 
to  find  it  out  and  offer  to  pay  it;  and  not  till  then  can  a 
return  of  it  be  claimed.  Neither  is  the  holder  generally 
deemed  to  be  under  any  obligation  to  present  it  for  payment 
before  suit  upon  it.^  Though  where  a  certificate  was  given 
to  A.,  "payable  to  order  of  himself  on  presentation  of  this 
certificate  properly  indorsed,"  the  court  regarded  this  as  so 
far  like  an  ordinary  deposit  that  A.  could  not  sue  the  bank 
upon  it  without  a  previous  demand.^ 

(c)  In  Massachusetts  it  is  said  that  a  certificate  of  deposit 
is  not  like  a  promissory  note  on  demand  so  far  as  concerns 
Mass.  the  Statute  of   Limitations,  for  upon  such  notes 

Second  view,   ^j^    statute  ruus  from  their  date,^  while  a  certifi- 

statute  runs  ' 

from  demand,  qq^^q  jg  not  duc  Until  demand,  being  intended  to 
circulate  as  money.^ 

And  in  Pennsylvania  the  statute  dees  not  run 
until   demand.'^     So  it  is  in  New   York  and    In- 
diana.    The  very  nature  of  the  instrument  shows  that  it 
N  Y  and       represents  money  actually  left  with  the  bank  to  be 
i"d.  retained  until  demanded.^ 

2  Birch  V.  Fisher,  51  Mich.  39. 

8  Hunt  V.  Divine,  37  111.  137 ;  Smilie  v.  Stevens,  39  Vt.  315,  affirmed 
in  Bellows  Falls  Bank  v.  Rutland  County  Bank,  40  id.  377. 

*  Bellows  Falls  Bank  v.  Rutland  County  Bank,  40  id.  377. 

6  Field  V.  Nickerson,  13  Mass.  131. 

«  Shute  V.  Pacific  National  Bank,  136  Mass.  4S7. 

■>  McGough  V.  Jamison,  107  Pa.  St.  336  (1884). 

8  National  Bank  v.  Washington  County  National  Bank,  5  Hun  (N.  Y.), 
607  ;  Munger  v.  Albany  City  National  Bank,  85  N.  Y.  587  ;  Boughton  v. 
Flint,  74  N.  Y.  476  ;  Howell  v.  Adams,  68  N.  Y.  314 ;  Brown  v.  McElroy, 
52  Ind.  404 ;  Smiley  v.  Fry,  100  N.  Y.  262. 
506 


STATUTE   OF   LIMITATIONS.  §  304 

(d)  It  seems  clearly  reasonable  that  the  Statute  of  Limi- 
tations should  not  be  deemed  to  begin  running  until  demand. 
The  contract  of  the  parties  is  to  pay  "on  presentation  of  the 
certificate,"  and  this  changes  by  express  agreement  the  or- 
dinary rule  that  the  debtor  must  seek  the  creditor  and  pay 
his  debt,  on  which  rests  the  rule  that  a  debt  can  be  sued 
for  without  demand.  In  case  of  a  certificate  of  deposit,  or  in 
any  case  where  there  is  an  agreement  express  or  implied  that 
the  creditor  shall  seek  the  debtor,  neither  party  is  in  fault 
until  demand  is  made,  and  the  statute  should  not  run  until 
then,  although  of  course  the  creditor  may  pay  at  any  time.^ 

§  303.  When  a  Certificate  of  Deposit  is  stale.  —  A  lapse  of 
thirty-one  days  does   not  raise  the   presumption 

.        o^    -  1  •    1      Thirty-one 

that  it  is  dishonored  paper,  even  m  btates  which   days  not 
hold    that    a    certificate    of    deposit    is    due    at   ^''''^' 
its  date.^ 

Where  the  owner  has  indorsed  the  certificate,  and  care- 
lessly allowed  it  to  pass  beyond  his  control,  one  who  buys 
it  in  good  faith,  for  value  and  within  a  reasonable  time,  is 
entitled  to  protection. ^ 

But  (as  is  held  by  some  courts  as  in  regard  to  checks) 
a  certificate  of  deposit  is  stale  after  six  years,  and  is  taken 
as  dishonored  paper,   and  the  holder  cannot  en-   jj^j^j^j^jg 
force  its   second  payment  by  the  bank.^     But  in   after  six 

^  ^11  years,  but 

New  York  a  transfer  of  a  certificate  (that  bore   not  in  New 
interest)  seven  years  after  date  does  not  subject 
the  holder  to  prior  equities.^ 

§  304.  Payment  by  Certificates  of  Deposit.  —  In  general  only 
Conditional  Payment.  —  A  certificate  of  deposit  is  presumed 
to  be  taken,  not  as  cash,  but  as  a  convenient  means  of  ob- 
taining cash,   and  where  a  certificate  was  given  as  a  loan, 

9  Hunger  v.  Albany  City  National  Bank,  85  N".  Y.  587;  Pardee  v.  Fish, 
60  N.  Y.  2G5 ;  Bellows  Falls  Bank  v.  Rutland  County  Bank,  40  Vt.  377; 
Fells  Point  Savings  Institution  v.  Weedon,  28  Md.  320. 

1  §  303.    Birch  v.  Fisher,  51  Mich.  36  (1883). 

2  Gregg  y.  Union  County  National  Bank,  87  Ind.  238.  See  also  Tripp 
V.  Curtenius,  36  Mich.  497  (1877). 

3  National  Bank  v.  Washington  County  National  Bank,  5  Hun  (N.  Y.), 
605  (1875). 

667 


§  305  CERTIFICATES   OF   DEPOSIT. 

and  the  hank  failed  before  maturity,  the  lender  was  held  to 
hear  the  loss.^ 

Where  a  State  treasurer,  upon  beginning  his  duties,  instead 
of  demanding  the  funds  due  from  his  predecessor  in  cash, 
accepts  in  payment  thereof  certificates  of  deposit  issued  by 
a  bank  in  which  such  funds  have  been  deposited  for  safe- 
keeping, he  is  chargeable,  upon  the  subsequent  failure  of 
said  bank,  for  the  amount  of  such  funds. ^ 

§  305.  Collecting  Bank  taking  its  own  Certificates  in  Pay- 
ment.—  By  custom  banks  receive  their  own  certificates  of 
deposit  as  payment,  and  such  custom  will  be  judicially  noticed 
by  the  courts,  and  will  justify  a  collecting  bank  in  receiving 
its  own  certificate  of  deposit  in  payment  of  paper  it  holds  for 
collection ;  and  the  debtor  is  discharged,  even  though  the  bank 
fails  before  remitting.  And  especially  will  this  be  so  where 
the  owner  of  the  paper  directed  the  bank  to  remit  by  draft, 
for  he  is  presumed  to  have  intended  a  draft  of  the  collecting 
bank.i 

From  the  language  of  the  court  in  this  case  it  would  seem 
that,  custom  or  not,  the  payment  ought  to  be  good.  "  The 
plaintiff  in  effect  claimed  that  the  debtor  should  have  pre- 
sented his  certificates  of  deposit  at  the  bank  counter,  and  had 
the  money  counted  out  to  him,  and  then  counted  it  back  to 
the  cashier.  The  law  does  not  require  any  such  vain  and 
unnecessary  formality." 

This  is  sound,  of  course,  if  the  certificate  would  really  have 
been  paid  by  the  bank,  and  the  fact  that  the  bank  received 
it  as  payment  is  proof  that  it  would  have  paid  cash  if  de- 
manded. In  respect  to  the  transaction  as  a  question  of  cus- 
tom, the  court  said  that  the  ignorance  of  the  plaintiff  as  to 
the  existence  of  such  usage  was  of  no  moment;  every  business 
man  must  be  held  to  know  the  method  by  which  nearly  all 
banks  in  the  country  transact  business  by  checks,  drafts,  and 
certificates  of  deposit. 

A.  sold  land  to  B,,  and  forwarded  the  deed  to  the  C.  bank, 

1  §  304.   Burrows  v.  Bangs,  34  Mich.  304  (1876). 

2  State  V.  Hill,  47  Neb.  459  (189(3). 

1  §  305.   British  &  Americaa  Mortgage  Co.  v.  Tibbals,  63  Iowa,  468. 
568 


CERTIFICATES   OF   DEPOSIT.  §  308 

to  be  delivered  to  B.  on  payment  to  the  C.  bank  of  -12,000, 
which  was  to  be  remitted  to  A.  at  once.      The  bank    -pj^j^j^g  j^^ 
took  its  own  certificates  of  deposit  from  B.,  and   "^"f^rV*?" 

*  cate  held  to 

failed  the  same  nidit  before  remitting  to  A.    Held,    be  a  fraud, 

.„  .  ,     and  the  de- 

it  was  a  fraud  on  A.  to  take  the  certihcates  instead    positor  pre- 

of  cash,   and  that  the  funds  in  the  hands  of  the 

assignee  were  impressed  with  a  trust  in  favor  of  A.  to  the 

extent  of  fi2,000,  which  should  be  paid  in  preference  to  other 

claims.^ 

§  306.  Lost  Certificate.  —  A  negotiable  certificate  of  deposit 
lost  before  indorsement  cannot  give  the  finder  any  title,  and 
although  it  says  "payable  on  return  of  this  certificate,"  the 
bank  has  no  right  to  require  a  bond  of  indemnity  from  the 
depositor  before  paying  him  the  money. ^ 

No  one  can  be  a  bona  fide  taker  of  a  certificate  of  deposit, 
unless  he  takes  within  a  reasonably  short  time;  otherwise 
banks  could  issue  certificates  with  the  same  effect  as  bank 
bills.  If  a  certificate  is  due  at  the  time  of  its  loss,  the  sub- 
sequent holder  is  subject  to  the  equities,  and  a  payment  by 
the  bank  to  the  loser  would  bar  an  action  by  such  holder, 
wherefore  no  bond  of  indemnity  is  required. ^ 

Although  ordinarily  one  who  demands  payment  of  a  cer- 
tificate of  deposit  must  surrender  the  certificate,^  the  bank 
is  not  entitled  to  retain  the  money  if  the  certificate  is  not 
forthcoming.  The  depositor  is  entitled  on  proof  of  loss,  and 
indemnity,  if  required,  to  relief  in  equity.^ 

§  307.  Interest  on  Certificate  of  Deposit.  —  A  rate  of  interest 
specified,  as  six  per  cent  from  date,  continues  after  maturity, 
and  until  the  certificate  is  paid.^ 

§  308.     Certificate  to  Order  of  Husband  or  "Wife.  —  S.  depos- 

2  Francis  v.  Evans,  33  N.  W.  (Wis.)  93. 

1  §  306.  Citizens'  National  Bank  i'.  Brown,  11  N.  E.  799  (Ohio,  June, 
1887). 

2  Brown  v.  Citizens'  National  Bank,  38  Bank.  Mag.  (Am.)  135;  18 
Bank.  Mag.  (3d  series,  Am.),  135. 

«  Read  v.  Marine  Bank,  59  Hun  (N".  Y.),  578. 
*  Bank  V.  Little,  17  Gr.  Chy.  R.  (Canada),  685. 

1  §  307.  Cordell  v.  First  National  Bank  of  Kansas  City,  64  Mo.  600 
(1877)  ;  Payne  v.  Clark,  23  Mo.  259  (1S8G). 

569 


§  309  CERTIFICATES   OP   DEPOSIT. 

ited  money  and  received  a  certificate  payable  "to  the  order 
Death  of  of  S.,  OF  o£  E.,  liis  Wife."  It  was  held  that  the 
huRbami  re-     (jgath  of  S.  rcvokcd  the  power  of  E.  to  draw  the 

vokes  wife  s  ^ 

power.  money  ;  during  the  life  of  S.  her  power  was  that  of 

an  agent,  and  S.  could  have  revoked  it  at  any  time,  and  the 
death  of  the  principal  revoked  the  agent's  authority.  ^ 

It  would  seem  much  more  probable  that  the  intent  of  such 
an  arrangement  was  to  give  the  wife  a  power  over  the  de- 
posit concurrent  with  that  of  S.,  or  at  least  only  second  to  it, 
and  that  the  death  of  S.,  instead  of  diminishing  the  power 
of  E.,  only  eliminated  the  power  of  S.  and  left  that  of  E. 
to  reign  alone.  If  a  thing  may  be  done  by  S.  or  by  E.,  the 
vanishing  of  the  term  S.  leaves  E.  the  only  one  able  to  do 
that  thing, —  in  this  case  drawing  the  money.  The  other  con- 
struction makes  the  whole  sentence  equal  only  to  the  first 
clause. 

§  309.  Interest  Accounts. —  Ordinarily,  as  to  deposits  in  an 
incorporated  bank  the  rule  is  that  a  generral  deposit  draws 
no  interest  1  unless  by  agreement  until  upon  demand  for 
payment  it  is  refused  or  unreasonably  delayed, ^  and  defend- 
ing a  suit  in  good  faith  is  not  unreasonable  or  vexatious 
delay.^ 

Interest  on  a  deposit  runs  from  demand,  and  a  counter- 
claim asking  to  have  the  deposit  set  off  against  a  claim  on 
the  depositor  is  sufficient  demand.^" 

Private  bankers  usually  pay  interest  on  customers'  bal- 
ances, and,  e  converso,  charge  interest  on  their  overdrafts. 
"With  us,  however,  it  is  a  proper  subject  of  a  special 
greemen  .     ^gj-ggmgnt  or  understanding  between  the  parties. 

1  §  308.  Baltimore  v.  Wrightson,  63  Md.  81  (1884)  ;  citing  Murray  v. 
Cannon,  41  Md.  476. 

1  §  309.    First  National  Bank  v.  Coleman,  11  Brad.  (111.)  511. 

2  Parkersburg  National  Bank  v.  Als,  5  W.  Va.  50 ;  Jassoy  v.  Horn,  64 
HI.  379  ;  Stearns  v.  Brown,  1  Pick.  (Mass.)  531 ;  Dodge  v.  Perkins,  9  Pick. 
(Mass.)  3G8;  Pierce  v.  Rowe,  1  N.  H.  182 ;  Griswold  v.  Chandler,  5  N.  H. 
497  ;  Wendell  v.  French,  19  N.  H.  213  ;  Stark  v.  Gamble,  43  N.  H.  468  ; 
Parsons  v.  Treadwell,  50  N.  H.  356. 

8  Aldrich  v.  Dunham,  16  111.  403. 
8«  Sickles  V.  Herold,  149  N.  Y.  332. 

570 


INTEREST   ON    DEPOSITS.  §  309 

In  England  it  might  be  judicially  noticed  and  assumed  by 
the  courts  as  the  regular  course  of  business.  But  probably 
it  would  not  be  so  with  us,  where  private  banking  is  carried 
on  much  less  extensively.  Such  agreements  may  be  entered 
into  also  with  an  incorporated  bank,  though  certainly  they 
would  never  be  assumed  in  dealings  with  a  corporation  or 
association,  however  it  might  be  with  a  firm  or  an  individual 
in  the  business.  It  naturally  happens  that  nearly  all  the 
cases  which  we  find  on  this  subject  are  English.*  They 
chiefly  concern  disputes  which  arise  as  to  when  rests  may  be 
taken,  and  as  to  what  rate  of  interest  shall  be  allowed  in 
cases  not  specifically  provided  for  by  a  distinct  agreement. 

(a)  Usage,  if  it  contravenes  no  law,  will  govern  in  such 
controversies.     So  when  a  banker  and  his  customer 

.  Usage  and 

are  shown  to  have  conducted  their  banking  account  mode  of 
for  a  series  of  years  upon  a  certain  specified  system,  ^*  '"^' 
which  is  not  in  itself  intrinsically  illegal,  it  will  be  assumed 
that  that  system  had  been  originally  agreed  upon  between 
them,  and  the  principles  involved  in  it  will  be  held  binding 
for  the  solution  of  any  subsequent  disagreement.^  But  ac- 
quiescence in  the  general  system  does  not  go  further  than  to 
fix  the  principle  upon  which  the  accounts  shall  be  computed ; 
it  does  not  admit  the  accuracy  of  particular  items,  any  of 
which  may  be  disputed.^ 

(t)  It  is  necessary,  however,  that  the  principle  which  it  is 
sought  thus  to  establish   should  be  one  which   is   in  itself 
strictly  legal.     Thus,  it  cannot  be  questioned  that   (^^^^^t  ^.^j^. 
a  bank,  or  banker,  equally  with  any  other  indi-   troithe 

.  usury  laws. 

vidual,  IS  subject  to  the  operation  oi  the  usury 
laws,  and  cannot  exact  more  than  the  legal  rate  of  interest, 
either  directly  or  indirectly.  The  custom  pursued  in  dis- 
counting, of  deducting  the  interest  at  the  beginning  of  the 
term  of  the  loan,  thereby  in  fact  gaining  a  very  little  more 
than  the  strict  legal  rate,  is  allowed,  and  has  been  sanctioned 

*  Gwyn  V.  Godby,  4  Taunt.  346  ;  Ikin  v.  Bradley,  5  Price,  536;  Cross- 
kill  V.  Bower,  32  Beav.  86. 

6  Mosse  V.  Salt,  32  Beav.  269. 

«  Ibid. ;  Claucarty  v.  Latouche,  I  Ball  &  B.  420. 

571 


§  309  CERTIFICATES   OF   DEPOSIT. 

by  the  courts.  This  matter  is  treated  under  the  topic  "Dis- 
count."' 

(c)  One  of  the  most  common  methods  of  circumventing 
„„  ,  „        the  usury  laws  is  by  takinj^  "rests"  at  very  short 

"Rests,  '  or  •'  .  . 

frequent         intervals,  and  so  compounding  the  interest  many 

compound-  .  i  •         i  p  •       i 

ingof  times,  perhaps,   in  the    course    oi   a  single  year. 

interest.  That  "  rcsts  "  may  be  taken  at  intervals  of  proper 

length  is  undoubted  ;  the  only  question  is,  what  interval  is 
proper  ?  In  Clancarty  v.  Latouche,  supra,  a  compounding  at 
tri-monthly  rests  was  declared  to  be  usurious  and  intolerable. 
In  Rufford  v.  Bishop,^  it  was  said  that  the  decision  in  Clan- 
carty V.  Latouche  seemed  to  throw  some  doubts  on  rests  at  a 
less  interval  than  one  year,  but  that  it  must  be  admitted 
that  shorter  rests  were  legal.  No  definite  rule  of  law  there- 
fore exists  on  the  point.  In  the  United  States,  accountings 
in  every  branch  of  business  are  customarily  had  more 
promptly  and  frequently  than  is  usual  in  England,  and  it  is 
quite  probable  that  tri-monthly  rests  might  be  sanctioned,  if 
agreed  to  by  both  parties. 

The  nature  of  the  customer's  indebtedness  to  his  banker  for 
advances  is  not  affected  by  the  fact  that  the  final  footing  is 
cast  so  as  to  include  interest,  which,  by  rcsts  at  proper  inter- 
vals, has  been  from  time  to  time  converted  into  principal,  and 
has  since  itself  also  borne  interest.  Hence  a  mortgage,  given 
generally  to  secure  the  customer's  balance,  will  secure  a  bal- 
ance of  which  such  interest,  and  interest  upon  interest,  are 
component  parts. ^  But  where  a  mortgage  is  given  by  the 
customer  to  secure  a  specific  balance  owing  by  him  on  a  cer- 
tain day,  and  subsequent  transactions  are  had  between  the 
parties,  in  which,  as  well  as  in  those  which  had  preceded  the 
mortgage,  compound  interest  was  uniformly  charged,  it  was 
nevertheless  held  that  the  precise  sum  secured  by  the  mort- 
gage was  thereby  at  once  excepted  from  the  general  custom 
governing  the  other  dealings  of  the  parties,  and  that  interest 
could  not  thereafter  be  compounded  thereon,  but  must  be  cal- 

■?  Maine  Bank  v.  Butts,  9  Mass.  49. 

«  5  Russ.  346. 

8  Rufford  V.  Bishop,  supra. 

672 


INTEREST   ACCOUNTS.  §  309 

culated  at  simple  rates,  as  in  all  cases  of  ordinary  mortgage 
debts.  10 

(^)  When  a  judgment  is  recovered  by  the  bank  against  the 
customer  for  overdrafts  or  advances,  interest  will  be  allowed 
at  the  same  rate  which  the  bank  itself  was  paying    ^^_^^^^  ^^^_ 
upon  deposits  on  the  same  account. ^^     But  where    tiemen't,  or 

^  '^  J.1      i.      n     •  insolvency 

the  banker  and  the  customer  arrange  that  all  in-   destroys  a 
debtedness  of  either  to  the  other  shall  bear  interest   tract  rateTf 
at  a  certain  rate  per  cent,  yet  upon  the  death  of  the   |}'^'p^^J;°"  ^ 
customer,  or  upon  his  closing  his  dealings  with  the 
banker,  being  at  the  time  indebted  to  him,  or  upon  his  in- 
solvency, or  upon  the  death  of  the  banker,  or  his  ceasing  to 
carry  on  business,  or  becoming  bankrupt,  the  special  arrange- 
ment at  once  ceases  to  operate,  and  from  the  date  of  such 
occurrence  the  balance  of  indebtedness  then  due  from  either 
to  the  other  carries  only  such  simple  interest  as  is  carried  by 
any  other  ordinary  contract  debt.^^ 

(f)  In  casting  interest  or  making  the  charge  to  the  drawer, 
it  is  clear  that  the  banker  must  debit  the  drawer  of  a  check, 
not  from  the  date  of  the  drawing  but  from  the  date   up  to  what 
of  the  actual  payment  of  the  check. i3    If  the  banker   |i'»e  j^nterest 
accepts  the  check  some  time  before  actually  paying   on  a  deposit 
it,  it  has  not  been  decided  whether  he  may  debit  the   acceptance 
drawer  from  the  date  of  the  acceptance  or  from  that 
of  the  paying.     But  it  has  been  said  that  the  accepting  of  a 
check  payable  at  a  day  future  is  equivalent  to  a  loan  of  the 
amount  named,  by  the  drawer  to  the  banker,  for  the  interval. 
Following  this  principle,   it  would  practically  amount  to  a 
debiting  at  the  time  of  payment.     For  if  the  debit  were  made 
at  the  time  of  acceptance,  yet  the  acceptance,  creating  at  once 
a  loan  from  the    depositor  to   the    banker  for  the  interval, 
would  cause  interest  to  run  on  the  same  sum,  for  the  same 
period  at  the  same  rate  per  cent,  from  the  banker  to  the  cus- 

1°  Mosse  V.  Salt,  32  Beav.  269. 

"  Gwyn  V.  Godby,  4  Taunt.  346 ;  Ikin  v.  Bradley,  5  Price,  536. 
12  Crosskill  v.  Bower,  32  Beav.  8G. 

18  Goodbody  v.  Foster,  cited  to  this  point  in  Byles  on  Bills,  Sharswood's 
ed.,  p.  25. 

573 


§  309  CERTIFICATES    OF   DEPOSIT. 

tomer,  and  the  one  amount  would  exactly  offset  the  other. 
But  since  the  acceptance  only  binds  the  banker,  at  his  own 
peril,  to  have  funds  enough  of  the  depositor  to  meet  it  when 
payment  is  demanded,  and  as  until  such  demand  he  has  the 
full  use  of  such  funds,  it  would  seem  interest  should  in  rea- 
son be  calculated  to  the  date  when  demand  may  be  made. 

Although  this  reasoning  is  good  as  to  an  acceptance  of  a 
check  before  delivery  by  the  drawer,  or  as  to  a  check  payable 
at  a  future  day,  yet  in  other  cases,  as  the  acceptance  amounts 
to  payment  so  far  as  the  drawer  is  concerned,  he  should  not 
receive  interest  upon  the  amount  of  the  check  after  such 
certification.  The  money  is  transferred  at  once  from  the 
drawer's  account  to  the  account  of  certified  checks,  and 
becomes  substantially  a  deposit  of  the  holder  of  the  check, 
and  if  any  one  receives  interest  he  should.  The  drawer 
should  not  receive  interest  on  funds  in  which  he  has  no 
interest. 

C/)  From  the  rule  that  the  banker  is  in  no  sense  a  trustee, 
or  quasi  trustee,  for  the  benefit  of  his  customer,  it  follows 
that,  under  an  agreement  to  allow  interest,  he  is  under  no 
obligation  annually  to  balance  the  account  and  credit  the 
interest,  so  as  to  prevent  the  running  of  the  Statute  of 
Limitations.^* 

"  Pott  V.  Clegg,  16  M.  &  W.  321 ;  Foley  v.  Hill,  2  H.  L.  Cas.  40. 


574 


CHAPTER   XX. 

PAYMENT   OF   DEPOSIT. 

§  310.   Analysis.    See  Payment  of  Notes,  §  556.    Of  Checks,  §  362.    Of  Forged 
Checks,  §  461. 
Duty  of  Bank. 

(A)   By  contract  implied  311  from  the  course  of  business,  it  is  the  duty  of 
a  bank  to  pay,  over  its  counter,  or  through  the  ciearing-liouse,  348 
(according  to  tlie  manner  of  presentment),  in  good  money  312  upon 
presentment  in  banking  hours  of  a 
Genuine,  4G1  valid,  31C  subsisting. 

(The  bank  may   take  time  to  inquire  if  the  order  is  stale  or 
otherwise  suspicious.) 
Written,  313 

(It  may  pay  on  the  verbal  order,  if  it  so  elects,  but  is  entitled 
to  written  evidence  of  authority  for  a  payment.) 
Properly  drawn  order  for  the  whole  or  any  part  315  of  the  deposit 
(if  the  order  is  bona  fide,  in  the  regular  course  of  business,  and  not 
merely  to  vex  the  bank  by  numerous  suits),  signed  by  the  depo- 
sitor, or  by  his  authorized  agent  311  or  representative,  or  by  the 
person  who  has  proved  his  ownership  of  the  deposit  against  the 
depositor,  5G5  and  341  if  the  bank  has  to  the  credit  of  the  drawer 
sufficient  available  funds  to  cover  the  order  (if  the  bank  has  part 
funds,  its  duty  is  to  pay  as  much  as  it  can,  if  the  holder  is  willing 
to  receive  part  payment,  and  is  willing  to  give  up  the  order  to  the 
bank,  but  this  view  is  not  uniformly  adopted),  and  free  from  a 
right  of  retention  by  the  bank,  in  consequence  of  a  lien,  323  set- 
off, 323  attachment,  346  injunction,  347  adverse  claim,  341  or  incum- 
brance, by  agreement  or  otherwise,  provided  that  the  Statute  of 
Limitations  321  has  not  run  against  the  account. 
Misapplication.  317  And  it  is  no  excuse  for  a  bank's  refusal  to  honor 
an  order  properly  drawn  and  signed,  that  it  has  reason  to  believe 
that  the  moneys  (e.  g.  trust  funds,  are  to  be  applied  as  the  drawer 
has  no  right  to  apply  them,  unless  it  participates  in  the  profits  of 
the  paijment  with  knowledge,  actual  or  constructive,  of  the  facts  that 
make  the  application  of  the  money  wrong;  in  such  case  it  is  not 
only  excused,  but  prohibited  from  making  the  payment. 
But  it  is  an  excuse  that  it  has  heen  forced  to  pay  by  a  power  it  could 
not  resist,  as  a  public  enemy.  318 
If  the  drawer  has  revoked  the  order  before  the  bank  has  made  pay- 

575 


S  311  PAYMENT    OF    DEPOSIT. 

ment  or  bound  itself  to  pay,  it  must  not  pay,  nor  if  the  drawer  is 
insane,  and  the  bank  has  notice  319  of  it,  or  if  the  drawer  is  dead, 
not  being  a  corporation  or  a  firm  (it  is  to  be  hoped  that  this  law  of 
revocation  by  death  as  to  checks  will  be  changed  by  statute),  and 
the  payments  made  will  be  appropriated  305  in  their  order,  the  first 
sum  drawn  being  deemed  a  payment  pru  ta»io  of  the  first  sum  de- 
posited, even  tliough  some  of  tlie  items  of  the  account  were  trust 
moneys. 

This  is  the  general  rule ;  but,  as  a  very  just  modification,  it  has  been 
held  that  a  depositor  will  be  presumed  355  to  be  drawing  his  own 
rather  than  trust  moneys  wlien  the  two  are  mingled,  though  the  lat- 
ter were  the  earliest  deposits ;  and  if  trust  funds  can  be  traced  into  a 
deposit,  they  will  not  be  deemed  to  come  out,  so  long  as  the  pay- 
ments can  be  otlierwise  accounted  for. 

Any  payment  subsequent  to  the  trust  deposit  will  not  touch  it  so 
long  as  tiiere  is  enougli  other  money  to  make  the  payment,  even 
though  this  was  put  in  bank  after  the  trust  money,  but  before  the 
payment. 

Over-drafts  356  may  be  a  fraud  on  the  holder  of  the  order,  though  not 
on  the  bank  ;  but  if  the  bank  pays,  whether  knowing  the  facts  or 
not,  it  can  recover  from  the  drawer. 
Void  Paper.     §  316. 

Corporate  obligations  that  are  idtra  vires  by  circumstances  unknown 
to  the  bank,  if  paid  by  it,  may  be  charged  to  the  obligor ;  but  it  is 
otlierwise  if  the  bank  has  notice  of  the  facts  invalidating  the  paper, 
or  if  it  pays  on  paper  that  would  not  be  enforceable  in  tlie  hands  of 
a  bona  fide  holder  for  value,  as,  for  example,  such  as  was  signed  under 
duress,  or  by  an  infant,  &c. 
Payment  of   Checks.     §  430. 
Payment  of  Notes  and  Acceptances.     §  556. 
(B)   Succession  of  Banks.     §  320. 

When  one  bank  succeeds  to  the  business  and  assets  of  another,  the 
depositors  of  the  swallowed  bank  become  depositors  of  the  succes- 
sor, and  the  transfer  does  not  set  the  Statute  of  Limitations  running 
against  them. 

§  311.  Obligation  of  the  Bank  to  honor  Orders.  —  The 
bank  is  under  the  obligation  of  honoring  the  customer's 
drafts  and  checks  whenever  the  same  are  presented  for  pay- 
ment, provided  that  at  the  time  of  such  presentment  the  bal- 
ance of  the  account,  if  then  struck,  would  show  a  credit  in 
favor  of  the  customer  of  funds,  on  which  the  bank  has  no  lien, 
sufficient  to  meet  the  sum  called  for  by  the  check  or  draft. 
The  contract  so  to  honor  the  depositor's  orders  is  implied 
from  the  usual  course  of  business.  The  deposit  is  made  with 
the  tacit  understanding  that  the  bank  shall  respond  to  the 
576 


bank's  obligation.  §  312 

depositor's  orders,  so  long  as  there  is  sufficient  balance  to  his 
credit.^ 

A  banker  "  gives  the  community  to  understand  that  those 
who  have  funds  in  his  hands  have  not  only  the  right  to  draw 
upon  the  deposit,  but  that  all  drafts  will  be  paid  on  presen- 
tation; he  opens  virtually  a  letter  of  credit  to  his  depositor, 
which  is  a  guaranty  to  him,  as  well  as  to  all  who  make 
advances  on  the  faith  of  it.  For  all  practical  purposes  it 
assimilates  itself  to  a  parol  promise  to  pay  any  check  that 
the  owner  of  the  deposit  may  draw;  and  thus  the  rule  which 
binds  the  drawee  of  a  bill  of  exchange  as  an  acceptor,  when 
he  has  promised  in  advance  to  honor  it,  furnishes  a  strong 
analogy. "  ^ 

§  312.  For  w^hat  Description  of  Funds  Depositor  is  entitled 
to  Draw.  —  As  a  general  rule,  the  depositor,  having  once 
brought  his  funds  securely  into  the  hands  of  the 
proper  officer,  and  having  duly  received  his  credit  must  pay  in 
for  the  amount  in  dollars  and  cents,  has  thereafter  though  the^" 
a  perfect  claim  on  the  bank  for  this  amount,  in  ^fSTf^an 
money. ^     One  of  the  cited  cases  shows  that  when  a   [^solvent 

''^  bank),  un- 

deposit  was  made  in  good  faith  of  the  bills  of  a   i^ss  there  is 

11  1  1  •  1  ^"  agree- 

bank,  supposed  at  the  time  by  both  parties  to  be  ment  to  the 

solvent,  but  which  had  in  fact  already  stopped  pay-  the  deposi°or 

ment,    and  the   amount   was   in    ordinary  course  ft^auJ^asTf"^ 

passed  to  the  credit  of  the  depositor  as  so  much  fhe^ingoV"^ 

money,   so  many  dollars,  the  bank  was  held  to  '^'^""-^  °^  '°- 

sufficiency 

repay  the  amount  in  good  money ;  although  it  was  of  funds. 
shown  as  a  fact  that  the  bills  had  been  kept  by 
themselves,  and  not  mingled  with  the  general  funds  of  the 
bank,  and  that  they  still  continued  so  when  the  insolvency 
of  the  issuing  bank  was  discovered,  when  the  receiving  bank 
promptly  sought  to  undo  the  credit.  Precisely  the  same  rule 
applies  where  the  bank  undertakes  to  make  a  collection  for 

1  §  311.  Downes  v.  Phoenix  Bank,  6  Hill  (N.  Y.),  297;  Marzetti  v. 
AVilliams,  1  Barn.  &  Ad.  415;  Watson  v.  Phoenix  Bank,  8  Met.  (Mass.) 
217 ;  First  National  Bank  v.  Pease,  68  111.  App.  562. 

2  McGregor  v.  Loomis,  1  Disney  (Ohioj,  251. 
1  §  312.    Thompson  v.  Riggs,  5  Wall.  663. 

VOL.  I. —  37  577 


§  312  PAYMENT   OF   DEPOSIT. 

its  customer,  and  passes  the  amount  to  his  credit.     (§  248.) 
In  neither  case  is  there  any  bailment  of  tlie  specific  funds  or 
money  received  by  the  bank ;  but  at  once,  upon  the  giving 
credit  in   ordinary  form,  the   simple   indebtedness   accrues 
which,  like  any  other  indebtedness,  can  only  be  discharged 
in  funds  which  the  law  makes  a  legal  tender.     This  has  been 
repeatedly  held  in  the  Western  States  where  bank  bills  of 
the  so  called  "  wild-cat  banks  "  were  deposited,   and  credit 
given  for  the   nominal   value   in  dollars   and   cents.     Fre- 
quently, the  depreciation  of  these  bills  had  begun  at  the 
time  of  deposit;  often  they  sunk  almost  immediately  after- 
wards through  every  stage  of  depreciation  to  utter  worthless- 
ness.     But  the  courts  uniformly  held  that  the  credit  given 
for  so  much  money  could   only  be  discharged   by  so  much 
"money,"  and  that  bills  similar  to  those  received,  or  even 
the  identical  ones,  could  not  be  forced  upon  the  customer  in 
payment. 2     So  where  the  deposit  was  made  in  bills  of  the 
bank  itself,  and  they  were  at  the  time  greatly  depreciated,  it 
was  held  that  payment  must  nevertheless  be  made  in  full  in 
good  money, ^     The  right  of  the  depositor  is  not,  however, 
necessarily  to  the  gold  or  silver  coin  of  the  country  ;  but  only 
to  such  money  as  is  by  the  law  of  the  land  legal  tender  at  the 
time.     Hence  it  has  been  held  that  a  deposit  made  in  1860 
in  gold  could,  after  the  passage  of  the  Legal  Tender  Act  so 
called,  be  paid  off  in  the  Treasury  notes  of  the  United  States  to 
the  same  nominal  amount,  without  regard  to  their  excessive 
depreciation  in  fact.*    Semhle  that  payment  by  a  bank  within 
the    Confederate    States,  made   in    Confederate    notes   to   a 
United  States   quartermaster,  under  the  stress  of   military 

2  Corbit  V.  Bank  of  Smyrna,  2  Harr.  (Del.)  235  ;  Marine  Bank  of  Chi- 
cago V.  Chandler,  27  111.  525 ;  Marine  Bank  of  Chicago  v.  Birney,  28  id. 
90;  Marine  Bank  of  Chicago  v.  Rushraore,  id.  463;  Marine  Bank  of 
Chicago  V.  Ogden,  29  id.  248 ;  Chicago  Mar.  &  Fire  Ins.  Co.  v.  Carpenter, 
28  id.  300;  Willetts  v.  Paine,  43  id.  433;  Fort  v.  Bank  of  Cape  Fear, 
1  Phill.  L.  (N.  C.)  417.  See  also  the  pages  on  the  "  Payment  of  Checks," 
§430. 

8  Bank  of  the  Commonwealth  of  Kentucky  v.  Wister,  2  Pet.  318. 

*  Carpenter  v.  Northfield  Bank,  39  Vt.  46;   Sandford  u.  Haj^s,  52  Pa. 
St.  26;  Gumbel  v.  Abrams,  20  La.  An.  568;  and  see  "  Special  Deposits." 
678 


MUST   BE   IN   LEGAL   TENDER,  §  313 

orders  of  the  United  States  general  commanding  in  the 
place,  may  acquit  the  indebtedness  of  the  bank  to  the  de- 
positor, provided  the  original  deposit  was  made  in  Confed- 
erate notes. ^  But  a  depositor  of  Confederate  notes,  though 
at  the  time  of  the  deposit  they  were  bankable  funds  at  the 
place,  was  held  to  be  not  entitled  afterward  to  recover  the 
amount  from  the  bank  in  good  money. ^  Of  course  any  local 
custom  to  make  and  receive  payments  in  other  than  the  legal 
money  cannot,  in  the  absence  of  an  express  agreement  be- 
tween the  parties,  affect  the  rule  of  law;  and  evidence  of 
such  a  custom  is  impertinent.^  But  if  the  bank  specially 
agrees  only  to  make  payment  in  something  else  than  legal 
tender,  whether  of  greater  or  of  less  value,  such  a  contract 
between  the  bank  and  the  depositor  may  be  binding.* 

See  also  title  "Special  Deposit." 

§813.  Verbal  Order. — The  order  is  almost  always  ex- 
pressed in  writing,  by  check  or  otherwise.  But  there  is  no 
absolute  necessity  for  this.  A  verbal  direction  from  the  cus- 
tomer to  the  bank  to  pay  a  sum,  or  to  transfer  a  credit,  would 
fully  justify  the  bank  in  so  doing.  If  the  bank  itself  is  will- 
ing to  act  upon  a  verbal  order,  this  would  be  a  perfect  defence 
to  a  suit  by  the  depositor  for  the  amount  transferred  under  it. 
But  though  the  bank  may,  if  it  choose,  act  upon  such  direc- 
tions, it  is  under  no  obligation  to  do  so;  by  the  usages  of  the 
banking  business  it  is  entitled  to  demand  some  written  evi- 
dence of  the  order.  ^ 

If  the  bank  accepts  a  verbal  direction,  and,  either  expressly 
or  by  fair  implication,  consents  to  follow  it,  it  cannot  there- 
after be  heard  to  say  that  it  is  only  required  to  follow  written 
directions.^ 


5  Nelligan  v.  Citizens'  Bank  of  Louisiana,  21  La.  An.  332. 

6  Foster  v.  Bank  of  New  Orleans,  21  La.  An.  338. 

"•   See  cases  from  Illinois  Reports,  above  cited ;  Thompson  v.  Riggs, 
5  Wall.  663. 

8  Thompson  v.  Riggs,  5  Wall.  663. 

1  §  313.    AVatts  V.  Christie,  11  Beav.  546;  Coffin  v.  Henshaw,  10  Ind. 
277;  Walker  v.  Rostron,  9  M.  &  W.  421  ;  McEwen  v.  Davis,  39  Lid.  111. 

2  Armour  v.  Bank,  69  Miss.  706  (1892). 

579 


S  315  PAYlttENT    OF   DEPOSIT. 

8  314.     Payment  without    Order  from  the    Depositor.  —  The 

agent  of  H.  deposited  in  the  P.  Bank  money  of  H,,  without 

the  knowledge  of  the  latter,  writing  in  the  bank 

Favment  to  °  i 

agent.  register  "N.  H.  by  S.  A.  P."     The  bank  issued  a 

certificate  payable  to  N.  H.,  and  afterwards  paid  the  money 
One  who  to  the  agent  on  his  indorsement  of  the  certificate 
deposits a3      u-sx   g   j^y  g_  ^   P."'     H.  ratified  the  doposit,  and 

agent  may  '  -^ 

have  no  au-  g^^d  the  bank  for  the  amount.  Mela,  that  the 
draw.*  °  bank  had  no  right  to  assume  that  N.  H.  was  a  fic- 
titious principal,  and  that,  as  the  agent  had  no  authority  to 
draw,  the  bank  must  reimburse  H.,  and  that  the  full  amount 
shown  on  two  certificates  of  deposit  could  be  recovered, 
although  the  money  drawn  by  the  agent  on  the  first  ma^  have 
been  used  to  buy  the  second.  ^  McFarland  and  Paterson,  JJ., 
dissenting. 

§  315.  Order  may  be  for  Part  of  the  Deposit.  —  Bo7ia  fide 
in  the  regular  course  of  business,  and  not  for  mere  vexation 
of  the  bank,  the  customer  may  draw  out  his  funds  in  such 
parcels  as  he  may  see  fit,  both  as  regards  number  and  amount. 
The  rule  of  law  forbidding  a  creditor  to  split  up  his  demand 
does  not  affect  this  principle,  which  is  based  upon  a  custom 
of  the  banking  business  that  has  been  well  said  to  be  so 
ancient,  unquestioned,  and  well  known  that  courts  will  take 
judicial  notice  of  it,  without  proof.i  But  in  the  case  cited  of 
Chicago  Ins.  Co.  v.  Stanford,  the  court  said,  that  if  there 
should  be  a  dispute  between  the  bank  and  the  customer,  and 
the  latter  should  draw  a  multitude  of  checks,  not  in  the 
ordinary  course  of  bona  fide  business,  but  for  the  purpose  of 
vexation  and  of  bringing  a  proportionate  number  of  suits 
against  the  bank,  then  the  court  would  apply  itself  to  find 
some  remedy.  In  England  it  was,  until  lately,  contrary  to 
law  to  draw  a  check  for  less  than  20s.  ;  but  by  a  recent  statute 
a  check  for  any  sum  may  be  legally  drawn,  if  it  be  bona  fide 
against  funds  of  the  drawer  actually  in  the  hands  of  the 

1  §  3U.    Honig  V.    Pacific   Bank,  73   Cal.  464;  15  Pac.  58 ;  Keir  v. 
People's  Bank,  158  Pa.  305. 

1  §  315.    Munn  /'.  Burch,  25  111.  35;  Chicago  Ins.  Co.  v.  Stanford,  28 
id.  168;  Byles  on  Bills,  *21,  Sharswood's  note  (Sharswood's  ed.). 
580 


VOID   PAPER.  §  317 

banker.     In  our  own  country  the  law  sets  no  limit  whatso- 
ever, and  annexes  no  conditions. 

§  316.  Payments  on  Void  Paper.  —  If  obligations  issued  by 
a  depositor  have  been  declared  void,  the  bank,  knowing  this, 
must  not  pay  them. 

A  pension  check  issued  to  a  payee  who  is,  at  the  time  of 
issue,  deceased  is  absolutely  void.^ 

A  bank  "  could  not  become  the  depositary  of  the  collected 
taxes  of  the  people  for  a  valid  and  legal  purpose,  and,  with 
full  knowledge  of  the  illegal  and  void  character  of  the  bonds, 
which  had  been  over-issued,  permit  the  money  in  its  posses- 
sion to  be  misappropriated  to  the  discharge  of  those  bonds, 
To  sanction  such  a  principle  would  allow  every  trustee  of 
moneys  to  account  for  them  by  the  known  misconduct  of 
others,  and  release  him  from  his  duty  to  see  that  the  trust 
fund  under  his  control  is  not  diverted  from  the  trust  with 
his  knowledge  and  consent.  "^ 

If  an  obligation  that  would  be  void  in  the  hands  of  a  bona 
fide  holder  for  value  without  notice  (as  if  signed  under  duress, 
or  by  an  infant)  is  paid  by  the  bank  without  notice,  it  is  in 
the  same  position  as  such  a  holder;  indeed  it  is  just  such  a 
holder  itself,  and  cannot  charge  the  deposit  with  the  payment 
if  the  paper  is  repudiated  by  the  obligor.  But  if  an  obliga- 
tion is  a  corporate  one  and  merely  ultra  vires  by  circumstance 
unknown  to  the  bank,  it  will  have  a  right  to  charge  the  cor- 
poration with  the  payment, 

§  317.  Bank's  Duty  as  to  Trust  Fund.  —  The  banker  can- 
not excuse  his  disobedience  of  his  customer's  orders,  in  the 
due  course  of  business,  by  setting  up  that  he  knew.  Banker  oan- 
or  had  reason  to  believe,  that  the  customer's  order  into  third 
was  given  in  promotion  of  an  unlawful  purpose.*'  fai^s%o/ " 
For  example,  the  banker  is  not  justified  in  refus-  af^e^kmere'- 
ing   to  honor  the   depositor's   check    because   he   ]y  because 

°  '■  ,  he  IS  aware 

knows  or  believes  that  the  check  is  an  appropria-   ofanintended 
tion  of  funds  to  a  person  or  for  a  purpose  to  whom   trust. 

0  §  316.   United  States  v.  First  National  Bank,  82  Fed.  410  (1897). 

1  Howard  v.  Deposit  Bank,  80  Ky.  496. 

0  §  317.  Merchants  &  Planters'  Bank  r.  Meyer,  56  Ark.  449  (1892) ; 
McCord  V.  California  National  Bank,  96  Cal.  197. 

581 


§  317  PAYMENT   OP   DEPOSIT. 

or  for  which  the  depositor  is  not  lawfully  authorized  to  ap- 
propriate these  funds. ^ 

"Supposing  that  the  banker  becomes  incidentally  aware 
that  the  customer,  being  in  a  fiduciary  or  a  representative 
capacity,  meditates  a  breach  of  trust,  and  draws  a  check  for 
that  purpose,  the  banker,  not  being  interested  in  the  transac- 
tion, has  no  right  to  refuse  the  payment  of  the  check,  for  if  he 
did  so  he  would  be  making  himself  a  party  to  an  inquiry  as  be- 
tween his  customer  and  a  third  person. " 

But  if  the  depositor  seeks  to  pay  his  own  debt  to  the 
banker  by  an  appropriation  of  funds  to  his  credit  in  a  fidu- 
But  must  not  ciary  capacity  with  the  banker,  then  the  banker  is 
participate  in   affected  with  knowledge  of  the  unlawful    charac- 

pronts  of  ^ 

such  wrong,  tcr  of  the  appropriation,  and  would  be  compelled 
to  refund. 2 

Where  A.  receives  what  he  knows  to  be  an  asset  of  the 
estate  or  trust  from  an  executor  or  trustee,  with  actual  knowl- 
edge derived  from  the  trustee  of  his  intention  to  use  the 
proceeds  for  his  own  private  wants,  or  derived  from  facts 
as  convincing  as  the  trustee's  declaration,  A.  will  be  com- 
pelled to  surrender  the  money  paid,  or  assets  pledged  to  or 
purchased  by  him.^ 

But  this  principle  does  not  touch  the  payment  of  checks 
properly  drawn,  even  though  the  bank  may  know  the  money 
is  drawn  with  intent  to  use  it  wrongfully,  unless  it  partici- 
pates in  misapplying  the  funds,  then  it  is  liable.''    Afortiori, 

1  Gray  v.  Johnston,  L.  R.  3  II.  L.  Cas.  14,  per  Lord  Westbury. 

2  Gray  v.  Johnston,  L.  R.  3  H.  L.  Cas.  14 ;  Lund  v.  Seamen's  Bank, 
37  Barb.  (N.  Y.)  129;  Clark  v.  First  National  Bank,  57  Mo.  App.  277, 
citing  Johnson  v.  Payne  Bank,  56  Mo.  App.  257;  American  Trast  & 
Building  Co.  u.  Boone,  102  Ga.  202  (1897). 

But  see  Lee  v.  Marion  National  Bank,  94  Ky.  43  (21  S.  W.346)  (1893), 
•where  a  sheriff,  collector  of  railroad  taxes,  deposited  the  collections  in  a 
bank,  and  requested  that  it  be  applied  to  payment  of  a  debt  owed  by  him 
to  the  bank.  The  sureties  on  the  sheriff's  bond  were  obliged  to  answer 
for  his  default,  and  could  not  require  the  bank  to  account  to  them. 

3  Duncan  v.  Jaudon,  15  Wall.  (U.  S.)  165 ;  Colt  v.  Lasnier,  9  Cow. 
(N.  Y.)  320;  Smith  v.  Ayer,  101  U.  S.  320;  M'Leod  v.  Drummond,  17 
Ves.  Jr.  153 ;  Shaw  v.  Spencer,  100  Mass.  382. 

4  Bank  v.  Clapp,  76  N.  C.  482. 

582 


bank's  duty  as  to  trust  funds,  §  317 

it  does  not   require  a  bank  to  inquire  as  to  the   drawer's 
intent. 

"The  circumstances  under  which  a  liability  like  that 
claimed  here  will  arise  against  the  banker  is  stated  in  Gray 
V.  Johnston;  and  attention  is  there  called  to  an  important 
element  in  the  consideration  of  such  cases,  which  is,  that  a 
banker  cannot  question  the  right  of  his  customer  by  Bank  not  re- 
refusing  to  honor  his  demands  by  check  or  otherwise^  breach *ot'  ^' 
upon  any  theory  that  it  is  the  banker^ s  duty  to  look  ^V^"^^  ^^ 
after  the  appropriation  of  the  trust  funds  when  with-   ""'ess  it  par- 

,  p  ticipates  in 

arawn  from  the  bank,  and  to  protect  the  trust  by  the  profits. 
setting  up  Tijus  tertii  against  the  demand.  This  case  goes 
further  than  any  I  have  found,  in  some  of  its  expressions,  to 
justify  the  contention  that  mere  knowledge  of  the  banker  that 
a  breach  of  trust  is  intended  makes  him  privy  to  it  and  lia- 
ble. But  on  scrutinizing  the  cases  cited  it  will  be  found  that 
participation  in  the  profits  of  the  fraud  is,  generally  speaking, 
an  element  in  the  case ;  and  a  mere  reason  to  believe  that 
the  trustees  were  misapplying  the  assets  will  not  make  the 
banker  liable ;  for  this  would  be  to  make  every  trustee  ac- 
countable for  his  conduct  in  the  trust  to  every  agent  whom  he 
happened  to  employ,  and  would  carry  the  principle  of  con- 
structive trust  to  an  inconvenient,  and  indeed  to  an  imprac- 
ticable length,  "s 

When  a  depositor  has  a  private  and  a  public  account,  be- 
ing not  only  a  public  officer  but  an  executor,  and  having  an 
individual  account,  the  law  will  not  charge  the  bank  with 
knowledge  of  the  depositor's  fraud,  nor  impose  on  it  the  duty 
of  inquiry,  merely  because  he  has  drawn  on  the  treasurer's 
account  checks  payable  to  himself  or  to  bearer,  or  has  trans- 
ferred money  from  one  account  to  another.^  The  bank  is  not 
bound  to  read  the  purpose  of  the  drawer  between  the  lines  of 
the  check. 

A  bank  must  honor  the  checks  and  certificates^''   of   its 

*  Walker  v.  Manhattan  Bank,  25  Fed.  Rep.  255. 
^  Goodwin  v.  American  National  Bank,  48  Conn.  550  (1881) ;  Central 
National  Bank  v.  Conn.  Mut.  Life  Ins.  Co.,  104  U.  S.  54. 
6»  McCaflin  v.  Jones,  155  111.  539. 

583 


§  317  PAYMENT   OF   DEPOSIT. 

depositor  drawn  in  proper  form,  without  regard  to  the  use 
the  depositor  is  going  to  make  of  the  fund ;  the  only  limita- 
tion is  that  the  bank  must  not  itself  participate  in  the  profits 
of  the  fraud. '^ 

(a)  If  a  bank  participates  in  the  misapplication  of  trust 
money  it  is  liable ;  as  where  money  deposited  by  A.  in  his 
own  name  and  known  by  the  bank  to  belong  to  another  was 
applied  by  A.  to  pay  his  debt  to  the  bank,  it  was  held  liable 
to  the  principal.^ 

Where  a  bank  aids  or  participates  in  misapplication  by 
entering  a  check  payable  to  "  H.  W.  C.  trustee  "  to  the  indi- 
vidual account  of  the  trustee,  the  bank  is  liable  to  the  trust 
estate ;  ^^  but  it  is  not  liable  where  the  check  is  payable  to 
trustee  individually,  even  though  the  body  of  the  check  states 
that  it  is  due  to  him  as  trustee,  provided  the  bank  does  not 
participate  in  the  deception.^* 

Where  a  bank  applies  a  deposit  to  the  payment  of  the 
trustee's  individual  debt,  the  act  may  be  ratified  by  the  cestui 
que  trust. ^^ 

A  bank  without  inquiry  discounted  notes  drawn  by  a  town 

'  Walker  v.  Manhattan  Bank,  25  Fed.  Rep.  255 ;  Keane  v.  Robarts, 
4  Madd.  3-32,  357 ;  Providence  Assisting  Association  v.  Citizens'  Savings 
Bank,  32  Atl.  306  (1895)  ;  Hatch  v.  Johnson  Loan  &  Trust  Co.,  79  Fed. 
828  ;  State  National  Bank  v.  Reilly,  124  III.  464  ;  Mayor  v.  Tenth  National 
Bank,  HI  N.  Y.  447  (1888);  Merchants  &  Planters'  Bank  v.  Meyer,  56 
Ark.  499  (1892) ;  Sayre  v.  Weil,  92  Ala.  466  (1891)  ;  Eyrick  v.  Capital  State 
Bank,  67  Miss.  73  (1889). 

8  Commercial  Bank  v.  Jones,  18  Tex.  811.  See  also  Clark  v.  First 
National  Bank,  57  Mo.  App.  277;  American  Trust  &  Banking  Co.  v. 
Boone,  102  Ga.  202  (1897);  Armour  v.  Bank,  69  Miss.  705  (1892);  citing 
Eyrick  v.  Capital  State  Bank,  67  Miss.  60 ;  Knobelach  v.  Bank,  43  S.  C. 
242  (1894) ;  citing  Steele  v.  Atkinson,  14  S.  C.  154.  But  cf .  Lee  v.  Marion 
National  Bank,  94  Ky.  43  (1893). 

S"  Duckett  V.  National  Mechanics'  Bank,  86  Md.  400  (1897);  Barroll  v. 
Forman,  88  Md.  188  (1898). 

8*  Duckett  V.  National  Mechanics'  Bank  (supra) ;  see  also  and  cf.  Duck- 
ett V.  Bank,  88  Md.  8  (1898). 

8<^  Sayre  v.  Weil,  94  Ala.  466  (1891) ;  citing  WolfEe  v.  State,  79  Ala. 
206;  Woods  v.  Legg,  91  Ala.  513;  Swink's  Adm'r  v.  Snodgrass,  17  Ala. 
657. 

584 


PAYMENT    OF   DEPOSIT.  §  319 

treasurer  in  his  official  capacity  without  authority.  The 
proceeds  were  placed  to  his  credit  as  treasurer,  and  town 
money  was  from  time  to  time  deposited  on  the  account,  and 
he  drew  checks  against  the  funds  as  treasurer  and  used  the 
money  for  private  purposes.  Held,  that  the  bank  could  not 
plead  against  the  town's  demand  for  its  money  so  squandered, 
that  it  supposed  the  treasurer  had  authority  to  draw  the 
notes.  They  must  be  considered  personal  loans  to  the  de- 
positor ;  and  when  he  drew  out  money  really  belonging  to 
the  town  to  pay  these  notes,  he  did  what  the  bank  must  be 
held  to  know  he  had  no  right  to  do,  and  it  must  refund  the 
town.^ 

But  advancing  money  to  a  trustee  and  then  allowing  him 
to  pay  the  loan  by  the  proceeds  of  trust  property  he  has  a 
right  to  sell,  does  not  necessarily  make  the  bank  responsible, 
no  circumstances  being  shown  sufficient  to  put  the  bank  on 
inquiry  as  to  whether  the  money  advanced  was  to  be  used  for 
trust  purposes  or  not.^^ 

Where  a  fund  deposited  by  K.  in  trust  for  D.  is  paid  by 
the  bank  to  K. 's  administrator,  in  the  absence  of  any  notice 
from  D.  the  payment  discharges  the  bank.  '^^'^ 

A  bank  is  not  bound  to  inquire  into  the  propriety  of  any 
transfer  between  the  account  of  an  individual  partner  and  the 
partnership  fund.  It  must  honor  the  check  of  any  partner 
drawn  against  the  firm  deposit. ^^  Of  course  the  check  must 
be  signed  in  the  firm  name. 

§  318.  Forced  Payment.  —  If  a  bank  has  been  forced  to  pay 
by  an  authority  it  could  not  question  or  resist,  it  will  not 
have  to  repay  the  deposit  to  the  depositor. ^ 

§  319.  Insanity  of  Depositor.  — If  the  bank  pays  in  good 
faith,  not  knowing  of  the  insanity  of  the  depositor,  it  will  be 
protected.  1     But  the  check  of  one  who  is  adjudged    insane 

»  Town  of  East  Hartford  v.  American  National  Bank,  49  Conn.  539. 
10  Loring  v.  Brodie,  134  Mass.  469. 
10.'  Schluter  v.  Bank,  117  N.  Y.  125. 
"  Backhouse  v.  Charlton,  8  Ch.  D.  444  (1878). 

1  §  318.    Grivot  v.  Louisiana  State  Bank,  24  La.  An.  265. 

1  §  319.   Riley  v.  Albany  Savings  Bank,  3G  Hun  (N.  Y.),  513. 

685 


§  320  PAYMENT   OF   DEPOSIT. 

by  a  court  of  competent  jurisdiction  is  utterly  void  at  its 
inception.  1* 

An  agent's  authority  is  not  revoked  by  lunacy  of  his  princi- 
pal until  this  is  judicially  ascertained,  and  the  bank  may  pay 
the  agent  till  then.^ 

§  319  A.  Payment  to  Guardian.  — A  guardian  has  no  au- 
thority to  draw  funds  from  a  bank  where  such  funds  are  due 
to  his  ward  as  administratrix  of  an  estate.  If  the  bank 
makes  the  payment  without  an  order  of  court  it  is  liable  to 
the  ward.^ 

§  320.  Succession  of  Banks.  —  Where  an  insolvent  bank 
transfers  its  assets,  name,  and  franchise  to  another  corpora- 
tion, the  latter  is  responsible  to  the  creditors  of  the  former. ^ 

A  savings  bank  succeeding  to  the  business  of  another  must 
pay  the  certificates  of  deposit  of  the  latter,^  and  always  where 
the  business  and  funds  of  bank  A.  pass  to  bank  B.,  B.  is 
liable  fully  to  the  depositors  of  A.^  in  the  absence  of  agree- 
ment of  the  depositors  to  the  contrary. 

When  a  bank  accepts  an  assignment  of  all  the  assets  and 
liabilities  of  another  bank,  and  credits  on  its  books  the  amount 
of  a  depositor's  (D.)  credit  on  the  books  of  the  assignor  bank, 
D.  becomes  a  depositor  with  the  assignee  bank,  and  his  claim 
cannot  be  barred  by  the  Statute  of  Limitations.^ 

i»  American  Trust  &  Banking  Co.  v.  Boone,  102  Ga.  202  (1897). 
2  Wallis  V.  Manhattan  Co.,  2  Hall  (N.  Y.),  495. 

1  §  319  A.  Ryan  v.  North  End  Savings  Bank,  168  Mass.  215;  Walker 
V.  The  State  Trust  Co.,  40  App.  Div.  (Hun,  N.  Y.)  55  (1899). 

1  §  320.    Island  City  Savings  Bank  v.  Sachtleben,  3  S.  W.  (Tex.)  733. 

2  Citizens'  Savings  Bank  v.  Blakesley,  42  Ohio  St.  645. 

8  Eans  V.  Exchange  Bank,  79  Mo.  182;  Hopper  v.  Moore,  42  Iowa, 
563. 

*  Green  v.  Odd  Fellows'  Bank,  65  Cal.  71. 


586 


CHAPTER  XXI. 

STATUTE   OF    LIMITATIONS. 

§  321.  Analysis.     See  §  301. 

Does  not  run  against  a  general  deposit  until  a  right  of  action  ac- 
§  322.  crues,  which  is  not  until  demand  is  made  upon  the  bank,  —  it  being 

a  part  of  the  contract  of  deposit  implied  by  the  uniform  course  of 
business  that  tiie  bank  is  in  no  default  in  not  seeking  the  creditor, 
but  may  hold  the  deposit  until  he  demands  it  (unless  the  bank  ob- 
tained the  money  by  fraud,  §  322  e),  or  circumstances  arise  making 
such  demand  useless,  as, 

(1)  Suspension  of  payment  by  the  bank, 
(e)    (2)  Notice   by  an  account  stated,   or  otherwise,  that   the  bank 

holds  adversely,  and  will  not  pay. 
But  when  one  bank  succeeds  to  the  business  and  assets  of  another, 
the  transfer  does  not  set  the  statute  running  against  the  depositors 
in  the  e.xpired  bank.     §  320. 
Some  slight  opposition  has  been  manifested  to  this  view,  but  the  over- 
whelming weight  of  authority,  direct  and  by  analogy,  favors  it. 

(c)  (1)  As  to  special  deposit,  the  same  rule  holds. 

(d)  (2)  As  to  proceeds  of  collection,  the  same  rule  holds. 

§  322.  Statute  of  Limitations.  —  Suit  by  Depositor  for  his 
Balance.  —  The  indebtedness  of  the  banker  being  an  ordinary 
indebtedness  at  common  law,  the  Statute  of  Limitations  will 
run  against  it,  as  against  any  other  simple  debt.  But  when 
the  statute  will  begin  to  run  has  not  been  as  yet  conclusively 
settled.  In  Union  Bank  v.  Knapp,^  it  was  said  that  the  stat- 
ute would  begin  to  run  from  the  date  of  the  last  balancing  of 
accounts,  as  in  the  depositor's  bank-book,  if  no  subsequent 
transactions  should  be  had  between  the  parties.  This  is 
the  strict  corollary  from  the  rule  that  the  bank's  liability 
to  the  depositor  is  a  simple  debt.  But  there  is  certainly 
room  to  argue  that  this  calculation,  from  the  date  of  the 
last  transaction  between  the  parties,  is  not  founded  either 

1  §  322.  3  Pick.  (Mass.)  96;  Grant  on  Bankers,  &c.,  p.  4.  See  also 
Pott  V.  Clegg,  16  Mee.  &  W.  321 ;  Bridgman  v.  Gill,  24  Beav.  302. 

687 


§  322  STATUTE   OF   LIMITATIONS. 

in  reason  or  in  sound  law.  Viewing  it  practically,  the  longer 
ncteiition  is  the  bank  retains  the  money  undisturbed,  the  better 
etito'nhe'^  it  is  for  the  bank.  If  it  has  been  allowed  to  reap 
^du^i-e  if  extraordinary  gains  from  the  funds  of  a  cus- 
this  does  not    tomcr,  bccause  it  has  been  allowed  to  retain  them 

apply  to  all  -i    f  i  i  c      •    i 

debtors.  undistubed  for  the  unwonted  space  of  eight,  ten, 

or  twelve  years,  this  would  seem  to  be  no  just  cause  for  allow- 
ing it  to  add  the  still  more  enormous  gain  of  a  complete 
appropriation  of  the  whole  sum.  If  the  business  of  the 
institution  or  firm  is  properly  conducted,  the  depositor's 
balance  will  remain  for  any  period  as  an  open  and  live  credit 
on  the  books  of  the  bank ;  and  therefore  the  depositor's  draft 
for  his  principal,  or  any  part  of  it,  could  never  operate  as  an 
injurious  surprise,  as  a  like  demand  might  do  between  in- 
dividuals under  ordinary  circumstances.  Such  seems  clearly 
to  be  the  fair  reason  of  the  matter.  The  legal  arguments 
and  authorities  which  sustain  it  seem  scarcely  less  than 
conclusive. 

The  rule  of  the  case  above  cited  can  be  based  only  on  the 
assumption  that  the  contract  is  a  perfectly  simple  one  of  un- 
it is  clear  qualified  indebtedness.  But  this  is  not  so.  We 
mandis*an  ^^SiVQ  already  seen  that  it  is  a  contract  specially 
essential         modified  by  the  clear  legal  understanding  that  the 

part  of  the  •'  °  ^  ° 

contract.  moncy  shall  be  forthcoming  to  meet  the  order  of 
the  creditor  whenever  that  order  shall  be  properly  presented 
for  payment.  It  follows,  therefore,  that  this  demand  for 
payment  is  an  integral  and  essential  part  of  the  undertaking, 
and,  it  may  be  said,  even  of  the  debt  itself.  In  short,  the 
agreement  of  the  bank  with  the  depositor,  as  distinct  and 
valid  as  if  written  and  executed  under  the  seal  of  each  of  the 
parties,  is  only  to  -pay  upon  demand  ;  accordingly,  until  there 
has  been  such  demand,  and  a  refusal  thereto,  or  until  some 
No  action  act  of  the  depositor,  or  some  act  of  the  bank  made 
mand,  or  kuown  to  the  depositor,  has  dispensed  with  such 
d^spen^slng  demand  and  refusal,  the  statute  ought  not  to  begin 
with  it.  to  run,  nor  should  any  presumption  of  payment  be 

allowed  to  arise. 

(a)  Decisions  fully  sustain  these  views. 
688 


IN  GENERAL  RUNS  FROM  DEMAND.         §  322 

In  Minnesota 2  and  Illinois^  demand  is  a  prerequisite  to 
the  maintenance  of  an  action  for  a  general  deposit  unless 
circumstances  exist  amounting  to  a  legal  excuse,  and  the 
statute  runs  only  from  demand.  In  New  York,  Pennsyl- 
vania, Maryland,  California,  and  Georgia  the  law  is  the 
same.  The  undertaking  of  the  bank  is  not  to  pay  immedi- 
ately and  absolutely,  but  when  payment  shall  be  required. 
It  is  in  no  default  till  payment  is  demanded.  Therefore  no 
right  of  action  exists,  and  the  statute  docs  not  run  until 
demand  is  made  as  stipulated  for  in  the  implied  contract  of 
deposit.^ 

(5)  Analogies  of  the   law  favor  this  view.     The  statute 
runs  in  favor  of  an  indorser  of  a  demand  note  only   demand  ob- 
from   the  time    of   demand    and   notice,  however  ligations. 
long  the  demand  may  be  postponed.^ 

(c)  So  in  case  of  a  contract  to  return  securities  left  with 
a  bank  for  safe  keeping,  the  statute  runs  against  the  right 
of  action  for  breach  of  the  contract  only  from  the  time  of 
demand,  and  not  from  the  time  of  conversion.^  If  the  action 
were  for  conversion,  the  rule  would  be  otherwise ;  no  demand 
is  necessary  to  maintain  trover  when  the  bank  treats  a  special 
deposit  as  part  of  its  assets.^ 

2  Branch  v.  Dawson,  33  Minn.  399  (1885). 

«  Brahm  v.  Adkins,  77  111.  263. 

*  Downes  v.  Phoenix  Bank,  6  Hill  (N.  Y.),  297;  Adams  v.  Orange  Co. 
Bank,  17  Wend.  (Mass.)  514  ;  Girard  Bank  v.  Bank  of  Penn  Township, 
39  Pa.  St.  92 ;  Planters'  Bank  v.  Farmers  &  Mechanics'  Bank,  8  Gill  &  J. 
(Md.)  449  ;  Farmers  &  Mechanics'  Bank  r.  Planters'  Bank,  10  id.  422 
(decision  based  on  banking  usage)  ;  McGough  v.  Jamison,  107  Pa.  St. 
336 ;  Bank  v.  Merchants'  National  Bank,  91  N.  Y.  106  ;  Thomson  v. 
Bank,  82  N.  Y.  1 ;  Hales  v.  Seaman's  Bank,  28  App.  Div.  (Hun,  N.  Y.) 
407(1898);  Finkbone's  Appeal,  86  Pa.  St.  368;  Humphrey  v.  County 
National  Bank,  113  Pa.  St.  417;  Green  p.  Odd  Fellows'  Bank,  6.5  Cal.  71 
(1884)  ;  Mitchell  v.  Beckman,  64  Cal.  117  ;  Minnerlyn  v.  Augusta  Bank, 
88  Ga.  337  (1897). 

For  facts  amounting  to  demand,  see  Delahunty  v.  Central  National 
Bank,  37  App.  Div.  (Hun,  N.  Y.)  434  (1899). 

6  Parker  v.  Stroud,  98  N.  Y.  379. 

6  Ganley  v.  Troy  City  National  Bank,  98  N.  Y.  487. 

'  First  National  Bank  of  Monmouth  v.  Dunbar,  19  111.  App.  558  (1886). 

589 


§  322  STATUTE    OF   LIMITATIONS. 

(cT)  Where  a  deposit  of  money  is  made  in  bank,  the  Stat- 
ute of  Limitations  does  not  begin  to  run  until  after  demand 
is  made.     So  where  a  note  as  collateral  security 

Proceeds  of  ,  ,  .  , 

note  left  for  to  a  line  of  discounts  is  deposited  in  bank,  and  it 
is  converted  into  money  by  the  bank,  the  Statute 
of  Limitations  does  not  begin  to  run  as  to  the  proceeds  of 
the  note  until  after  demand. 

In  such  a  case  in  Pennsylvania  the  court  said:  "It  is  a 
settled  rule  of  law,  that  when  a  deposit  is  made  in  a  bank 
the  statute  does  not  begin  to  run  until  after  demand  is  made. 
It  is  true,  the  defendant  was  not  technically  a  depositor  of 
money  to  be  drawn  out  on  his  check,  but  we  are  unable  to 
see  any  substantial  difference  between  such  case  and  the  one 
in  hand.  He  was  a  customer  or  dealer  with  the  bank,  was 
having  a  line  of  discounts,  and  the  notes  in  controversy  were 
deposited  as  collateral  to  such  discounts.  What  was  the 
duty  of  the  bank  when  the  collateral  notes  were  paid  ?  It 
was  to  deposit  or  carry  the  proceeds  to  the  credit  of  the 
defendant's  account.  He  would  then  occupy  the  position  of 
any  other  depositor. "  ^ 

(e)  Further,  in  the  case  of  a  naked  debt,  the  statute  never 
begins  to  run  before  a  right  of  action  on  behalf  of  the  claim- 
ant or  creditor  has  accrued.     If  this  be  a  sound 

Statute  ,       .    ,        .     .  ,       .  ~   ,, 

never  runs       principle,  it  IS  conclusivc  ot  thc  prcscut  question, 
of  acdon         For  debt  though  it  be  of  the  bank  to  the  depositor, 


accrues. 


it  is  not  such  a  naked  debt  that  it  can  be  sued  upon 
by  the  depositor  at  any  moment.  The  authorities  are  numer- 
ous and  overwhelming  that  the  depositor's  right  of  action  does 
not  come  into  existence  until  after  he  has  made  a  demand 
upon  the  bank,  which  there  was  an  implied  and  valid  under- 
standing between  them  in  the  outset  that  he  should  make,^ 
or  until  somiC  act  of  the  bank  has  waived   such  demand. ^^ 

8  Humphrey  v.  County  National  Bank,  113  Pa.  St.  417,  421. 
«  Downes  v.  Phoenix  Bank,  6  Hill  (N.  Y.),  297;  Adams  v.  Orange  Co. 
Bank,  17  Wend.  (Mass.)  .514  ;  Johnson  v.  Farmers'  Bank,  1  Harr.  (Del.) 
117;  Girard  Bank  v.  Bank  of  Penn  Township,  39  Pa.  St.  92;  Union  Bank  v. 
Planters'  Bank,  9  Gill  &  J.  (Md.)  439;  Watson  v.  Phoenix  Bank,  8  Met. 
(Mass.)  217;  Bellows  Falls  Bank  v.  Rutland  County  Bank,  40  Vt.  377. 
"  Farmers  &  Mechanics'  Bank  v.  Planters'  Bank,  10  Gill  &  J.  (Md.) 
590 


WAIVER   OP    DEMAND.  §  322 

The  duties  of  demand  and  of  payment  are  reciprocal.  Surely 
then  the  legal  results  of  these  rights  should  be  reciprocal 
likewise.  If  the  depositor  cannot  sue  till  he  has  demanded 
payment,  e  converso  he  should  not  lose  his  right  to  sue  till  the 
payment  has  been  refused;  for  until  that  time  he  has  a  right 
to  suppose  that  the  original  agreement  between  himself  and 
the  bank,  which  was  entered  into  for  their  mutual  advantage 
and  profit,  and  from  which  his  refraining  from  demand  is 
enabling  the  bank  to  reap  an  unusually  great  advantage  and 
large  profit,  is  still  subsisting  in  unbroken  force. 

The  acts  which  have  been  held  to  waive  demand  by  the 
depositor  are :  1.  Notification  to  him  by  the  bank  that  his 
claim  will  not  be  paid.^^  2.  The  rendition  to  him  waiverof 
by  the  bank  of  an  account,  in  which  it  claims  the  demand. 
money  as  its  own.^  3.  Suspension  of  specie  payment  and 
discontinuance  of  banking  operations  by  the  bank,  with 
knowledge  thereof  by  the  depositor. ^^  4.  Suspension  of  pay- 
ment and  closing  the  doors  of  the  bank.^* 

In  Adams  v.  Orange  County  Bank,^^  the  publication  of  a 
list  of  unclaimed  deposits,  made  under  the  State  statute 
requiring   such    publication  at  certain   intervals, 

New 

was  held  to  be  an  acknowledgment  of  indebtedness  acknowiedg- 
to  the  depositors  therein  named,  from  which  a  "^^" ' 
new  promise  could  be  implied  to  prevent  the  running  of  the 
Statute  of  Limitations ;  and  the  court  added,  that  it  would 
seem  that,  if  facts  existed  excusing  payment,  they  should  be 
noticed  in  such  publication,  or  otherwise  should  be  deemed 
to  have  been  waived. 

If  the  bank  has  obtained  the  money  by  fraud,  or  through 
an  illegal  contract,  suit  by  the  depositor  lies  at  once,  with- 


422 ;  Planters'  Bank  v.  Farmers  &  Mechanics'  Bank,  8  id.  449 ;  Bank  of 
Missouri  v.  Benoist,  10  Mo.  519  ;  Cooper  v.  Mowry,  16  Mass.  7. 

1^  Farmers  &  Mechanics'  Bank  ly.  Planters'  Bank,  uhi  supra. 

^2  Bank  of  Missouri  v.  Benoist,  ubi  supra. 

IS  Planters'  Bank  o.  Farmers  &  Mechanics'  Bank,  ubi  supra. 

"  Cooper  V.  Mowry,  uM  supra ;  Board  of  Court  House  and  City  Hall 
Commissioners  v.  Irish-American  Bank,  68  Minn.  470  (1897). 

15  17  Wend.  (N.  Y.)  514. 

591 


§  322  STATUTE   OP   LIMITATIONS. 

out  demand.  So  where  money  was  paid  in  and  a  receipt 
taken  from  the  cashier,  stipulating  that  payment  should  not 
No  demand  be  made  before  a  certain  day,  thus  in  fact  trans- 
thTbani7ob-  muting  the  transaction  into  a  loan  to  the  bank, 
inonet  by  being  a  contract  which  in  this  instance  the  cashier 
fraud.  }ia(j  not   powcr  to   enter   into   on    behalf   of   the 

corporation,  it  was  held  that,  since  the  contract  was  illegal 
and  the  bank  could  only  claim  to  withhold  the  money  from 
the  owner  by  virtue  of  this  illegal  contract,  it  should  not 
be  entitled  to  a  prior  demand,  but  the  owner  might  sue 
immediately.^^ 

16  White  V.  Franklin  Bank,  22  Pick.  (Mass.)  181. 


592 


CHAPTER   XXII. 

LIEN    AND     SET-OFF. 

§  323.  Analysis.    See  Lien  on  Shares.     §  697  et  seq. 
A  Lien 

Is  a  mere  riglit  of  the  bank  to  retain  in  its  possession  (though  in 
maritime  law  and  in  equity  liens  may  exist  independently  of  pos- 
session) property,  the  title  of  which  (absolute  or  special)  is,  or  in 
the  case  of  negotiable  paper  purports  to  be,  in  one  against  whom 
the  bank  has  some  demand,  until  tliat  demand  is  satisfied. 
Liens  are  particular  or  general. 
A  Particular  Lien 

Attaclies  to  a  thing  for  a  claim  growing  out  of  or  connected  with 
that  particular  tiling,  and  is  favored  at  common  law  as  founded  in 
equity. 
A  General  Lien 

Is  a  right  of  retention,  not  only  for  charges  growing  out  of  or  con- 
nected with  that  particular  thing,  but  also  for  charges  in  respect 
of  all  dealings  between  the  parties  of  a  like  nature.    Such  liens 
are  not  favored. 
§  332.   Creation. 

Liens  arise  by  express  agreement,  or  from  the  course  of  business,  and 
never  exist  wliere  tlie  terms  of  agreement,  express  or  implied,  are 
inconsistent  with  the  lien. 
§  326.   Effect. 

A  lien  is  good  against  the  depositor,  whether  he  is  true  owner  of  the 

property  or  not.     §  699. 
A  lien  upon  non-negotiable  property  is  good  against  the  whole  world, 
§  326.   if  the  debtor  is  the  true  owner  at  tlie  time  the  lien  arises.     Liens 
relate  back  to  the  beginning  of  possession,  unless  the  bank  has 
§  33L   notice  of  intervening  rights  before  parting  with  the  consideration 
that  creates  the  lien,  wherefore  an  attaching  creditor  or  a  pur- 
chaser from  the  debtor  takes  it  subject  to  the  liens  of  the  bank, 
arising  before  it  has  notice  of  the  purchase  or  service  of  the  at- 
tachment. 
§  324.  A  lien  on  negotiable  property  is  good  against  all  the  world,  if  the 

bank  takes  it  honajide  for  value,  witliout  notice,  and  in  the  usual 
course  of  business. 
§  333.  In  New  York,  Pennsylvania,  &c.,  a  bank  having  possession  of  paper 

which  really  does  not  belong  to  its  debtor  has  no  lien  if  it  has  not 
changed  its  position  on  faith  of   the  paper,  but  merely  holds  it 
VOL.  I. -38  593 


§  323  LIEN    AND    SET-OFF. 

against  a  pre  existing  general  balance.    But  in  most  States  a  pre- 
existing debt  is  a  sufficient  consideration  to  constitute  tlie  bank  a 
holder  for  value  in  the  usual  course  of  business.     The  New  York 
exception  is  not  recognized. 
On  what  and  fob  what  the  Lien  attaches. 
§  324.  A  bank  has  a  general  lien  upon  all  moneys  and  negotiable  securities 

of  the  depositor  in  its  hands,  in   the  regular  course  of  business, 
unless  there   is  an  agreement  to  tlie  contrary,  or  the  bank  has 
notice  of  facts  indicating  that  tlie  intent  of  tlie  depositor  in  making 
or  appropriating  the  deposit  is  inconsistent  with  such  lien. 
Under  this  principle,  a  bank  has  a  lien  for  its  general  balance  upon 

business  paper  placed  with  it  for  collection,  and 
On  the  proceeds  of  such  collections. 

On  goods,  bonds,  deeds,  &c.,  upon  the  faith  of  which  it  has  made 
advances,  it  has  a  particular  lien. 
§  324.    (c)  But  it  has  no  general   lien   on  securities  left  with  it  after  it  has 

refused  to  lend  money  on  them. 
§  325.  Nor  on  bills  left  to  be  exclianged. 

(a)      Or  on  the  surplus  proceeds  of  collaterals  sold. 
(b,d)    Nor  on  any  moneys  deposited  for  a  special  purpose, 
(c)      Nor  on  a  special  deposit. 
§  326.  The  property  and  the  claim  that  is  the  basis  of  the  lien  must  be  due 

(c,  d)  to  and  from  the  same  funds.  (The  property  of  A.  cannot  be  held 
for  a  debt  due  from  A.  as  administrator  or  trustee,  or  from  the 
firm  to  which  A.  belongs,  nor  can  the  bank  keep  A.'s  property  tor 
a  debt  due  from  A.,  unless  it  is  due  to  the  bank.) 
This  must  be  actually  true  in  case  the  property  is  non-negotiable ; 
but  in  case  of  negotiable  property,  the  bank  may  presume  that  it 
belongs  to  the  depositor,  unless  it  has  notice  to  the  contrary.  If 
the  bank  is  aware  that  the  property  is  not  that  of  the  depositor, 
it  can  only  hold  it  for  a  claim  against  him  who  is  really  entitled 
to  it,  and  not  against  a  third  person  whom  it  supposes  to  be  the 
owner. 
§  327.  Appropriation  of  deposits. 

(e)  If  there  are  several  accounts  in  different  branches  of  the  bank, 
or  in  the  same  branch,  which  are  really  kept  by  the  same 
depositor  in  the  same  right,  tiie  bank  may  apply  a  deposit  in 
any  one  to  satisfy  an  overdraft  on  any  other,  and  if  a  de- 
positor does  not  apply  his  deposit  himself,  the  bank  may 
(d)  appropriate  it,  even  to  a  claim  barred  by  the  Statute  of  Limi- 
tations. 
§  328.  Money  received  by  a  depositor  for  the  use  of  the  bank,  but  not  paid 

over,  may  be  charged   against   him  on   general  account,  and  in 
equity  the  bank  may  retain  a  deposit  for  an 
§  329.  Unmatured  debt. 

As  for  a  note  of  the  depositor,  if  there  is  otherwise  danger  of 
loss,  as  by  the  depositor's  insolvency,  though  at  law  there 
cannot  be  a  lien  or  set-off  of  a  future  debt  against  a  present 
demand,  except  by  agreement.    §  702. 

594 


ANALYSIS.  §  323 

§  330.  Loss  of  lien. 

Lien  may  be  lost  by  taking  security  for  the  debt,  voluntarily 
parting  with  possession,  &c.     §  701. 
§  331.         Estoppel. 

The  bank  may,  by  bad  faith,  be  estopped  to  assert  a  lien  that 
would  ordinarily  exist, 
(a)  And  as  to  a  purchaser,  a  bank  cannot  set  up  a  lien  for  advances 
made  after  it  knew  of  the  purchase. 
Set-off.     (See  Set-off  of  bank  bills,  §§  633,  0-39.) 

Ts  a  defence  to   a  demand  by  setting  up  an  opposing  demand  to 
counterbalance  it  in  whole  or  in  part. 
§  334.  The  demands  must  be  run  between  tlie  same  two  real  funds. 

§  335.  They  must  be  certain,  or  capable  of  being  reduced  to  certainty,  by 

computation. 
(This  excludes  demands  for  damages,  the  amount  of  which  a  jury 
must  determine  by  their  own  estimate  and  opinion,  and  not  merely 
by  calculation,  in  case  they  deem  the  claim  a  good  one.) 
§  336.  The  demands  must  be  money  demands. 

Goods  intrusted  to  the  bank  for  any  purpose  but  to  be  turned  into 
a  money  credit  are  not  tlie  subject  of  set-off. 
§  336  a.       Certified  check  not  subject  to  set-off  by  bank. 
§  337.  Insolvency, 

Of  depositor. 

The  bank  may  retain  his  deposit  to  satisfy,  so  far  as  it  will  go, 
his  indebtedness  to  it,  and  if  any  part  of  its  claims  arising  out 
of  contract  are  unliquidated  (as  in  case  of  notes  on  which  the 
depositor  was  indorser  and  the  principals  are  insolvent),  it  may 
keep  the  deposit  till  the  probable  debt  is  ascertained. 
§  338.  Of  a  commercial  bank. 

The  depositor  may  offset  his  deposit  or  other  debt  due  from  the 
bank  against  a  debt  due  from  him,  though  it  matures  after 
the  insolvency. 
But  if  his  claim  against  the  bank  came  into  his  hands  after  the 
insolvency,  he  will  be  allowed  only  what  he  paid  for  it,  except 
under  statute  law. 
§  339.  Of  a  savings  bank. 

Depositor  cannot  offset  his  deposit  after  insolvency  of  the  bank. 
§  340.  Death  of  Depositor. 

The  bank  may  offset  against  his  representatives  just  as  against  him. 
Comparison  of  Lien  and  Set-off. 

(1)  Set-off  is  a  statute  creation  (except  in  equity),  while  liens  exist 

at  common  law. 

(2)  A  lien  at  common  law  requires  the  possession  by  the  bank,  actu- 

ally or  constructively,  of  the  property  of  another,  while  set-off 
has  nothing  to  do  with  the  possession  of  any  specific  property 
to  which  the  debtor  has  title. 

(3)  A  lien  gives  a  right  to  retain  specific  articles  of  property,  the  title 

to  which  is  not  in  the  retainer,  while  set-off  can  never  give  a 
right  to  retain  property  owned  by  another. 

595 


§  324  LIEN   AND    SET-OFF. 

(4)  It  is  clear,  therefore,  that  the  word  "  lien  "  cannot  properly  be  used 
in  reference  to  the  claim  of  the  bank  upon  a  general  deposit,  for 
the  funds  on  general  deposit  are  the  property  of  tlie  bank  itself. 
The  term  "set-off"  should  be  applied  in  such  cases,  and  "  lien  " 
when  a  claim  against  paper  or  valuables  on  special  or  specific 
deposit  is  referred  to. 
In  the  cases,  tlie  words  are  used  very  loosely,  and  sometimes  the  true 
force  of  a  case  has  been  mistaken  by  text-writers  through  failure 
to  keep  in  mind  tiiis  distinction. 
The  practical  effect  of  lien  and  set-off  is  much  the  same.  They 
result  in  balancing  opposing  claims,  and  since  transfers  of  a  gen- 
eral deposit  are  subject  to  the  equities  between  the  bank  and  the 
depositor,  until  notice  to  the  bank,  its  right  of  set-off  is  as  good 
in  respect  to  a  general  deposit  as  its  lien  in  respect  to  a  specific 
deposit  for  collection  or  as  collateral. 

§  324.  On  what  the  Lien  attaches  and  for  -what  Demands.  — 
The  rule  may  be  broadly  stated,  that  the  bank  has  a  general 
lien  on  all  moneys  and  funds  of  a  depositor  in  its  possession 
for  the  balance  of  the  general  account. ^  Of  course,  so  long  as 
the  balance  is  in  favor  of  the  depositor,  the  lien  has  no  vitality 
in  it.  But  when  payment  upon  an  overdraft,  a  discount,  an 
acceptance,  or  other  species  of  advance  or  loan  by  the  bank  to 
him,  creates  an  indebtedness  on  his  part,  all  the  funds  which 
the  bank  has  or  obtains  to  his  credit  may  be  applied  upon 
such  indebtedness  until  it  is  fully  discharged,  and  without 
any  request  or  direction  from  him.^" 

1  §  324.  Ford  v.  Thornton,  3  Leigh  (Va),  695;  State  Bank  v.  Arm- 
strong, 4  Dev.  (N.  C.)  519;  McDowell  v.  Bank  of  Wilmington,  1  Harr. 
(Del.)  369;  Commercial  Bank  of  Albany  v.  Hughes,  17  Wend.  (N.  Y.) 
94 ;  Dawson  v.  Real  Estate  Bank,  5  Pike  (Ark.),  283  ;  Bank  of  United 
States  V.  Macalester,  9  Barr  (Pa.),  475;  Beckwith  v.  Union  Bank,  4  Sandf. 
Super.  (N.  Y.)  604  ;  Marsh  v.  Oneida  Bank,  34  Barb.  (N.  Y.)  298;  Davis 
V.  Bowsher,  5  Terra,  488;  Jourdaine  v.  Lefevre,  1  Esp.  N.  P.  66;  Bolton 
V.  Puller,  1  B.  &  P.  539;  Giles  v.  Perkins,  9  East,  12;  Scott  v.  Franklin, 
15  East,  428;  Brandao  v.  Barnett,  12  CI.  &  F.  787;  Jones  v.  Peppercorne, 
5  Jur.  N.  s.  140;  28  L.  J.  Ch.  153  ;  In  re  Williams,  3  Ir.  Eq.  346;  Buffalo 
County  Bank  v.  Hanson,  34  Neb.  455  (1892) ;  Gibbons  v.  Hecox,  105  Mich. 
509;  Peoples'  Bank  v.  Tufts,  35  Atl.  792  (1896);  Jones  v.  Merchants' 
National  Bank,  72  Hun  (N.  Y.),  344;  London  Chartered  Bank  v.  White, 
4  App.  Cases,  413;  Rice  v.  National  Bank,  77  Mich.  414;  Merchants' 
National  Bank  i'.  Maple,  65  111.  App.  484;  Bank  v.  Brewing  Co.,  50  Ohio 
St.  151  (1893);  Mt.  Sterling  National  Bank  v.  Green,  99  Ky.  262  (1896). 

i"  Knapp  V.  Cowell,  77  la.  528. 

596 


LIEN.  §  324 

A  bank  which  becomes  assignee  of  a  lessor  and  has  in  its 
possession  securities  of  the  lessee,  the  bank  has  not  a  lien 
upon  such  securities  for  rent,  and  cannot  apply  collection 
thereon  to  the  payment  of  rent  without  the  lessee's  con- 
sent.^* 

The  funds  thus  applicable  have  been  said  to  be  not  alone 
the  general  deposit  of  the  customer,  but  any  business  paper, 
as  notes  or  bills,  belonging  to  him  and  which  he  has  intrusted 
to  the  bank  for  collection.'-^ 

Upon  precisely  what  property  belonging  to  the  customer 
in  the  possession  of  the  bank  the  lien  will  attach,  is  a  subject 
upon  which  there  have  been  few  decisions  in  America.  In 
Alabama  it  is  held  that  a  bank  has  a  lien  upon  all  moneys 
and  securities  of  a  customer,  coming  into  its  possession  in 
the  regular  course  of  business,  for  any  balance  due  it  on 
general  account.^ 

A  bank  may  set  off  a  deposit  of  a  customer  against  an 
indebtedness  due  from  him  to  an  indorser.^" 

When  a  customer  deposits  with  a  bank  securities  to  cover 
overdrafts  not  exceeding  a  specified  amount,  the  bank's  gen- 
eral lien  is  displaced  and  the  bank  cannot  hold  the  securities 
for  overdrafts  exceeding  the  specified  amount.^* 

(a)  A  bank  discounting  a  draft  on  faith  of  goods  shipped 
by  the  drawer  acquires  an  equitable  lien  on  the   Discount  oa 
proceeds  of  the  goods.  ^  goods. 

(5)  A  bank  holding  a  depositor's  demand  note  has  a  lien 
on  the  proceeds  of  drafts,  though  collected  after   proceeds  of 
the  filing  of  a  petition  in  bankruptcy.^  coiiectiou. 

(c)  A  bank  has  no  lien  for  a  general  balance  upon  secu- 

1*  Buffalo  County  Bank  v.  Hanson,  34  Neb.  4.55  (1892). 

2  Ex  parte  Pease,  1  Rose,  232;  Ex  parte  Wakefield  Bank,  1  id.  243; 
19  Ves.  Jr.  25;  but  see  Lord  Bolingbroke's  Case,  in  Joy  v.  Campbell, 
1  Sch.  &  Lef.  346  ;  Cockrill  v.  Joyce,  62  Ark.  216  (1896). 

8  Lehman  v.  Tallassee  Manuf.  Co.,  64  Ala.  567;  In  re  Tallassee  &  Co., 
64  Ala.  595. 

8«  Van  Winkle  Gin  Co.  v.  Citizens'  Bank,  89  Tex.  147  (1896). 

3!-  Earl  of  Strathmore  v.  Vane,  33  Ch.  Div.  586. 

*  Flour  City  National  Bank  v.  Garfield,  30  Hun  (N.  Y.),  579. 

^  In  re  Farnsworth,  Brown,  &  Co.,  5  Biss.  223. 

69T 


§  325  LIEN   AND   SET-OFF. 

rities  accidentally  in  its  possession  or  not  in  its  possession 
No  lien  on      jn  the  coui'sc  of  busincss  as  a  bank,  for  example, 

securities  in  ■,    r  •   t         ^         t         ^  r 

baiiii's  pes-     securities    left  with   the  bank   alter    its   reiusal 

session  acci-       ,         -,.  i     j  i  i        ^  J^^  a 

dentally,  not   to  discount  them  or  lend  money  on  them.** 
busin^ess!  °^         (^)  It  is  d  neccssary  condition  of  a  symbolical 
pledge  by  delivery  of   bills  of   lading,  warehouse  receipts, 
Symbolical      <^<^->  ^^^^  *^^  property  itself  be  in  the  possession 
pfedge.  Qf  some  othcr  person  than  the  pledgor,  and  that 

it  be  separated,  capable  of  identification." 

§325.  Specific  and  Special  Deposits. — Any  special  pur- 
pose attaching  to  the  deposit  inconsistent  with  a  general 
lien  will  prevent  it,  as  giving  bills  to  a  banker  to 
de^pol^fno*^  exchaugo  for  others.  1  Money  deposited  under  an 
era"  Sifnc"',  agreement,  understood  by  the  cashier,  and  in- 
if  such  lien      tended  to  benefit  all  creditors,  cannot  be  retained 

would  be  in- 
consistent       \jY  the  bank  as  an  offset  against  its  claims  upon 

with  the  pur-       •'  ■,         m         ^ 

pose  of  the      the  dcpositor.  ^^     bo  where  securities  are  pledged 
eposit.  ^.^^  ^  particular  loan  or  debt,  the  banker  has  no 

lien  on  them  to  secure  payment  of  a  general  balance,  or  of 
other  demands  and  indebtedness,^  unless  there  is  a  special 
agreement  to  that  effect. 2"    And   this  is  true  even  where 

"  Petrie  v.  Myers,  54  How.  Pr.  (N.  Y.)  513;  Lucas  v.  Dorrien,  7  Taunt. 
(N.  Y.)  278 ;  s.  c.  1  IMoore,  29  ;  First  National  Bank  v.  Galton,  172  111. 
625  (1898)  ;  Bank  v.  Weems,  69  Tex.  489  (1888) ;  citing  Rose  v.  Houston, 
11  Tex.  324,  Chapman  v.  Allen,  15  Tex.  278,  King  v.  Gilleland,  60  Tex. 
271,  Glasscock  v.  Hamilton,  62  Tex.  143. 

'  Union  Trust  Co.  v.  Trumbull,  187  111.  146. 

1  §  325.  Barnett  v.  Brandao,  12  Clark  k  Fin.  787,  805,  809;  Fitzger- 
ald V.  State  Bank,  64  Minn.  469  (1896)  ;  Armstrong  v.  Chemical  National 
Bank,  41  Fed.  234. 

i«  Fitzgerald  v.  State  Bank,  64  Minn.  469. 

2  Wyckoff  V.  Anthony,  90  N.  Y.  442;  and  see  Davis  v.  Bowsher, 
5  Term,  491;  Duncan  v.  Brennan,  83  N.  Y.  487  ;  Robinson  v.  Frost,  14 
Barb.  (N.  Y.)  536;  Lane  v.  Bailey,  47  Barb.  (N.  Y.)  395;  Woolley  v. 
Louisville  Banking  Co.,  81  Ky.  527  (1884)  ;  Teutonia  National  Bank  of 
New  Orleans  v.  Loeb,  27  La.  An.  110  (1875);  Reynes  v.  Dumont,  1-30 
U.  S.  354  (1889);  Masonic  Savings  Bank  v.  Bangs,  84  Ky.  140  (1886); 
Loyd  V.  Lynchburg  National  Bank,  86  Va.  694  (1890). 

2«  Merchants'  Bank  v.  Denmere,  92  Ga.  739  (1893) ;  Loyd  v.  Lynch- 
burg National  Bank,  86  Va.  694  (1890). 
598 


NO    GENERAL   LIEN   ON   SPECIFIC   DEPOSITS.  §  325 

collaterals  are  allowed  to  remain  in  the  bank  after  the  debt 
secured  by  them  is  paid.^*  So,  if  a  check  is  deposited  to 
take  up  the  check  of  another  person,  the  bank  cannot  apply 
it  to  satisfy  the  depositor's  debt  to  the  bank.^ 

(a)  And  if  a  bank  sells  collateral  security,  and  there  is 
a  surplus  of  proceeds  after  the  debt  secured  is    „     , 

'■  '^  _  Surplus 

paid,   the  surplus  cannot  be  applied  on  general   from  sale  af 

,      ,  .  collateral. 

balance.* 

Where  a  note  is  pledged  by  a  bank  to  another  bank  to 
secure  a  loan,  and  the  maker  being  threatened  with  suit  pays 
said  note  to  the  pledgee  without  being  allowed  to  set  off  a 
deposit  to  his  credit  in  the  pledgor  bank,  the  maker  is  equi- 
tably entitled  to  recover,  in  preference  to  general  creditors, 
from  a  receiver  of  the  pledgor  bank,  who  holds  surplus  of 
collaterals  in  excess  of  debt  secured  to  the  pledgee,  the 
amount  of  such  deposit  which  the  maker  would  have  been 
allowed  to  set  off  had  the  original  bank  retained  the  note.** 

(&)  In  Bank  of  United  States  v.  Macalester^  the  general 
rule  was  laid  down  that  funds  deposited  in  a  bank  for  a 
special  purpose,   known  to  the  bank,  cannot  be   no  general 
withheld  from  that  purpose,  to  the  end  that  thev   l'^"  'f  bank 

'^       ^  "      has  notice  or 

may  be  set  off  by  the  bank  against  a  debt  due  to  it   facts  incon- 

f  11        1  •,  1  T       1  1     •  sistent  with 

irom  the  depositor.     Accordingly,  certain  coupons   it,  as  a  spe- 
of  the  State  bonds,  issued  by  the  State  of  Illinois,    [n^he"de-°^° 
liaving  been   made    payable  at  the  Bank  of   the   p°^'^* 
United  States,  and  funds  to  precisely  the  amount  necessary 
to  meet  these  coupons  having  been  deposited  by  the  State  in 
the  bank  just  before  they  fell  due,  it  was  held  that  the  bank, 
understanding  the  purpose  of  the  deposit,  could  not  refuse 
to  apply  the  money  to  the  payment  of  the  coupons  on  the 

2»  Bacon's  Adm'rs  v.  Bacon's  Trustees,  94  Va.  686  (1897). 

*  Straus  t-.  Tradesmen's  National  Bank,  36  Hun  (N.  Y.),  451 ;  National 
Bank  v.  Insurance  Co.,  104  U.  S.  54. 

*  Brown  v.  New  Bedford  Savings  Inst.,  137  Mass.  262 ;  Wolstenholra 
V.  Sheffield  Union  Banking  Co.,  54  Law  T.  R.  n.  .s.  746 ;  Hathaway  v. 
Fall  River  National  Bank,  131  Mass.  14;  Appl.  of  Bank  of  Commerce, 
44  Pa.  St.  423. 

*"  Becker  v.  Seymour,  71  Minn.  394  (73  N.  W.  1096)  (1898). 
6  9  Barr  (Pa.),  475. 

699 


§  325  LIEN   AND    SET-OFF. 

ground  of  a  prior  undischarged  indebtedness  of  the  State  to 
the  bank.  The  same  general  rule  is  laid  down  by  Grant  in 
his  English  Treatise,  p.  273.  He  says  that  the  claim  of  a 
general  lien  by  the  bank  would  be  inconsistent  with  its 
special  undertaking.  The  reasoning  in  the  above  case,  how- 
ever, and  that  in  Mr.  Grant's  work,  both  tend  to  show,  though 
it  is  not  directly  stated,  that  if  the  deposit  were  so  made  that 
the  bank  did  not,  as  matter  of  fact,  know,  or  at  least  did  not 
have  such  strong  cause  that  it  could  not  reasonably  insist 
that  it  did  not  know,  that  the  deposit  was  intended  to  meet 
the  special  purpose,  and  that  it  could  not  therefore  be  sub- 
jected to  the  lien,  then  the  lien  might  attach.  For  if  the 
bank  had  not  such  knowledge,  or  ample  means  of  obtaining 
such  knowledge,  it  may  well  be  urged,  that,  with  an  unpaid 
indebtedness  of  the  customer  to  the  bank  already  subsisting, 
it  would  refuse  to  have  further  dealings  with  him,  if  they 
were  to  be  of  such  a  qualified  and  unusual  nature. 

The  English  cases  eliminate  from  the  operation  of  the  lien 
all  property  which  comes  into  the  banker's  hands  plainly 
ear-marked  or  appropriated  for  any  special  purpose.  A  cus- 
tomer's security,  specifically  stated  to  be  for  the  amount 
"which  shall  or  may  be  found  due  on  the  balance  of  his 
account,"  was  held  to  be  security  for  the  then  existing  bal- 
ance only,  and  not  to  be  applicable  upon  the  subsequent 
floating  balance.^  In  like  manner,  a  security  specifically 
given  for  a  contemporaneous  advance  of  one  thousand  pounds 
by  the  banker,  was  held  not  to  be  applicable  against  an  in- 
dependent indebtedness  of  five  hundred  pounds,  afterwards 
arising  upon  the  ordinary  running  account." 

(c)  It  seems,  too,  that  the  deposit  should  be  made  with  the 
banker  in  his  character  as  such,  and  should  not  be  in  the 
Special  de-  nature  of  a  special  deposit  for  a  particular  purpose 
posit.  j^Q^  connected  with  the  banking  business.     Thus, 

for  example,  a  chest  of  plate  confided  to  the  banker,  not  as 


«  In  re  Medewe,  26  Beav.  588;  28  L.  J.  Ch.  891. 
'  Vanderzee  i-.  Willis,  3  Bro.  C.  C.  21 ;  Zinck  v.  Walker,  2  W.  Bl. 
1154. 

600 


LIEN. 


32G 


a  banker  but  as  a  custodian,  merely  for  safe  custody  in  his 
vaults,  was  held  not  subject  to  the  licn.^ 

((7)  Money  deposited  for  a  specific  purpose  must  be  applied 
to  that  and  no  other.  Where  a  State  had  two  deposits  in 
a  bank,  one  to  pay  coupons  and  bonds  issued  by    Specific  de- 

1  ■       ■  ii  .1  1  i.      1     p'l^il  cannot 

the  canal  commissioners,  the  other  under  control  U  appropri- 
of  the  fund  commissioner,  the  latter  being  over-  '^f"he"/epol 
drawn,  the  bank  applied  the  former  deposit  to  set-  'torto  bank, 
tie  the  deficit.  Held,  that  this  could  not  be  done  by  the 
bank ;  it  was  the  agent  of  the  coupon  holders  to  the  extent 
of  the  sura  set  apart  for  their  payment.^ 

§  326.  The  opposing  Claim  and  the  Property  must  be  due  to  and 
from  the  same  two  Funds.  — The  lien  and  the  right  of  set-off  only 
exist  where  the  individual,  who  is  both  depositor  and  debtor, 
stands  in  both  these  characters  in  precisely  the  same  relation 
and  on  precisely  the  same  footing  towards  the  bank.  That  is 
to  say,  for  instance,  the  bank  can  claim  no  lien  on  the  deposit 
of  a  partner,  made  on  his  separate  account,  in  order  to  set  off 
the  same  against  a  debt  owing  them  from  the  firm  ;  ^  and  this 
not  even  if  property  specifically  pledged  to  the  bank  by  the 
partner  on  his  separate  account  afterwards  becomes  the  prop- 
erty of  the  firm.  Even  then,  if  the  firm  fails,  the  banker  can 
hold  the  property  thus  pledged  solely  as  security  for  any  sepa- 
rate indebtedness  of  the  individual  partner.^  For  it  is  not  in  the 
bank's  possession  as  the  property  of  the  firm ;  so  far  as  the 
firm  is  concerned  the  bank's  possession  is  accidental.  And 
the  surplus  above  the  indebtedness  of  a  firm  cannot  be  applied 
by  the  bank  to  the  individual  debt  of  a  partner  without  the 
consent  of  the  partner.^"  Neither  can  the  individual  partner 
and  the  firm  so  shift  their  respective  credits  and  debits  as  to 
set  them  off,  the  one  against  the  other,  when  the  bank  itself 
is  insolvent.^     When  a  bank  makes  a  loan  to  a  partner  in  the 

8  Ex  parte  Eyre,  1  Ph.  235;  Brandao  v.  Barnetfc,  12  CI,  &  F.  809; 
O'Connor  v.  Majoribanks,  4  Man.  &  G.  435. 

9  Judy  V.  Farmers  &  Traders'  Bank,  81  Mo.  404. 

1  §  326.    Watts  V.  Cliristie,  11  Beav.  546.  ^ 

2  Ex  parte  McKenna,  30  L.  J.  Bank.  20. 

2"  Bank  of  La  Grange  v.  Cotter,  101  Ga.  134  (1897). 
8  Watts  V.  Christie,  11  Beav.  546;  26  L.  J.  Ch.  711. 

601 


§  326  LIEN   AND   SET-OFF. 

firm  name,  on  the  authority  of  the  firm,  with  a  knowledge 
that  such  loan  is  to  be  used  to  pay  an  individual  indebted- 
ness to  the  bank,  the  firm  is  not  bound.^"  In  like  manner, 
it  has  been  held  that  the  joint  and  several  note  of  A.  as  prin- 
cipal, and  B.  and  C.  as  sureties,  cannot  be  paid  out  of  the 
individual  deposit  even  of  A.* 

But  later  decisions  hold  that  the  bank  may  apply  the 
amount  credited  to  a  depositor  to  a  debt  due  to  it  by  such 
depositor  jointly  with  another.^" 

The  decision  in  Dawson  v.  Bank*  was  based  on  two 
grounds  —  one  that  the  charter  of  the  bank  prohibited  such 
set-off,  the  other  because  the  debts  were  not  mutual.  On 
the  latter  ground  this  decision  followed  Traramell  v.  Harrell** 
which  was  overruled  by  Leach  v.  Lambeth.*'^ 

So,  also,  a  bank  with  which  certain  notes  belonging  to  A. 
and  B.  as  co-owners  are  left  for  collection  has  a  lien  on  A.'s 
half  of  said  notes  for  any  balance  due  to  it  from  A.  on 
general  account.^'' 

The  funds  of  a  corporation  cannot  be  applied  to  the  indi- 
vidual debt  of  the  corporation's  president.*^ 

Money  deposited  by  a  person  to  the  credit  of  himself,  as 
"  deputy  treasurer,"  cannot  be  applied  by  the  bank  to  the 
payment  of  an  overdraft  by  another  person,  as  "county 
treasurer."  ^^ 

In  the  first  case  cited  in  this  paragraph,  the  facts  were  these. 
The  bankers  stopped  payment,  being  at  the  time  indebted  to 
A.,  but  having  a  balance  due  from  the  firm  of  A.  and  B. 
Before  they  had  actually  committed  an  act  of  bankruptcy,  A. 
assigned  his  credit  to  the  firm,  and  notified  the  bankers.  But 
it  was  held  that  the  assignment  could  not  be  legally  made. 

8»  Eyrich  v.  Capital  State  Bank,  67  Miss.  74  (1889). 
*  Dawson  v.  Real  Estate  Bank,  5  Pike  (Ark),  283. 
*«  Eyrich  v.  Capital  State  Bank,  67  Miss.  71   (1889),  citing  Moody  v. 
Willis,  41  Miss.  347. 
«  4  Ark.  602. 
*'  14  Ark.  668. 

id  Greene  ».  Jackson  Bank,  18  R.  I.  779. 
4«  Ferry  v.  Home  Savings  Bank,  114  INIich.  321  (1897). 
*/  Citizens'  National  Bank  v.  Alexander,  120  Pa.  476. 
602 


LIEN.  §  326 

In  short,  it  may  be  laid  down  as  a  general  rule,  based  upon 
and  illustrated  by  many  of  the  cases  cited  and  commented 
upon  in  this  and  the  immediately  preceding  paragraphs,  that, 
if  a  customer  has  any  duplex  relationship  with  his  banker, 
the  line  of  demarcation  shall  be  carefully  preserved.  If  he 
borrows  a  specific  sum,  and  gives  specific  security  for  it,  all 
transactions  relating  thereto  shall  be  kept  accurately  distinct 
from  the  transactions  growing  out  of  his  ordinary  connection 
with  the  bank,  as  a  simple  depositor.^ 

(a)  If  the  same  person  keeps  separate  accounts  at  the 
same  bank  in  distinct  characters,  the  one  being  his  indi- 
vidual account,  and  the  other  being  kept  by  him  under  any 
species  of  trust,  if  tlie  bank  has  notice  of  the  Trust  ac- 
nature  of  this  second  account,  it  will  be  bound  to  *^°""*" 
keep  the  two  distinct.  If  the  bank  wrongfully  permits  the 
depositor  to  intermingle  the  accounts,  or  to  make  transfers 
from  the  trust  account  to  his  personal  account,  when  in  fact 
he  had  no  right  so  to  do,  it  may  possibly  render  itself  liable 
to  reimburse  the  beneficiary  or  principal  who  has  been  un- 
justly stripped  of  his  property ;  in  which  case,  if  the  cus- 
tomer has  drawn  against  his  own  account,  so  that  his  balance 
no  longer  furnishes  means  of  remuneration  to  the  bank,  it 
will  have  no  recourse  but  to  bear  the  loss.^  The  decision 
in  this  case  was  based  upon  the  ground  that  the  bankers 
had  actual  cognizance  of  the  circumstances  which  rendered 
the  conduct  of  their  customer  fraudulent ;  and  so  were,  in 
the  view  of  the  law,  privy  to  the  fraud.  Where  the  circum- 
stances fail  to  show  real  or  implied  knowledge  of  this  de- 
scription on  the  part  of  the  bank,  the  reason  of  this  cause 
would  not  reach. 

(b)  Where  a  bank  knew  that  the  account  of  a  depositor 
was  opened  by  him  as  general  agent,  to  facilitate  his  business 
as  agent  of  an  insurance  company,  by  accumulating  premiums 
on  policies,  —  held,  that  the  bank  was  chargeable  with  notice 
of  the  equitable  rights  of  the  company,  although  he  deposited 
other  money  in  the  same  account  and  drew  checks  upon  it 

6  Mosse  V.  Salt,  32  Beav.  269 ;  32  L.  J.  Ch.  756. 
«  Bodenham  v.  Hoskins,  13  Eng.  L.  &  Eq.  222. 

603 


§  326  LIEN    AND    SET-OFF. 

for  his  private  use  ;  and  the  company  might  enforce  its 
beneficial  ownership  therein  against  the  bank,  claiming  a 
lien  thereon  for  a  debt  due  to  it  which  he  contracted  for 
his  individual   use.' 

(c)  The  deposit  and  the  debt  must  be  due  to  and  from  the 
same  fund.  A  bank  cannot  keep  a  deposit  made  by  D.  as 
assignee,  for  D.'s  individual  debt.^ 

Where  an  agent  deposits  money  of  his  principal  in  his 
own  name  as  "  agent,"  the  bank  knowing  the  trust  character 
of  the  funds  cannot  appropriate  them  to  the  individual  debt 
Funds  of  of  the  agent,  even  with  his  consent,  to  the  prejudice 
principal  not    q£  ^]^g  principal.^     So  where  funds  are  deposited 

applicable  to  ^  ^ 

agent's  debt,  jn  the  name  of  "J.  C.  W.,  Trustee,"  the  bank 
cannot  apply  them  to  a  debt  due  from  J.  C.  W.i"^ 

(d)  A  bank  cannot  apply  the  funds  of  a  new  partnership 
Overdraft  of  to  Settle  the  Overdraft  of  the  old  firm  now  dis- 
oid  firm.  solved,  though  one  of  the  two  partners  in  the  old 
firm  continues  in  the  business.^^ 

But  the    bank  may  apply  a  deposit,  made  by  a  surviving 
partner,  in  behalf  of  an  insolvent  firm,  to  an  indebtedness  of 
the  firm  to  the  bank."" 

(e)  A  firm  finding  itself  in  embarrassed  circumstances 
deposited  a  certain  sum  in  the  bank  with  which  it  was  ac- 
On  money  customcd  to  do  busiucss,  but  made  the  deposit 
of  c.  in  the      •     ^j^    name  of  the  book-keeper  of  the  firm.     The 

possession  or  '■ 

B.,  and  de-      g^^-^  jj^  qucstion  was  due  to  persons  for  whom  the 

posited  in  ^  _,  i       i       i 

the  name  of  depositing  firm  acted  as  agents,  ihe  bank  had 
no'iie'!!'for"'^  knowlcdgc  that  the  deposit,  though  in  the  name 
fhough'it  of  the  book-keeper,  was  of  money  of  the  firm,  but 
thought  the  ^j^j  j^Q^  know  that  it  was  of  money  which  the  firm 
^•'s-  had  received  in  the  course  of  an  agency.     It  was 

held  that  the  bank  had  no  lien  on  this  deposit  for  indebted- 
■f  Central  National  Bank  v.  Conn.  Mut.  Life  Ins.  Co.,  104  U.  S.  54 
(1881). 

8  Lawrence  v.  Bank  of  Republic,  35  N.  Y.  320. 

9  Baker  v.  New  York  National  Exchange  Bank,  100  N.  Y.  31. 

10  Bundyr.  Town  of  Monticello,  84  Ind.  119  (1882). 

11  Richardson  v.  International  Bank,  11  111.  App.  582. 

II-  Hodgin  V.  People's  National  Bank,  124  N.  C.  540  (1899). 
604 


LIEN.  §  326 

ness  of  the  firm  to  it.^^  j^  order  to  apply  money  deposited 
in  A.'s  name  to  the  debt  of  B.,  the  bank  must  show  not  only 
that  it  is  not  A.'s  money,  but  that  it  is  actually  the  money 
of  B.12 

(/)  Neitlier  shall  the  banker  have  his  lien  upon  non- 
negotiable  property  subject  to  a  trust,  and  improperly  left 
with  him  or  pledged  to  him  by  the  trustee,  though  Trust  prop- 
the  bank  is  without  notice  of  the  trust ;  unless,  ^^^y- 
indeed,  the  cestui  que  trust  shall  have  done  some  act  or 
been  guilty  of  some  negligence  such  as  to  deprive  him  of  his 
counter  rights.^^  And  a  deposit  in  the  name  of  A.  as  agent 
or  trustee,  or  in  the  name  of  A.  if  the  bank  has  notice  that  it 
belongs  to  another,  cannot  be  applied  by  the  bank  to  A.'s 
debt  to  itself,  nor  will  it  have  any  lien  on  a  fiduciary  deposit. 
If  the  trust  property  is  traceable  into  the  debt  now  due  from 
the  bank  to  the  depositor,  the  true  owner  can  claim  the 
fund.14 

(^)  But  if  the  trust  property  consists  of  bills  or  notes, 
payable  to  bearer,  or  other  property  transferable  by  delivery 
merely,  and  be  not  ear-marked  as  trust  property,  if  the  cus- 
tomer deposit  them  as  if  they  were  his  own,  and  the  banker 
receives  them  in  due  course,  bona  fide  and  with  no  notice  of 
the  trust,  he  shall  hold  them  under  his  lien.^^ 

In  the  case  of  money,  or  any  negotiable  securities,  it  has 
been  frequently  held  that  where  the  bank  has  no  notice 
that  they  do  not  belong  to  the  depositor,  it  acquires  a  valid 
lien  for  his  indebtedness. ^^     Though  it  has  been  held,  that, 

12  Falkland  v.  St.  Nicholas  National  Bank,  84  N.  Y.  145. 

i2«  Thomas  '.'.  Exchange  Bank,  99  Iowa,  202  (1896). 

^3  Manniiigford  v.  Toleman,  1  Coll.  670  ;  Stackhouse  v.  Countess  of 
Jersey,  30  L.  J.  Ch.  421 ;  Murray  v.  Pinkett,  12  CI.  &  F.  764;  Locke  v. 
Prescott,  32  Beav.  261;  Fisher  v.  Knight,  61  Fed.  491. 

^*  National  Bank  v.  Insurance  Co.,  104  U.  S.  54;  Knatchbull  v.  Hal- 
lett,  L.  R.  13  Ch.  Div.  696;  Cook  v.  Tullis,  18  Wall.  332;  Burtnett  v. 
First  National  Bank,  38  Mich.  630;  Neely  c.  Rood,  54  Mich.  134.  See 
Title,  §565;  Clemtner  v.  Drovers'  National  Bank,  157  111.  206;  Union 
Stock  Yards  Bank  v.  Gillespie,  137  U.  S.  411  (1890);  Preston  v.  Prather, 
137  U.  S.  604  (1891). 

"  Barnett  v.  Brandao,  6  M.  &  G.  630. 

1^  As  where  the  deposit  was  really  trust  money,  or  a  note  belonging  tc 

605 


§  327  LIEN   AND   SET-OFF. 

if  A.  delivers  promissory  notes  to  B.  to  get  discounted  for 
him,  and  B.  takes  them  to  his  own  banker  for  that  purpose, 
who  insists  on  placing  them  to  the  credit  of  B.,  B.'s  account 
then  showing  a  balance  against  him,  equity  would  still  compel 
the  banker  to  account  to  A.^" 

And  if  the  bank  has  notice  that  paper  does  not  belong  to 
the  debtor,  as  where  one  bank  sends  paper  to  another  indorsed 
"for  collection  on  account  of  A.  B.,"  the  receiving  bank  can- 
not apply  the  proceeds  to  the  debt  of  the  transmitting  bank, 
as  it  may  in  the  absence  of  any  notice  that  it  does  not  belong 
to  the  debtor  bank  ^^  (except  in  New  York,  <fec.,  in  some  cases, 
see  Title,  §  565). 

§    327.      Several    Accounts    in    the    same    Right. Where   a 

depositor  keeps  several  accounts  with  his  banker,  as,  for  ex- 
ample, a  general  account,  a  loan  account,  and  a  discount  ac- 
count, all  being  in  fact  kept  by  him  in  his  own  right,  nothing 
short  of  a  clear  and  distinct  contract  to  that  effect  will  pre- 
vent the  bank  from  fastening  its  lien  upon  any  securities  it 
may  obtain  for  reimbursement  of  any  of  these  accounts  which 
may  be  overdrawn.^ 

If  the  customer  has  more  than  one  account  with  his  bank, 
it  is  his  privilege,  upon  making  any  deposit,  to  declare  to  the 
credit  of  w^iich  account  it  shall  be  carried,  and  the  banker 
cannot  alter  this  appropriation.  But  if,  at  the  time  of  depos- 
iting, the  depositor  neglects  to  appropriate,  then  the  bankers 

another,  though  unknown  to  the  bank,  the  latter  may  apply  it  on  the 
depositor's  debt.  School  District  v.  First  National  Bank,  102  Mass.  174  ; 
"Wood  V.  Boylston  National  Bank,  129  Mass.  358 ;  Gordon  v.  Kearney, 
17  Ohio,  572;  Meyers  v.  New  York  Co.  National  Bank,  36  App.  Div. 
(Hun,  N.  Y.)  102  (1899)  ;  London  and  River  Plate  Bank  v.  Hanover 
National  Bank,  36  App.  Div.  (Hun,  N.  Y.)  487  (1899);  Pederson  v.  So. 
Omaha  National  Bank,  52  Neb.  95  (1897).     See  Title,  §  565. 

"  Grant  on  Banking,  307;  Lord  Bolingbroke's  Case,  in  Joy  y.  Camp- 
bell, 1  Sch.  &  L.  346. 

18  Bank  of  Metropolis  v.  First  National  Bank,  22  Blatchf.  58  ;  First 
National  Bank  v.  Reno  Co.  Bank,  3  Fed.  Rep.  257;  Claflin  v.  AYilson, 
51  Iowa,  15;  White  v.  National  Bank,  102  U.  S.  658;  Blaine  v.  Bourne, 
11  R.  L119. 

1  §  327.    In  re  European  Bank,  8  L.  R.  App.  41 ;  and  see  Pedder  v. 
Preston,  9  Jur.  n.  s.  496;  11  C.  B.  n.  s.  535. 
606 


LIEN.  §  327 

may,  within  any  reasonable  time  thereafter,  appropriate  the 
amount  to  either  of  the  customer's  accounts  that  they  see  fit.^ 
The  importance  of  this  privilege  to  the  bank  is  easily  seen 
to  be  great  when  it  happens  that,  at  the  time  of  making  the 
deposit,  the  customer  has  overdrawn  any  one  of  his  several 
accounts,  for  then  the  bank  may  apply  upon  this  account  the 
amount  of  any  unappropriated  deposit.  But,  except  for  this 
privilege,  the  bank  must  preserve  the  distinction  between  the 
accounts,  and  could  not  transfer  from  one  to  supply  a  defi- 
iency  in  another,^  nor  appropriate  a  deposit  expressed  to  be 
made  to  the  one  to  any  other  ;  *  unless  indeed  the  accounts 
though  in  form  distinct,  are  yet  both  in  fact  kept  by  the  de- 
positor in  the  same  right,  in  which  case  it  seems  that  the  bank 
may  protect  itself  by  such  process  of  transferring  credits  and 
debits  between  the  two  as  may  be  necessary.^ 

(a)  An  entry  in  the  customer's  books  has  been  held  not  to 
be  evidence  of  an  appropriation  by  him.^ 

It  has  been  held  that  a  banker  may  appropriate  a  deposit, 
not  appropriated  by  the  depositor,  to  the  credit  of  an  account 
or  indebtedness  owing  by  this  depositor  to  this  banker  and  a 
former  partner  of  his  ;  although,  at  the  same  time,  the  de- 
positor is  also  indebted  upon  a  further  account  to  the  banker 
himself  as  successor  to  the  old  firm.'' 

(5)  But  if  a  stipulation  of  suretyship  in  terms  expressly 
appears  to  provide  for  and  cover  a  series  of  future  advances, 
to  be  constantly  paid  off  and  renewed,  it  is  obvious  that  the 
surety  is  not  discharged  when  the  amount  named  in  the  bond 
has  been  once  met  by  deposits.^ 

(c)  Where  a  running  account  contains  legal  and  illegal 
items  mingled  together,  payments  will  be  considered  as  ap- 

2  Simson  v.  Ingham,  2  Barn.  &  Cr.  72 ;  State  Bank  v.  Armstrong, 
4  Dev.  (N.  C.)  519. 

8  Ex  parte  Kingston,  In  re  Gross,  6  L.  R.  Ch.  App.  632. 

*  Farley  v.  Turner,  26  L.  J.  Ch.  710. 

^  Pedder  v.  Preston,  9  Jur.  n.  s.  496  ;  11  C.  B.  n.  s.  535  ;  and  see  In  re 
European  Bank,  8  L.  R.  App.  41. 

^  Manning  v.  Westerne,  2  Vern.  606. 

7  Snead  v.  Williams,  9  L.  T.  n.  s.  115. 

8  Heuniker  v.  AVigg,  4  Q.  B.  792. 

607 


§  328  LIEN    AND    SET-OFF. 

propriatcd  to  discharge  the  legal  items,  in  their  own  order,  in 
preference  to  the  illegal  items.^ 

((Z)  An  unappropriated  deposit  may  be  appropriated  by  the 
banker  to  the  discharge  of  an  indebtedness  of  the  depositor 
barred  by  the  Statute  of  Limitations.^'^ 

(g)  A  depositor's  balance  in  one  branch  of  a  bank  may 
be  applied  to  his  debt  in  another  branch.  A.  had  a  bal- 
Bankmay  auce  at  the  L.  branch  of  a  bank,  and  owed  the  B. 
rountVo"  branch.  He  drew  a  check  on  the  L.  branch,  but  the 
its  branches.  \yc^^]^  combined  the  accounts  of  the  two  branches, 
thus  reducing  A.'s  assets  below  the  amount  of  the  check, 
and  refused  to  pay  it.  There  being  no  special  contract, 
it  was  held  that  the  bank  could  rightfully  combine  the 
accounts.^^ 

§  328.  What  can  be  charged  on  General  Account.  —  A.  had 
deposited  money,  notes,  checks,  &c.  on  general  account,  so 
that  at  his  death  the  bank  owed  him  $930.  But 
ceh"e^(f bya  the  bank  had  a  judgment  against  him  more  than 
usrofthV*"'  enough  to  offset  this,  and  A.  had  moreover  kept 
be'charged  »  sum  of  moucy  that  had  been  given  him  to  deposit 
against liim.  jj^  ^j^g  bank.  Upon  the  question  whether  the  bank 
had  a  right  to  charge  against  A.'s  general  account  the  sum 
received  for  use  of  the  bank,  and  which  he  refused  to  pay 
over,  the  court  said :  "  There  can  be  no  question  that,  if  the 
bank  had  paid  off  a  note  or  acceptance  of  his,  payable  at  the 
bank,  this  would  have  constituted  a  proper  debit  in  the  ac- 
count. It  is  not  to  be  doubted  also  but  that  they  had  a  right 
to  apply  his  funds  in  their  hands  to  the  payment  of  any  note 
or  acceptance  of  his  held  by  them.  From  the  nature  of  this 
account  as  an  open  running  account  of  the  cash  transac- 
tions of  the  parties,  embracing  a  variety  of  receipts  and  pay- 
ments, debits  and  credits,  from  the  manner  of  their  dealing, 
&c.,  either  has  a  right  to  retain  for,  or  to  charge  in  account 
against  the  other,  money  received  hy  the  latter  for  the  use  of 

9  Ex  parte  Randleson,  2  Deac.  &  C.  531  ;  Wright  v.  Laing,  3  Barn.  & 
Cr.  165. 

10  Williams  v.  Griffith,  5  Mee.  &  W.  300. 
u  Garnett  v.  M'Kewau,  Law  R.  8  Ex.  10  (1872). 
608 


LIEN.  §  329 

the  former^  so   that  the  balance  thus  ascertained  shall  he  the 
true  debt.''''  ^ 

§  329.  Unmatured  Debt. — The  lien  of  the  bank  does  not 
attach  until  some  indebtedness  is  actually  in  existence  and 
matured.!  Thus,  a  bank  holding  a  note  of  a  depositor  has 
no  right  of  set-off,  and  no  valid  lien,  before  the  note  matures ; 
so  that  it  has   been   held  that  if,  in  the  interval   At  law,  no 

,  ,  lien  or  set-ofE 

before  the  maturity,  the  depositor  makes  an  as-  for  imma- 
signraent  of  his  funds,  without  the  knowledge  of 
the  bank,  but  otherwise  legal,  the  amount  of  his  balance  will 
pass  to  the  assignee.^  So  in  Illinois  and  Missouri  it  is  held 
that  a  bank  has  no  lien  on  the  funds  of  a  depositor  to  apply 
them  on  a  debt  not  yet  due,^  and  cannot  retain  them  against 
a  check-holder.* 

This  is  at  strict  law.     But  it  would  seem  that  in  equity  the 
bank  might  have  a  safeguard.     The  case  has  arisen  where  a 
depositor's  note  had  been  discounted  by  the  bank  ;    Equity  win 
before  its  maturity  he  died  ;    at  the  time  of  his   ^;;;^';:',;^aijis(;^ 
death   the   amount   of   his   deposit  exceeded    the   ifitexbts  by 

'  ,         ,  allowing  tlie 

amount  of  the  note ;  by  a  court  of  equity  it  was    bank  to  retain 

.  1111  ]  c       c     ^^^  deposit 

held,  upon  application  by  the  bank,  and  prooi  or    against  im- 
danger  of  the  insolvency  of  his  estate  and  also  of   '"'^'""^  '^ 
the  indorsers  on  the  note,  that  equity  would  allow  the  bank 
to  retain  enough  of  the  deposit  to  meet  the  note ;  though, 
it  was  said,  in  law  the  debt  in  futuro  could  not  be  set  off 

1  §  328.  State  Bank  v.  Armstrong,  4  Dev.  (N.  C.)  519.  See  Dale  v. 
Sollet,  4  Burr.  2133 ;  Green  v.  Fanner,  4  Burr.  2214, 

1  §  329.  Jordan  v.  National  Shoe  &  Leather  Bank,  74  N.  Y.  467 ; 
Heidelbach  v.  Xational  Park  Bank,  87  Hun  (N.  Y.),  117. 

A  demand  note  is  due  at  once  for  the  purpose  of  set-off.  Citizens' 
Savings  Bank  v.  Vaughan,  115  Mich.  15G  (1897). 

2  Giles  V.  Perkins,  9  East,  12,  per  Lord  Ellenborough ;  Beckwith  v. 
Union  Bank,  4  Sandf .  Super.  (N.  Y.)  604,  is  sometimes  cited  to  the  same 
point,  but  it  is  not  a  very  satisfactory  authority.  Jones  v.  Manufacturers' 
Bank,  10  Week.  Xo.  Cas.  (Pa.)  102. 

8  Merchants'  Xational  Bank  v.  Ptitzinger,  20  111.  App.  29  (1886); 
Com.  National  Bank  v.  Proctor,  98  111.  558. 

*  Zelle   V.    German  Savings  Institution,  4  Mo.  App.  401  (1887) ;  Co- 
lumbia National  Bank  u.  German  National  Bank,  56  Neb.  801  (1898); 
First  Dearborn  National  Bank  v.  Blumenzeverg,  46  111.  App.  297. 
VOL.  I.  — 39  609 


S  329  LIEN   AND    SET-OFF. 

against  the  debt  in  prcesenti.^  The  sound  justice  of  this  is 
obvious.  For  it  is  certain  that  bankers  will  often  make  loans 
and  discounts  to  a  good  customer,  whose  balance,  though  con- 
stantly shifting,  is  generally  good,  with  the  fair  expectation 
that,  in  the  ordinary  course  of  dealing,  they  will  in  time  have 
funds  enough  come  to  their  hands  to  secure  them  against 
loss.  But  where  the  bank  discounted  the  customer's  note  for 
$5,000,  placing  the  amount  to  his  general  credit,  and  he  gave 
his  check  for  S1,000,  and  then  became  bankrupt,  it  was  held 
that,  as  against  the  owner  of  the  check,  the  bank  had  no 
lien  on  the  general  deposit  account  to  secure  the  note,  which 
had  not  yet  matured  at  the  time  when  the  check  was  pre- 
sented for  payment.*'  This  case  arose  in  Illinois,  where  the 
check-holder's  right  of  action  against  the  bank  is  recognized. 
In  the  absence  of  such  a  right  of  action,  it  is  not  impossible 
that  the  bank  might  have  simply  refused,  with  impunity,  to 
honor  the  check,  and  so  ultimately  secured  all  the  advantages 
of  the  lien  which  the  law  expressly  declares  not  to  exist. 

It  has  been  held  also,  in  Missouri,  Minnesota,  Kentucky, 
Iowa,  and  Georgia,  that  if  a  depositor  is  insolvent  his  deposit 
may  be  retained  for  an  unmatured  debt.'^ 

But  in  New  York  a  bank  has  no  lien  upon  the  property 
or  funds  of  an  insolvent  depositor  for  a  note  discounted  by 
the  bank  until  the  note  becomes  due.'" 

And  in  Michigan  mere  insolvency  is  insufficient  to  allow 
the  bank  an  equitable  set-off  of  unmatured  guaranteed  notes."* 

5  3  Leigh  (Va.),  695.  See  also  Thomas  v.  Exchange  Bank,  68  N.  \V. 
780  (1896). 

6  Fourth  Naiional  Bank  of  Chicago  v.  City  National  Bank  of  Grand 
Rapids,  68  111.  398. 

'  Knecht  v.  United  States  Savings  Institute,  2  Mo.  App.  563;  Sweetser 
V.  People's  Bank,  69  Minn.  196  (71  N.  W.  934)  (1897);  Stolze  v.  Bank, 
67  :\Iinn.  172  (69  N.  W,  813),  1897  ;  Kentucky  Flour  Company's  Assignee 
V.  Merchants'  National  Bank,  90  Ky.  229  (1890)  ;  Thomas  v.  Exchange 
Bank,  99  Iowa,  202  (1896)  ;  Georgia  Seed  Co.  v.  Talmage,  96  Ga.  256 
(1895).  See  also  dictum  in  Jordan  v.  National  Shoe  &  Leather  Bank, 
74  N.  Y.  473. 

7«  Smith  V.  Eighth  Ward  Bank,  31  App.  Div.  (Hun,  N.  Y.)  6  (1808). 

''>  Merchants'   National  Bank  v.    Stone,    45  Mich.  648  (1898).      See 
also  note  to  Fera  v.  Wickham,  17  L.  R.  A.  456  (N.  Y.). 
610 


LIEN.  §  330 

In  Jordan  v.  National  Bank,i  there  was  no  insolvency  or  any 
element  on  which  an  equitable  set-off  could  be  based.  The 
case  rested  on  the  statute,  and  the  court  decided  that  the 
bank  had  no  lien  or  set-off  for  an  unmatured  debt,  no  fact 
being  averred  on  which  to  found  an  equitable  jurisdiction. 

Equitable  set-offs  existed  before  statutory  ones,  and  are 
independent  of  the  latter ;  ^  and  although  future  debt  cannot 
at  law  be  offset  against  present  debt,^  yet  equity  will  always, 
upon  proof  of  danger,  as  by  the  probable  insolvency  of  the 
debtor,  allow  the  bank  to  retain  his  deposit.^*^ 

So  in  Ohio  an  unmatured  note  discounted  by  the  bank  can 
be  set  off  against  the  deposit,  saving  harmless  bona  fide  check- 
holders.^i 

Authority  given  by  the  depositor  to  the  bank  to  apply  de- 
posits to  the  payment  of  unmatured  debts  is  only  a  naked 
power,  not  coupled  with  an  interest,  and  is  revoked  by  no- 
tice of  the  depositor's  debt.^^" 

When  a  depositor  promises  to  keep  a  fair  balance  at  the 
bank,  it  does  not  imply  that  the  balance  is  to  be  held  by  the 
bank  for  unmatured  debts.^^^ 

§  380.  Loss  of  Lien.  — A  lien  may  be  lost,  if,  after  it  has 
been  established,  the  banker  takes  security  for  the  debt,  pay- 
able at  a  distant  day.^ 

So  a  lien  may  be  lost  by  voluntarily  giving  up  possession  of 
the  property,  or  by  conversion,  or  express  agreement.  But 
loss  of  possession  by  force,  fraud,  or  mistake  will  not  destroy 
a  lien,  nor  will  a  proper  repledging  of  pledged  property  on  the 
first  pledgee's  account,  if  the  repledging  does  not  go  beyond 
the  first  pledgee's  right  in  the  property. 

*  Story's  Equity,  ch.  38  ;  Ex  parte  Stephens,  11  Ves,  Jr.  24;  Ex  parte 
Flint,  1  Swans.  30;  Ex  parte  Blagden,  19  Ves.  Jr.  466. 
9  Martin  v.  Kunzmuller,  37  N.  Y.  396,  and  cases  cited. 
10  See  note  7. 

"  Skunk  V.  Merchants'  National  Bank,  19  Chic.  Leg.  N.  83. 
ii«  Gardner  v.  First  National  Bank,  10  Mont.  149  (1890). 
nb  Comer    v.    Bank    of    Commerce,    140   Mo.   225   (41    S.    W.   790) 
(1897). 

1  §330.  Cowell  V.  Simpson,  16  Ves.  Jr.  278;  Hewison  v.  Guthrie, 
3  Scott,  311 ;  2  Bing.  N.  C.  755. 

611 


§  331  LIEN   AND   SET-OFF. 

The  right  of  lien  on  a  note  of  a  depositor  is  not  affected  by 
the  fact  that  the  bank  has  pledged  such  note  as  security  to  a 
third  person, 2 

§  331.  Bank  estopped  to  assert  a  Lien.  —  Where  a  bank 
made  a  mistake  in  settlement,  but  waited  until  two  years  after, 
Rank's  bad     when  the  former  depositor  opened  a  new  account, 

faith  in  se-  ,  .  . 

cretinga  and  then  sprung  the  claim  upon  him,  it  was  held 
to  estop  it.  that  such  conduct  was  not  up  to  the  proper  stand- 
ard of  good  faith,  that  the  bank  should  have  notified  the  de- 
positor at  once  of  the  error,  and  that  its  silence  had  misled 
tJie  depositor  into  making  a  new  deposit,  and  the  bank  could 
not  retain  it.^ 

It  seems  clear  that  the  bank's  conduct  was  not  fair,  but 
that  alone  is  not  enough  to  change  legal  rights ;  the  further 
question  must  be  answered,  Did  the  neglect  of  the  bank  to 
notify  the  depositor  occasion  him  any  loss,  or  render  the  evi- 
dence of  the  matter  obscure  ?  If  the  mistake  could  be  clearly 
proved,  and  the  bank,  knowing  the  man,  preferred  the  method 
it  selected  to  a  lawsuit,  and  no  injury  was  done  to  the  deposi- 
tor, we  cannot  see  why  the  bank  might  not  retain  the  deposit. 
But  if  the  depositor  drew  checks  against  the  new  deposit,  and 
only  on  their  presentation  was  notified  of  the  claim,  the  bank 
should  be  held  estopped. 

(a)  B.,  after  depositing  title  deeds  with  a  bank  to  secure 
all  sums  to  become  due  on  a  general  balance  of  his  account 
So  the  bank  "^^^^  ^^^^  bank,  contracted,  with  the  bank's  knowl- 
is  estopped  to  edge,  to  scU  part  of  the  land  to  R.,  who  knew  of  the 

assert  a  hen  o    7  r  ' 

against  R.  as    tcrms  of  dcposit  of  the  deeds.     B.  afterwards  paid 

to  advances        •  i  i 

made  after  R.  into  the  bank  more  than  the  balance  due  it  at  the 
part'^orthe  time  of  the  contract  of  sale,  thus  (according  to 
by 'Ihe  iTen"^  Claytou's  Case,  1  Meriv.  585)  discharging  his  debt, 
ba'nk's'^knowi-  '^^^^  bank,  without  notifying  R.,  made  fresh  ad- 
eJge-  vances  to  B.,  keeping  him  always  in  debt  to  the 

bank.  R.  paid  the  purchase  money  by  instalments  to  B.  Held, 
that  the  bank  had  no  charge  on  the  land  as  against  R.  for  the 

2  Clute  V.  Warner,  8  N.  Y.  A  pp.  Div.  40. 

1  §  331.   Hancock  v.  Citizens'  Bank,  32  La.  An.  590. 

612 


SET-OFF.  §  333 

fresh  advances ;  also,  that  the  bank  had  no  charge  upon  the 
purchase  money. 

The  bank  was  estopped  from  claiming  a  lien  against  R. 
for  a  cause  arising  subsequent  to  R.^s  purchase  with  the  knowl- 
edge of  the  bank.^ 

B.  bought  cotton  borrowed  from  the  F.  Bank  and  deposited 
the  warehouse  receipts  with  the  bank  as  security  for  this  and 
other  debts.  B.  owed  the  bank  a  large  amount  and  was 
insolvent.  A.  bought  the  cotton  from  B.  with  the  bank's 
assent  and  without  notice  that  the  bank  claimed  a  lien  on  it. 
The  lien  being  unrecorded,  and  unknown  to  A.,  it  had  no 
effect  against  him,^ 

§  332.  General  Liens  are  not  favored,  and  must  rest  upon 
special  agreement,  course  of  dealing  between  the  parties,  or 
general  usage. ^ 

And  if  there  is  any  circumstance  inconsistent  with  the 
claim  of  a  lien,  it  will  not  be  upheld,  as  where  securities  are 
delivered  to  a  bank  for  a  specific  purpose.^ 

S  333.    A   Banker's   Lien  in  Pennsylvania,   New   York,  &c.  — 
The  pledge  of  securities  for  an  antecedent  debt,  being  founded 
on  no  present  valuable  consideration,  is  taken  sub-   Antecedent 
ject  to  the  equities  subsisting  between  the  pledgor 
and  third  parties.^ 

The  doctrine  in  Pennsylvania  is,  that  a  banker  has  a  general 
lien  on  securities,  unless  deposited  under  express  contract,  or 
under  circumstances  showing  an  implied  inconsistent  con- 
tract ;  but  a  holder  merely  for  an  antecedent  debt  is  not  pro- 
tected against  equities  existing  in  third  parties,  and  the  courts 
say  that  neither  decisions  out  of  Pennsylvania  nor  usage  can 
affect  the  rule.  It  is  very  probable,  however,  that  they  are 
mistaken  in  this,  and  that  succeeding  judges  may  find  a 
way  to  bring  Pennsylvania  into  harmony  with  her  sister 
States. 

2  London  &  Co.  Banking  Co.  v.  Ratcliffe,  L.  R.  6  App.  Cas.  722 
(1881). 

3  Bank  v.  Slayden,  8  Tex.  Civ.  App.  63. 

1  §  33-2.    Grant  v.  Taylor,  35  N.  Y.  Super.  Ct.  351. 

2  Bank  of  Metropolis  v.  New  England  Bank,  1  How.  234. 

1  §  333.  Liggett  Spring  &  Axle  Co.'s  Appeal,  111  Pa.  St.  291. 

613 


§  334  LIEN   AND   SET-OFF. 

\      In  California  a  bank  cannot  set  off  against  a  deposit  an 
amount  due  it  on  a  mortgage  indebtedness.^ 

S  334.  Set-off.  —  The  Debts  must  be  in  the  same  Right.  — 
The  rules  of  law  as  to  the  right  of  set-off  between  the  bank 
and  its  depositors  are  not  different  from  those  applicable  to 
other  parties.^ 

The  debts  must  be  between  the  same  parties  and  in  the  same 
right. ^  A  deposit  due  to  A.  as  executor  cannot  be  offset 
against  A.'s  personal  debt,  nor  vice  versa?  It  is  not  neces- 
sary that  the  claim  should  run  between  the  nominal  parties 
to  the  suit,  if  they  are  really  due  to  and  from  the  same  funds 
Note  dis-  o/i  both  sides  ;  as  where  a  note  was  discounted  for 

counted  for      ^j  g  benefit,  not  of  the  maker,  but  of  the  indorser, 

benetit  of  '  '  ' 

indorser.  it   was  held  in  a  suit   by  the  bank  against  the 

maker,  that  a  deposit  to  the  credit  of  the  indorser  should  be 
set-off  against  the  note.^ 

And  in  another  case  where  a  note  was  discounted  for  an 
indorser,  and  the  amount  credited  to  him  and  partly  drawn 
out  by  him,  it  was  said  that  the  bank  could,  if  it  so  desired, 
apply  the  balance  remaining  to  the  indorser's  credit  toward 
payment  of  the  note.  *  An  individual  deposit  cannot  be  offset 
against  a  partnership  debt.  ^  Nor  can  the  debt  of  one  partner 
on  a  note  indorsed  by  the  other  partner  be  set  off  by  the  bank 
against  the  deposit  of  the  firm.  ^^ 

It  would  seem  that  set-off  could  only  be  availed  of  by  the 
bank  in  respect  of  the  personal  deposits  of  the  depositor.     But 

2  McKean  v.  German-American  Savings  Bank,  118  Cal.  334:  (1897). 

0  §  334.    Eyrich  v.  Capital  State  Bank,  67  Miss.  70  (1889). 

1  Miller  v.  Mickel,  12  Pacif.  Rep.  240;  Scott  v.  Fritz,  51  Pa.  St. 
418;  Fry  v.  Evans,  8  Wend.  (N.  Y.)  530;  Canonsburg  Iron  Co.  w. 
Union  National  Bank,  34  Pitts.  L.  J.  93  (1886) ;  Stuart  v.  Commonwealth, 
8  Watts  (Pa),  74;  Grew  v.  Burditt,  9  Pick.  (Mass.)  265;  Thomas  u. 
Hopper,  5  Ala.  442. 

2  See  cases  above,  and  Tobey  v.  Maniif.  National  Bank,  9  R.  I.  236. 
8  Shackamaxon  Bank  v.  Kinsler,  16  Week.  No.  Cas.  (Pa.)  509. 

*  Ticonic  Bank  v.  Johnson,  21  Me.  426. 

6  International  Bank  of  Chicago  v.  Jones,  9  N.  E.  885  (111.,  Feb., 
1887);  International  Bank  v.  Jones,  119  111.  407;  Adams  v.  Bank,  113 
N.  C.  335  (1893). 

6«  Hodgin  V.  People's  National  Bank,  124  N.  C.  540  (1899). 

614 


SET-OFF.  §  336 

where  money  was  deposited  in  the  name  of  the  set-offof 
depositor's  wife,  the  depositor  bein^  at  the  time  ^X'^s  na"me 

insolvent  and   indebted   to  the   bank,  set-off   was  f^ainst  hus- 
band s  clubt, 
allowed  upon  proof  that  the  money  thus  deposited  for  the  money 

had  been  raised  upon  a  mortgage  of  the  husband's  from  hus- 

property,  in  which  the  wife  had  joined  in  the  usual  env,  aiuni^' 

form    ^  ^**  insolvent. 

Where  a  wife  deposits  in  a  bank,  in  her  own  name,  money 
of  her  general  estate,  and  the  bank  becomes  insolvent,  the 
husband,  being  indebted  to  the  bank,  has  a  right  to  set  off  the 
wife's  deposit  against  his  indebtedness^ 

§  335.   Certainty The  claims  set  off  must  be  certain,  i.  e. 

either  already  reduced  to  precise  figures,  or  capable  of  being 
liquidated  by  calculation  without  the  intervention  of  a  jury 
to  estimate  the  sum.^  And  when  the  claim  sought  to  be 
used  as  an  offset  requires  the  decision  of  a  jury  on  the  ques- 
tion of  negligence  before  the  claim  is  established,  it  cannot 
be  offset,  even  though  the  amount  of  the  judgment  is  very 
clear,  provided  there  should  be  any  judgment  in  favor  of  the 
claim.  As  where  a  bond  deposited  as  collateral  for  a  note  was 
lost,  and  in  suit  by  the  bank  on  the  note  the  maker  tried  to 
offset  the  loss  of  the  bond.^ 

A  judgment,  or  contract  claim,  that  can  be  sued  in  debt, 
assumpsit,  or  covenant,  may  be  set  off,^  But  a  demand  that 
must  be  sued  upon  in  tort,  or  by  bill  in  equity,  cannot  be 
set  off.4 

§  336.  Goods  as  such  not  a  Subject  of  Set-off.  —  Certified 
Check  in  Set-off.  —  A  bank  may  set  off  a  discounted  note 
held  by  it  against  pecuniary  credits  to  the  maker  upon  the 
latter's  insolvency.     Goods  merely  in  the  possession  of   the 

6  Citizens'  Bank  of  Garnett  v.  Bowen,  21  Kans.  354. 
'  Hall  V.  New  Farmers'  Bank,  98  Ky.  146  (1895). 

1  §  .335.  Wilmot  v.  Hurd,  11  Wend.  (N.  Y.)  584 ;  Thomson  t'.  Red- 
man, 11  M.  &  W.  487. 

2  Winthrop  Savings  Bank  v.  Jackson,  67  Me.  570. 

*  Hutchinson  i\  Sturges,  Willes,  261. 

*  Dean  v.  Allen,  8  Johns.  (N.  Y.)  390 ;  Gilchrist  v.  Leonard,  2  Bailey, 
(S.  C.)  135;  Ben  Roy  Irvine  v.  Dean,  93  Tenn.  350  (1894). 

615 


§  337  LIEN   AND    SET-OFF. 

bank,  and  not  intrusted  to  it  to  be  turned  into  a  money  credit, 
are  not  the  subject  of  set-off.  ^ 

Herein  set-off  differs  from  a  lien.  Set-off  cannot  confer  a 
right  to  detain  property  the  title  to  which  is  in  another,  but 
only  to  set  one  money  claim  against  another. 

(a)  A  banker,  upon  whom  a  check  has  been  drawn,  and 
who  has  certified  it,  cannot  set  off  against  the  same  any  debt 
or  demand  which  he  may  have  against  the  holder  when  the 
check  is  finally  presented  for  payment.  For,  it  is  said,  the 
check  is  not  a  payment  made  by  the  drawer  to  the  holder, 
creating,  therefore,  a  new  debt  from  the  banker  to  the  holder, 
but  is  merely  a  means  of  procuring  payment;  and  if  that' 
means  should  fail  from  any  cause,  be  it  such  a  set-off  or  other 
circumstance,  the  drawer  remains  liable.^  This  reasoning 
seems  by  no  means  beyond  criticism.  The  unquestionable 
weight  of  the  authorities  is  to  the  purport  that  the  certifica- 
tion does  create  a  direct  debt  from  the  bank  to  whomsoever 
is  or  may  come  to  be  the  holder  of  the  check,  and  that  such 
holder  occupies  the  position  of  a  simple  contract  creditor  or 
depositor;  also  that  the  drawer  does  not  remain  liable  on  his 
original  debt.  If  such  be  the  case,  it  is  hard  to  see  why  the 
set-off  might  not  be  allowed. 

§  337.  "When  Depositor  is  insolvent.  —  The  various  items  of 
deposit  with  and  payment  by  the  bank  form  a  running  account 
between  the  bank  and  the  customer.  For  any  indebtedness 
accruing  from  the  customer  to  itself,  the  bank  has  the  right 
to  set-off.  If  the  depositor  becomes  bankrupt,  his  deposit 
becomes  security  for  the  payment  of  his  debt  to  the  bank.  If 
this  debt  be  contingent  in  character,  or  if  it  be  a  claim  for 
unliquidated  damages  arising  out  of  a  contract,  then  the  bank 
may  retain  possession  of  the  deposit  until  such  time  as  the 
probable  indebtedness  shall  be  ascertained,  when  the  deposit 
may  be  set  off  against  it.^     The  rule  was  laid  down  by  Judge 

1  §  336.  Stetson  v.  Exchange  Bank,  7  Gray  (Mass.),  425,  citing  Dem- 
mon  V.  Boylston  Bank,  5  Cush.  (JNIass.)  194 ;  Rose  v.  Hart,  8  Taunt. 
499. 

^  Brown  v.  Leckie,  43  111.  497. 

1  §  337.    In  re  North,  16  Nat.  Bankr.  Reg.  (Mass.  Dist.)  420  ;  Ex  parte 
616 


SET-OFF.  §  338 

Lowell  in  the  case  cited,  that  "the  credit  should  be  set  oif 
against  the  whole  ultimate  debt  of  the  bank,  that  is  to  say 
against  the  aggregate  amount  of  the  notes  of  the  bankrupt  in 
which  he  is  the  principal  debtor;  and  as  to  those  on  which 
he  is  indorser  so  far  and  so  far  only,  as  is  made  necessary  by 
the  insolvency  of  the  real  principals." 

Judge  Lowell  further  said,  that  he  understood  "the  prac- 
tice in  England  to  be,  that  a  banker  who  has  discounted  notes 
for  his  customer  may  prove  for  the  whole  money  as  so  much 
lent  to  the  customer,  exhibiting  a  list  of  his  notes  or  bills, 
which  are  called  securities.  Any  deposit  the  banker  has  in 
hand  would  come  out  of  this  sum  total.  If,  however,  any 
bill  or  note  is  paid  by  other  parties  after  the  proof  has  been 
admitted,  its  amount  is  to  be  deducted  from  the  total  debt 
proved.  In  other  words,  the  proof  is  considered  as  made  on 
each  note  or  bill  separately,  though  not  so  in  form.  "^ 

§  338.  Insolvency  of  the  Bank.  —  Commercial  Bank.  —  Where 
the  bank  itself  stops  payment  and  becomes  insolvent,  the  cus- 
tomer may  avail  himself  in  set-off  against  his  in-  ^.^^^  ^^^^^^ 
debtedness  to  the  bank  of  any  indebtedness  of  the  ^ency. 
bank  to  himself,  as  for  example,  the  balance  due  him  on  his 
deposit  account.^  So  also,  even  though  the  debt  to  him  has 
not  matured  at  the  time  of  the  insolvency.^  The  right  is  an 
equitable,  not  a  legal,  one.-** 

Howard  National  Bank,  2  Low.  487.  See  Kelly  &  Co.  v.  Phelan,  5  Dill. 
228 ;  Ex  parte  Hornby,  De  Gex,  69  ;  Farmers'  Deposit  National  Bank  v. 
Penn  Bank,  123  Pa.  283;  Georgia  Seed  Co.  v.  Salmadge,  96  Ga.  259 
(189.')),  citing  Belcher  r.  Wilcox,  40  Ga.  391;  Ricks  v.  Broyles,  78 
Ga.  610;  Penn  Bank  v.  Farmers' Deposit  National  Bank,  130  Pa.  209. 

2  Ex  parte  Burn,  2  Rose,  55 ;  Ex  parte  Barratt,  1  Gl.  &  J.  327 ;  Ex 
parte  Hornby,  De  Gex,  69. 

1  §  338.  McLaren  v.  Pennington,  1  Paige  (N.  Y.),  102;  Receiver  v. 
Paterson  Gas  Light  Co.,  23  N.  J.  Law,  233;  Piatt,  Receiver,  v.  Bentley, 
11  Am.  Law  Reg.  171;  Bernstein  v.  Coburn,49  Neb.  734  (1896);  Mercer 
V.  Dyer,  15  Mont.  317  (1894)  ;  The  State  v.  Brobston,  94  Ga.  99  (1893), 
citing  Ray  v.  Dennis,  5  Ga.  357;  Morse  v.  Chapman,  24  Ga.  249;  Scott 
V.  Armstrong,  146  U.  S.  499  (1892)  ;  Salladin  v.  Mitchell,  42  Neb.  860. 

2  Bruyn  v.  Receiver,  9  Cow.  (N.  Y.)  413,  n.  ;  People  v.  St.  Nicholas 
Bank,  76  Hun  (N.  Y.),  522. 

■^  Scott  V.  Armstrong,  146  U.  S.  499  (1892). 

61T 


§  338  LIEN   AND    SET-OFF. 

The  right  to  set  off  an  unmatured  debt  is  not  contrary  to 
the  National  Banking  Law,  §  5242.2* 

The  maker  2  or  indorser^  of  a  note  falling  due  after  insol- 
vency may  set  off  his  deposit,  or  a  debt  due  him  at  the  time 
of  the  assignment,  but  not  a  claim  coming  to  him  or  due  ^^ 
after  the  assignment.^ 

The  set-off  may  be  made  equally  well  though  the  money 
deposited  is  not  the  money  of  the  depositor,  but  the  property 
of  others  held  by  him  in  trust  or  as  custodian,  and  deposited 
by  him  as  trustee.^  But  the  accounts  of  individuals,  as 
such,  and  of  a  firm  of  which  they  are  members,  cannot  be 
thus    availed  of.'^     See  §  560. 

Where  a  judgment  debtor  of  a  bank  deposits  money  with 
its  branch,  subject  to  his  own  check,  and  the  money  is  lost 
by  the  failure  of  the  bank,  the  deposit  does  not  discharge  the 
judgment.''* 

An  assignee  of  a  deposit  in  an  insolvent  bank  takes  subject 
to  the  right  of  set-off  for  both  assignor's  and  his  own  debts.'* 

In  an  action  by  a  receiver  of  an  insolvent  bank  on  a  note, 

defendant  offering  as  set-off  a  certificate  of  deposit 

cert'ificrte  of    must  show  that  he  received  it  before  the  filing  of 

caTofin"        the  bill  by  which  the  assets  of  the  bank  were  im- 

soiveucy.        pounded  for  benefit  of  all  its  creditors.  ^ 

A  deposit  cannot  be  set  off  against  a  liability  as  surety  on 
a  note  if  the  principal  is  solvent.^" 

2*  Mercer  i'.  Dyer,  15  Mont.  317  (1894). 

8  Jordan  v.  Sharlock,  84  Pa.  366  ;  Adams  v.  Spokane  Drug  Store,  57 

Fed.  888. 

*  Arnold  v.  Niess,  36  Leg.  Int.  (Pa.)  437  ;  Davis  v.  Industrial  Manu- 
facturing Co.,  114  N.  C.  334  (1894);  O'Connor  v.  Brandt,  12  N.  Y.  App. 
596. 

4«  Storts  V.  George,  150  Mo.  1  (1899). 

6  Venango  National  Bank  v.  Taylor,  56  Pa.  14 ;  Storts  v.  George,  150 
Mo.  1  (1899)  ;  Davis  v.  Knipp,  92  Hun  (N.  Y.),  297. 

6  IMiller  V.  Receiver  of  Franklin  Bank,  1  Paige  (N.  Y.),  444. 

7  Watts  V.  Christie,  11  Beav.  546. 

'«  Spilman  v.  Payne,  84  Va.  439  (1888). 

'*  Davis  V.  Industrial  Manufacturing  Co.,  114  N.  C.  329  (1894). 

8  Smith  V.  Jklosby,  9  Heisk.  (Tenn.)  501  (1872). 

8«  Xew  Farmers'  Bank's  Trustee  v.  Young,  100  Ky.  683  (1897). 

618 


SET-OFF.  §  340 

§  339.     Insolvency  of  Savings  Bank.  —  So  lon<]J  as  the  bank 
is  solvent  a  depositor  may  offset  his  deposit  against 
his  debt  to  the  bank,  but  so  soon  as  the  bank  be-   cammt  offset 
comes  insolvent  this  cannot  be  allowed.     The  de-   after'^bauk  is 
positors  reap  the  profits,  and  must  bear  the  losses   '"i*"'^'^"'- 
resulting  from  the  business  of  the  bank.^ 

§  340.  Set-off  as  against  Debtor's  Representatives.  —  If  the 
debt  be  mature  at  the  time  of  the  debtor's  death,  the  bank  has 
the  right  of  set-off  as  against  the  heirs,  executors,  and  admin- 
istrators of  the  deceased,  whether  the  estate  be  solvent  or 
insolvent,  precisely  as  it  would  have  enjoyed  the  same  right 
against  the  customer  himself  in  his  lifetime.  ^ 

1  §  339.  Hannon  v.  Williams,  34  N.  J.  Eq.  255 ;  Lawrence  v.  Nelson, 
21  N.  Y.  158.  Contra,  Matter  of  Receiver  of  New  Amst.  Savings  Bank 
V.  Tartter,  54  How.  Pr.  (N.  Y.)  385;  s.  c.  4  Abb.  N.  C.  (N.  Y.)  215. 

1  §  340.    State  Bank  v.  Armstrong,  4  Dev.  (N.  C.)  519. 


619 


CHAPTER  XXIII. 

ADVERSE    CLAIM. 

§  341.    Analysis. 

Justifiable  payment. 
§  342.  A  payment  otherwise  good  is  not  invalidated  by  the  existence 

§  344.  of  a  claim  of  which  tlie  bank  has  no  notice  at  the  time  of 

payment. 
But  after  notice  of  an  adverse  title,  a  bank  pays  at  its  peril ;  yet, 
§  342.  if  sued  or  threatened  witii  suit  by  tiie  depositor  or  his  attaching 

§  343.  creditor,  the  bank  cannot  itself  set  up  tlie  adverse  title,  but  may 

(6)  resort  to  a  bill  of  interpleader.     If  it  does  not  secure  itself  in  this 
way,  or  by  obtaining  a  bond  of  indemnity,  it  may  have  to  pay  a 
second  time. 
The  true  owner  can  recover  in  a  suit  against  the  bank,  even  though 
§  343.  he  did  not  give  notice  of  his  claim  till  after  service  of  attachment 

on  the  deposit  by  a  creditor  of  the  depositor,  but  the  court  will 
require  him  to  give  the  bank  a  bond  of  indemnity. 
The  substance  of  the  matter  is,  that,  as  the  bank  is  not  at  all  inter- 
ested in  sucli  disputes,  it  should  not  be  annoyed  and  put  to  ex- 
pense and  danger  by  them.  The  bank,  not  being  in  any  fault, 
should  not  be  compelled  to  bear  the  consequences  of  the  faults  of 
others.  Whenever  an  adverse  claim  exists,  the  bank  should  not 
be  required  to  pay  until  the  disputants  have  settled  the  matter 
between  themselves,  or  one  of  them  will  give  the  bank  a  bond  ; 
and  if  either  claimant  sues  the  bank,  it  should  have  the  privilege 
of  sending  the  service,  or  referring  the  officer  making  service,  to 
the  opposing  party,  whereupon  he  should  be  considered  the  real 
party  to  the  suit,  and  be  bound  thereby,  so  that  payment  in  ac- 
cordance with  the  judgment  rendered  would  forever  release  the 
bank.  Mere  notice  to  the  bank  of  adverse  claim  should  only  affect 
it  long  enough  for  the  claimant  to  proceed  against  the  depositor 
directly ;  and  if  he  does  not  promptly  do  this,  the  bank  should  be 
free  to  act  as  if  it  had  never  received  notice  of  his  claim. 
A  statute  is  in  order  to  amend  the  injustice  of  the  common  law  in 
this  matter,  which  puts  the  bank  to  the  expense  of  defending  itself 
in  suits  in  which  it  has  no  interest,  or  to  the  expense  of  a  bill  of 
interpleader  (in  those  cases  where  it  will  be  allowed,  for  it  is  not 
a  remedy  that  can  be  used  in  all  cases  of  adverse  claim,  it  only 

620 


HOW  BANK   CAN   SECURE   ITSELF.  §  342 

applies  where  the  claims  are  founded  in  privity  or  common  con- 
tract, and  strangers  cannot  be  compelled  to  interplead,  especially 
where  tort  has  intervened).  2  Story's  Eq.  Juris.  §§  812,  817- 
820;  Story  on  Agency,  §  217  ;  Viner's  Abr.  Interpleader. 

§  342.  Payments  in  Case  of  Adverse  Claims.  — A  bank  is  jus- 
tified in  paying  to  the  depositor  or  his  order,  or  to  the  order 
of  one  designated  by  the  depositor,  until  the  fund  is  claimed 
by  some  other  person.^  But  if  notified  that  the  deposit  be- 
longs to  another,  it  will  pay  the  depositor  at  its  peril.^ 

After  notice  that  a  third  person  claims  under  a  superior 
title,  and  intends  to  enforce  the  claim  adversely  to  the  de- 
positor, the  bank  should  hold  the  funds  until  the  title  is 
settled,  or  take  a  bond  of  indemnity,  otherwise  it  may  be  the 
loser ;  as  where  a  deposit  in  the  name  of  A.  was  garnisheed 
as  her  husband's,  the  court  decided  that  it  belonged  to  him, 
and  the  bank  paid  it  into  court ;  but  in  a  subsequent  suit  it 
was  shown  to  belong  to  A.,  and  the  bank  had  to  repay  the 
amount.  ^ 

(a)  A  bank  cannot  defeat  the  suit  of  its  depositor  by  show- 
ing adverse  title  in  another.  That  other,  or  his  attaching 
creditor,  may  dispute  the  depositor's  title,  but  not  the  bank ;  * 
and  as  we  have  just  seen,  even  a  payment  under  judgment 
will  not  save  the  bank  from  liability  to  the  depositor.  A 
bank  may  be  able  to  save  itself  from  future  loss  by  persuad- 
ing the  party  to  whom  it  makes  payment  to  give  it  a  bond  of 
indemnity. 

(5)  And,  if  possible,  the  claims  should  be  adjusted  without 
resorting  to  a  bill  of  interpleader;  but  if  a  settlement  can- 
not  be    reached    that   will   insure   safety    to   the   gj,]  ^j  ;„. 
bank,  and  it  has  reason  to  believe  that  the  claim   terpieader, 

1  §  342.   McEwen  v.  Davis,  39  Ind.  109. 

2  First  National  Bank  v.  Bache,  71  Pa.  213.  So  where  a  bank  paid 
money  standing  to  "  Trustees  of  Post  13,  G.  A.  R."  to  one  of  the  trustees 
after  notice  from  the  Post  not  to  do  so,  it  was  liable.  Arnold  et  al.,  Post 
No.  13,  V.  Macungie  Savings  Bank,  71  Pa.  287. 

8  Crumb  v.  Treiber,  Cuyahoga  Dist.  Ct.  Ohio,  4  Ohio  Dec.  R.  492; 
Townsend  v.  Webster  Five  Cents  Savings  Bank,  143  Mass.  147. 

*  First  National  Bank  of  Lock  Haven  v.  Mason,  95  Pa.  St.  113.  See 
German  Bank  v.  Himstedt,  42  Ark.  62. 

621 


§  342  ADVERSE   CLAIM. 

adverse  to  the  depositor  is  well  founded,  it  should  bring 
the  bill.5 

But  interpleader  will  not  be  decreed  in  some  cases  where  it 
is  most  essential  to  the  interest  of  the  bank  that  it  should  be. 
A  New  Jersey  case  strongly  illustrates  this.  The  Vice- 
Chancellor  said  :  —  ^ 

"  This  is  a  bill  of  interpleader.  Its  object  is  to  compel  the 
defendants,  Philip  W,  Crater  and  Maria  L.  Bininger,  to  inter- 
plead in  respect  to  the  hostile  titles  they  set  up  to  three  gov- 
ernment bonds,  of  the  par  value'  of  $2,500,  deposited  with  the 
complainants  by  Abraham  M.  Bininger,  to  indemnify  two 
gentlemen  who  became  his  sureties  on  a  recognizance,  given 
by  him  on  suing  out  a  writ  of  error  to  remove  a  judgment 
against  him. 

"  Mr.  Crater  and  Mrs.  Bininger  set  up  independent  adverse 
titles.  Mr.  Crater's  title  is  founded  in  the  ownership  of  Binin- 
ger. He  claims  by  virtue  of  a  judgment  against  Bininger, 
and  seizure  and  sale  of  the  bonds  under  it.  Mrs.  Bininger, 
who  is  the  wife  of  Abraham,  claims  that  the  bonds  were  pur- 
chased for  her,  with  her  own  money  ;  that  her  husband  never 
had  any  interest  in  them  ;  that  their  deposit  with  the  com- 
plainants was  wrongful  or  tortious  as  to  her,  and  that  the 
complainants,  in  withholding  them  against  her  demand,  are 
wrongdoers. 

"  It  will  thus  be  seen  that  the  position  of  the  complainants 
towards  the  opposing  claimants  is  radically  different.  To 
one  they  are  under  the  obligations  of  a  bailee.  He  may  re- 
cover the  bonds  without  showing  title.  When  the  object  of 
the  bailment  was  accomplished,  they  were  bound  to  surrender 
them  without  inquiry  as  to  title.  As  to  the  other,  if  her 
claim  is  true,  they  were  wrongdoers,  and  disputed  her  right 
to  the  possession  of  the  bonds,  at  their  peril. 

"  Under  this  state  of  facts,  have  the  complainants  a  right 
to  require  the  opposing  claimants  to  interplead  ? 

6  Bell  V.  Hunt,  3  Barb.  Ch.  (N.  Y.)  391;  Bedell  v.  Hoffman,  2  Paige 
(N.  Y.),  199;  German  Exchange  Bank  v.  Commissioners,  6  Abb.  N.  C. 
(N.  Y.)  394  ;  Marvin  v.  EUwood,  11  Paige  (N.  Y.),  365. 

6  First  Natl  Bank  of  Morristown  v.  Bininger,  26  N.  J.  Eq.  345  (1875). 

622 


INTERPLEADER.  §  342 

"  This  question  may  be  fully  answered  by  simply  quoting 
from  elementary  authorities. 

"Judge  Story,  in  his  work  on  Bailments,  §  110,  says: 
'  Where  the  parties  claim  in  absolute  adverse  rights,  not 
founded  in  any  privity  of  title,  or  any  common  contract,  there 
the  bailee  must  defend  himself  as  he  may,  for,  generally 
speaking,  he  cannot  compel  strangers  to  interplead  with  each 
other.  Indeed,  our  law  goes  to  the  extent  of  ordinarily  deny- 
ing a  bailee  any  right  to  set  up  the  interest  or  title  of  a  third 
person  against  the  title  of  his  own  bailor.' 

"  In  his  work  on  Equity  Pleadings,  §  293,  he  states  the 
rule  as  follows :  '  Where  the  claimants  assert  their  rights 
under  adverse  titles,  and  not  in  privity,  and  where  the  claims 
are  of  different  natures,  the  bill  is  wholly  unmaintainable.' 

"  And  in  his  work  on  Equity  Jurisprudence,  §§  819,  820, 
he  gives  the  following  illustration,  and  then  states  what  he 
understands  to  be  settled  principle :  '  Where  a  person  is  in 
possession  of  property  as  bailee,  to  which  the  bailor  himself 
has  no  possessory  title,  but  he  is  a  mere  tortious  possessor, 
and  the  rightful  owner  demands  it  of  the  bailee,  in  such  a 
case  the  question  may  arise  whether  he  can  compel  the  bailor 
and  the  rightful  owner  to  interplead  witli  each  other.  Upon 
principle,  it  would  seem  that  he  cannot,  for  not  only  is 
there  no  privity  between  him  and  the  rightful  owner,  but 
he  is  himself  liable  to  be  deemed  a  wrongful  possessor,  if  he 
should,  after  notice,  withhold  the  property  from  the  rightful 
owner.' 

"  '  The  true  docrine  would  seem  to  be,  that,  in  cases  of  ad- 
verse independent  titles,  the  party  holding  the  property  must 
defend  himself  as  well  as  he  can  at  law,  and  he  is  not  entitled 
to  the  assistance  of  a  court  of  equity,  for  that  would  be  to 
assume  the  right  to  try  merely  legal  titles  upon  a  contro- 
versy between  different  parties,  where  there  is  no  privity 
of  contract  between  them  and  the  third  person  who  calls  for 
an  interpleader.' 

"  Lord  Brougham,  in  Pearson  v.  Garden,  2  Russ.  &  Mylne, 
606,  in  commenting  on  the  question  as  to  whether  an  agent 
or  bailee  had  a  right  to  compel  his  principal  to  litigate,  with  a 

623 


§  342  ADVERSE   CLAIM. 

stranger,  the  title  to  property  held  by  him  for  his  principal, 
denied  its  existence  in  the  following  emphatic  language : 
*  Upon  such  a  state  of  facts,  can  I  hold  this  to  be  a  common 
case  of  a  claim  by  an  agent  against  his  principal,  and  of  an- 
other party  claiming  by  another  title,  foreign  to  the  title  of 
the  principal  ?  That  an  agent  should  have  the  power  of 
filing  a  bill  of  interpleader,  when  his  principal  demands  the 
re-delivery  of  his  goods  bailed  with  him,  appeared  to  me  so 
monstrous  a  proposition,  and  to  involve  such  frightful  conse- 
quences in  mercantile  transactions,  that  I  could  not  suppose 
it  was  meant  to  contend  for  any  such  doctrine.  For,  in  fact, 
/  N  it  amounts  to  this :  that  an  agent  may,  at  any  mo- 
ment, treat  his  principal  to  a  chancery  suit;  and  I 
was  therefore  relieved  to  find  that  the  plaintiff's  counsel 
went  entirely  on  the  peculiarity  of  this  case.' 

"  The  contract  of  bailment,  as  given  by  the  president  of  the 
complainants,  was  that  the  complainants  were  to  hold  the 
bonds  as  indemnity  to  the  two  gentlemen  who  had  become 
bail  for  Mr.  Bininger.  Though  there  was  no  express  stipula- 
tion to  that  effect,  the  law  made  it  the  duty  of  the  complain- 
ants to  surrender  the  bonds  to  Mr.  Bininger  when  the  liability 
of  his  bail  ended.  The  relation  of  the  complainants  to  Mr. 
Bininger  and  his  bail  grew  out  of  a  contract,  which  provided 
for  the  surrender  of  the  bond  in  spite  of  any  claim  which 
might  be  made  by  a  third  person. 

"  The  complainants  seek  to  put  their  case  on  the  ground 
that  they  are  stakeholders  or  trustees.  It  seems  to  me  im- 
possible to  say  they  hold  either  of  these  relations  to  Mrs. 
Bininger.  At  the  time  of  the  bailment  she  was  unknown,  she 
had  no  connection  with  it,  and,  if  her  claim  is  true,  the  com- 
plainant's possession  of  the  bonds,  if  not  tortious  at  its  incep- 
tion, became  so  after  demand  and  refusal.  A  stakeholder  is 
a  third  person,  chosen  by  two  or  more  persons,  to  keep  in 
deposit  property  the  right  or  possession  of  which  is  in  dis- 
pute, until  some  one  of  them  establishes  his  right  to  it.  A 
trustee  is  a  person  who  holds  the  legal  title  to  certain  prop- 
erty, the  beneficial  use  of  which  belongs  to  another.  T  think 
it  would  be  an  unwarrantable  misuse  of  well  defined  terms  to 
624 


INTERPLEADER.  §  312 

hold  the  complainants  were  cither  stakeholders  or  trustees  of 
Mrs.  Bininger. 

"If  this  was  a  case  of  first  impression,  no  difiiculty  would 
be  found  in  declaring  it  fell  clearly  within  the  purposes  de- 
signed to  be  accomplished  in  the  establishment  of  a  court  of 
equity.  But  the  rule,  denying  the  right  of  the  complainants 
to  require  Mrs.  Bininger  to  interplead  with  the  other  defend- 
ants, is  too  firmly  established  to  be  changed  by  anything 
short  of  legislative  power.     (2  Story's  Eq.  Jur.  §  320.) 

"  I  cannot  break  through  a  rule  so  firmly  established  as  to 
be,  in  the  judgment  of  Judge  Story,  no  longer  open  to  dis- 
cussion, even  if  it  were  clear  that  a  better  could  be  invented. 
Stability  in  legal  rules  is  more  important  than  that  they 
should  accomplish  complete  justice  in  every  case." 

Here  we  have  a  case  in  which  the  bank  could  not  success- 
fully defend  itself  at  law  against  its  bailor,  because  it  could 
not  set  up  the  title  of  a  stranger;  yet  if  the  title  of  the 
stranger  was  really  good,  the  bank  was  guilty  of  tort  in 
refusing  to  deliver  to  Mrs.  Bininger;  and  still  equity  calmly 
says  it  cannot  interfere  to  decree  interpleader  because  the 
rule  is  well  settled  that  the  parties  must  be  in  privity  in 
order  to  the  granting  of  such  decree.  A  stronger  call  for 
legislative  correction  could  hardly  be  imagined,  and  it  might 
be  urged  with  force,  that  although  stability  in  the  law  is 
valuable  and  not  lightly  to  be  interfered  with,  and  when  the 
law  is  only  a  formal  one,  this  rule  is  paramount,  yet  that 
where  real  injustice  exists  under  the  name  of  law,  to  give 
stability  to  that  law  is  to  fortify  injustice.  The  question  is, 
Would  greater  harm  result  from  change  than  from  continu- 
ance ?  Change  in  this  particular  case  would  not  result  in 
any  commercial  disturbance,  and  it  is  hard  to  see  why  a 
court  of  equity,  acknowledging,  as  the  New  Jersey  court  did, 
the  justice  in  the  case,  should  be  unwilling  to  add  one  more 
stone  to  the  temple  of  equity.  Its  walls  would  never  have 
towered  above  the  common  law,  if  the  mind  of  every  judge 
had  been  fettered  by  the  opinions  of  his  predecessors. 

The  argument  at  B.  is  baseless,  for  equity  would  not  have 
to  try  legal  titles,  but  only  to  send  the  parties  to  law  to  try 
them.  625 

VOL.  I.  — 40. 


§  343  ADVERSE   CLAIM. 

The  argument  at  C.  is  baseless,  for  it  is  not  the  agent  that 
treats  the  principal  to  a  suit,  but  the  third  party  who  claims 
adversely,  and  if  the  agent  does  not  act  bona  fide  in  the  mat- 
ter, of  course  he  is  answerable,  and  if  the  stranger  does  not 
walk  up  and  take  his  part  when  interpleader  is  decreed,  the 
matter  is  settled  in  favor  of  the  principal. 

It  may  be  that  the  most  just  arrangement  would  be  that 
notice  from  the  adverse  claimant  to  the  bank  should  not  hold 
the  property  any  longer  than  would  be  necessary  for  said 
claimant  to  push  his  rights  directly  against  the  depositor; 
that  if  he  did  so,  he  should  have  an  order  (attachment,  gar- 
nishee, or  injunction)  from  the  court  to  the  bank  to  retain 
the  deposit  until  the  question  was  settled,  unless  bond  of  in- 
demnity be  given;  but  that  if  he  did  not  within  a  reasonable 
time  after  notifying  the  bank  proceed  against  the  depositor 
directly,  the  bank  would  be  released  from  any  obligation  to 
him,  and  might  act  as  though  it  had  received  no  notice  of 
his  claim. 

§  348.  The  True  Owner  of  a  Deposit  may  recover  from  the 
Bank.  —  The  English  cases  at  law  hold  that  the  true  owner 
of  the  money  cannot  recover  it  in  a  suit  against  the  banker, 
even  after  such  notice.  "It  is  impossible,"  says  Mr.  Grant, 
"  for  the  banker  to  set  up  a  jus  tertii  against  the  order  of 
the  customer,  or  to  refuse  to  honor  his  draft,  on  any  other 
ground  than  some  sufficient  one  resulting  from  the  act  of 
the  customer  himself,  "^  Though  in  equity  the  rule  would 
appear  to  be  different  even  in  England. ^ 

(a)  In  the  United  States,  the  question  has  been  several 
times  discussed  in  the  courts  of  Pennsylvania,  and  the  posi- 
tion there  laid  down  gives  the  true  owner  a  right  to  the 
fund,  and  power  to  maintain  that  right  at  law  as  well  as  in 
equity. 3    The  best  discussion  of  the  matter  will  be  found  in 

1  §  343.  Grant  on  Banking,  ed.  1873,  p.  148  ;  see  Sims  v.  Bond,  5  B.  & 
Ad.  389 ;  Tassell  v.  Cooper,  9  C.  B.  509. 

2  See  Pennell  v.  Deffell,  4  De  G.,  Mac.  &  G.  372;  Bridgman  v.  Gill,  24 
Beav.  302. 

3  Frazier  v.  Erie  Bank,  8  W.  &  S.  (Pa.)  18  ;  Stair  v.  York  National 
Bank,  5  P.  F.  Smith  (Pa.),  364;  Farmers  &  Mechanics'  National  Bank  v. 

G26 


RECOVERY   OP   DEPOSIT    BY   TRUE    OWNER.  §  343 

Farmers  and  Mechanics'  National  Bank  v.  King,  cited  in  the 
last  note.  In  that  case,  the  court  even  went  so  far  as  to  say 
that,  when  the  true  owner  notified  the  bank  of  his   Even  after  a 

'  1     1  J     creditor  of 

ownership  only  after  the  bank  had   been    served   the  depositor 

,  .  -I  •       i.  J.1       J  •       has  served 

with  garnishee  process  in  a  suit  against  the  deposi-   garnishee  on 
tors,  till  the  true    owner  had   the   superior   title,   no'ticeCm 
and  might  recover  the  money  in  proceedings  in   ^^VeXids 
equity  against  the  bank ;    for  the  attaching  cred-   it  for  him. 
itor  of  the  depositor  could  acquire  no  better  title  than  that 
of  the  depositor  himself,  and  the  depositor's  title  was  liable 
at  any  time  to  be  divested  by  notice  from  the  true  owner 
served  on  the  bank.     The  same  case  gives  the  bank  some 
comfort  by  the  statement  that,  if  either  claimant 

''  _  riiit  lie  must 

sues  the  bank,  tlie  court  will  have,  and  will  exert,   give  bauk 
as  a  general  rule,  the  power  to  compel  the  plaintiff 
to  execute  to  the  bank  a  sufhcieut  bond  of  indemnity  as  a 
preliminary  to  a  judgment  in  his  favor. 

(5)   An  earlier  case  in  the  same  State,  commented  upon 
and  explained  in  the  last-named  case,  was  as  follows.     Pro- 
cess was  served  upon  the  bank  as  garnishee  of  the   The  bank 
nominal  depositor.     Judgment  was  rendered  in  fa-   ^H  u  upon 
vor  of  the  plaintiff.     The  bank,  after  service  of  the   ife''rVa7''^ 
process,  paid  away  all  the  money  standing  to  the   ^^ner,  ^^^ 
defendant's  credit.     Upon  issue  of  scire  facias,  it   after  service, 
sought  to  avoid  its  responsibility,  on  the  'ground  that  the 
money  was  not  really  that  of  this  depositor,  but  that  of  an 
undisclosed  principal,  who  found  no  fault  with  the  subsequent 
payments.     It  seemed  that  this  was  really  the  case.     But  the 
bank's  defence  was  not  allowed  to  prevail,  upon  the  ground 
that,  at  the  time  of  service  of  process,  and  the  accruing  of  the 
bank's  duty  to  hold  the  money,  the  bank  did  not  know  that 
the  fund  did  not  belong  absolutely  to  the  depositor.     The  re- 
lations of  all  the  parties  inter  se  at  the  moment  of  service 
became  fastened  definitely,  and  remained  throughout  all  the 
rest  of  the  proceedings  precisely  the  same.     The  bank  then 

Kin,^,  57  Pa.  St.  202;  Harrisburg  Bank  i;.  Tyler,  3  W.  &  S.  (Pa.)  373; 
Bank  of  the  United  States  v.  Macalester,  9  Pa.  St.  475.  See  an  obiter  re- 
mark in  Miller  v.  Receiver  of  the  Franklin  Bank,  1  Paige  (N.  Y.),  444. 

627 


§  344  ADVERSE   CLAIM. 

knew  only  the  depositor ;  its  duty  then  was  only  to  pay  to 
him  or  his  order ;  the  garnishment  which  found  him  the  ap- 
parent owner  kept  him  such,  without  regard  to  subsequent 
knowledge  obtained  by  the  bank.  Wherefore,  the  plaintiff 
was  entitled  to  the  money,  and  must,  under  the  circumstances, 
take  it  from  the  funds  of  the  bank.^ 

(c)  In  Kansas  the  court  held  that,  where  a  person  holding 
money  in  a  fiduciary  capacity  deposited  it  in  his  own  personal 
deposit  account,  the  equitable  owner  could  maintain  his  claim 
to  it  against  a  creditor  of  the  depositor  who  had  garnished  the 
depositor's  general  account.^ 

§  344.  A  New  York  Case.  Checks  Drawn.  Injunction. 
Presentment  of  First  Check.  Lunacy.  Payment  to  Committee. 
Presentment  of  Second  Check.  —  Certain  money  of 
otherwise  B.  was  at  Ms  request  deposited  with  a  bank  by  V., 
fnvaiida°ed  '^^i'O  however  did  so  in  his  own  name  to  the  credit 
verse  cla^m  ^^  ^  dcposit  account  he  then  had  with  the  bank, 
unknown  to     giving  to  B.  two  chccks  for  the  amount,  which  B., 

the  bank  at       ^  ='  '  ' 

the  time  of      February  22,  1869,  indorsed  and  delivered  to  H.  as 

payment;  •  t  •  c         ft  ? 

and  a  bank      part  Consideration  lor  H.  s  promise  to  marry  him. 

is  not  obliged    t  t  i      i         j.-         •  •  7-j.'i.xj 

to  look  into  In  a  proceeding  de  lunatico  mquirendo  instituted 
ofVcheck-  ^^^^^  ^^J'  ^^  ^^^  adjudged  that  B.  was  then,  and  for 
holder.  g|x  moutlis  had  been,  of  unsound  mind.     Pending 

The  suit  ^  ,    _  _     '^ 

should  be       the  proceeding,  the  bank  was  enjoined  from  paying 

b6tw66n  the 

substantial  ovcr  the  moucy  to  any  one,  and  on  March  31  was 
par  les.  ordered  to  pay  the  same  to  B.'s  son,  the  committee 

appointed,  and  on  April  15  complied.  On  March  6,  the 
larger  check  was  presented  for  payment  and  refused.  On 
March  8,  B.  married  H.  On  August  28,  1871,  the  smaller 
check  was  presented  and  refused. ^     The  bank  could  not  pay 

*  Jackson  v.  Bank  of  the  United  States,  10  Pa.  St.  61;  explained  and 
commented  on  in  Farmers  &  Mechanics'  National  Bank  v.  King,  57  id.  202. 

5  Morrill  v.  Raymond,  28  Kans.  415 ;  citing  Central  National  Bank  of 
Baltimore  v.  Connecticut  Mutual  Life  Ins.  Co.,  104  U.  S.  54. 

1  §  344.  Viets  v.  Union  National  Bank  of  Troy,  101  N.  Y.  563  ;  re- 
versing 31  Hun  (N.  Y.),  484,  and  citing  Van  Alen  v.  American  National 
Bank,  52  N.  Y.  1,  and  Bank  of  British  North  America  v.  Merchants' 
National  Bank,  91  N.  Y.  106.  The  judges  disagreed  as  to  the  grounds  of 
the  decision. 

628 


A   NEW   YORK   CASE.  §  344 

the  money  during  the  injunction,  and  when  the  committee 
presented  authority  from  the  court  to  receive  the  money,  the 
bank  acted  properly  in  paying  to  one  who  had  apparent 
authority  to  receive. 

"  It  must  be  conceded  that,  if  the  adjudication  of  lunacy 
was  in  force  at  the  time  the  payment  was  made,  it  was  a 
valid  and  legal  payment,  and  an  effectual  bar  to  any  claim 
by  the  plaintiff,  or  any  other  person  to  recover  the  money  of 
the  defendant." 

As  the  money  was  the  property  of  B.  when  deposited,  it 
remained  the  property  of  B.  and  the  payment  was  actually 
correct  and  legal.  Even  if  H.  had  an  equitable  claim,  it  was 
unknown  to  the  bank,  and  any  equitable  right  should  be  en- 
forced against  the  committee,  not  against  the  bank,  which 
could  not  be  expected  to  look  into  the  equities  between  third 
parties  before  paying  upon  order  of  the  court.^ 


629 


CHAPTER  XXTY. 

ATTACHMENT   AND   INJUNCTION. 

§  345.    Analysis. 

§  346.         A  deposit  is  subject  to  attachment  by  the  creditors  of  the  owner, 
but  a  deposit  is  not  attachable  as  the  property  of  the  nominal  de- 
positor, if  it  is  shown  .f,hat  lie  is  not  the  real  owner. 
After  certification  of  a  ciieck,  the  amount  covered  by  it  is  beyond 

the  reach  of  creditors  of  the  drawer. 
And  where  a  check  is  an  assignment,  a  bank  may,  after  service,  pay 

checks  actually  drawn  before  service. 
Proceeds  of  collection  in  the  hands  of  a  sub-agent  may  be  attached 
by  a  creditor  of  the  real  owner. 
§  346  A.     The  attaching  creditor  is  in  no  better  position  than  his  debtor  as  to 

the  deposit. 
§  347.         Injunction  upon  bank. 

§  346.  Attachment.  —  A  creditor  of  him  who  has  title  to 
a  deposit  may  attach  the  same,  and  an  attachment  holds  all 
money  of  the  debtor  in  the  hands  of  the  trustee  or  bank  at 
the  time  of  service,  and  also  what  may  come  to  his  hands 
afterward,  at  any  time  before  judgment;  and  it  makes  no  dif- 
ference that  the  money  is  deposited  for  the  use  of  C.  imless 
there  is  some  privity  of  contract  between  C.  and  the  deposi- 
tary, for  a  deposit  does  not  become  C.'s  property  until  his 
assent  or  privity  arises.^ 

Borrowed  money  can  of  course  be  attached  as  well  as  any 
other,  for  it  is  the  property  of  the  borrower.^ 

A  depositor.  A,,  sometimes  places  money  of  B.  in  his  (A.'s) 
name,  with  B.'s  connivance,  to  prevent  the  creditors  of  B.  from 
reaching  it ;  but  a  creditor  of  B.  will  not  be  prevented  from 

^  §  346.  Nicholson  v.  Crook,  56  Md.  55.  See  First  National  Bank  v. 
Jaggers,  31  Md.  38;  Farmers  &  Merchants' Bank  v.  Franklin  Bank,  31 
Md.  404;  People  v.  Johnson,  14  111.  342  ;  Kelly  v.  Roberts,  40  N.  Y.432; 
Brown  v.  Foster,  4  Cush.  (Mass.)  214;  Baker  v.  Moody,  1  Ala.  315. 

2  Fuller  V.  Randall,  1  Gray  (Mass.),  608. 
630 


ATTACHMENT.  §  346 

taking  the  fund,  if  he  can  show  tliat  it  is  really  B.'s  property, 
though  it  has  been  held  in  New  York  that  a  sheriff  could  not 
levy  on  such  a  deposit  as  though  it  were  B.'s.^ 

From  the  time  of  service  an  attachment  or  garnishment  is 
a  lien  that  no  act  of  the  bank  or  depositor  can  shake  off  with- 
out consent  of  the  creditor.'* 

Of  course  the  attachment  can  only  affect  funds  belonging  to 
the  debtor,  and  if  a  chock  has  been  certified  before  the  service, 
the  amount  covered  by  the  check  is  not  affected  by  the  garnish- 
ment ;  but  an  acceptance  away  from  the  bank  by  the  cashier 
is  not  good,  nor  a  promise  by  a  bank  clerk  that  a  check  shall 
be  paid,  and  such  acts  do  not  remove  any  portion  of  a  deposit 
from  the  attacks  of  creditors.^ 

Where  a  check  is  an  assignment  by  the  law  of  a  State,  an 
attachment  does  not  take  precedence  of  checks  drawn  before 
service,  and  the  bank  may  pay  such  checks  though   Payment  of 
presented  after  service,*^  but  it  should  be  careful  to   gg^vJ^g'^f/®'" 
assure  itself  that  the  check  is  not  of  a  subsequent   attachment. 
drawing  and  merely  antedated. 

In  those  States,  as  Pennsylvania,  where  a  check  is  not  an 
assignment,  the  bank  cannot  pay  any  checks  after  service.'' 

S.  in  England  drew  on  N.  in  New  York,  and  S.'s  banker, 
M.,  sent  it  to  the  F.  Bank  of  New  York  to  collect.     N.  began 
a  suit  against  S.,  and  wiien  the  draft  became  due    creditor  of 
paid  it,  and  at  once  attached  the  proceeds  in  the   (^i^positor 

'^  '  '^  may  attach 

hands  of  F.     F.  claimed  that  the  money  was  due    proceeds  of 

.  ..,  ,  ,,  .       collection  in 

from  it  to  M.,  its  principal,  and  could  not  be  at-   hands  of 
tached  in  its  possession  as  the  money  of  S.     The    ^"^  '^^^'^ ' 
court  held,  however,  that  the  attachment  was  good.^ 

8  Greenleaf  v.  Mnmford,  50  Barb.  (N.  Y.)  543.  But  see  Mechanics 
&  Traders'  Bank  v.  Dakin,  50  Barb.  (N.  Y.)  593  (1867),  and  cases  cited; 
Lawrence  v.  Bank  of  Republic,  35  N.  Y.  320  (1867)  ;  Mechanics  & 
Traders'  Bank  v.  Dakin,  28  How.  Pr.  (X.  Y.)  502  (1864). 

*  National  Commercial  Bank  v.  Miller,  77  Ala.  168. 

6  BuUard  v.  Randall,  1  Gray  (Mass.),  605;  Duncan  v.  Berlin,  60  N.  Y. 
151. 

«  Nat.  Bank  v.  Ind.  Bank  Co.,  114  111.  483  ;  Reeve  v.  Smith,  113  111.  47. 

7  Harry  v.  Wood,  2  Miles  (Pa.),  327. 

8  Naser  v.  First  National  Bank,  36  Hun  (N.  Y.),  343. 

631 


§  347  ATTACHMENT   AND   INJUNCTION. 

§  346  A.  An  attachment  or  judgment  lien  does  not  take 
precedence  of  a  prior  unrecorded  deed  or  mortgage,  whether 
the  creditor  had  or  had  not  notice  of  such  unrecorded  convey- 
ance at  the  time  of  levying  his  attachment,  or  docketing  his 
judgment.^  A  creditor  of  a  depositor,  who  attaches  money  to 
the  credit  of  his  debtor  in  bank,  is  in  no  better  condition  than 
the  depositor.  If  an  agent  mingle  his  principal's  money  with 
his  own,  so  that  it  cannot  be  followed,  the  principal  cannot 
recover  it  specifically  ;  but  the  agent  does  not  thereby  convert 
himself  into  a  mere  debtor ;  the  principal  may  claim  from  the 
admixture  the  sum  which  belonged  to  him.  A  collector  of 
rents  deposited  money  of  his  principal  in  a  bank  in  his  own 
name ;  it  was  attached  by  a  creditor  of  the  depositor,  and  im- 
mediately afterwards  notice  of  ownership,  &c.,  was  given  by 
the  principal.  Held,  that  the  attaching  creditor  stood  in  the 
position  of  the  depositor,  and  could  recover  only  what  the 
depositor  could .^ 

A  deposit  by  a  corporation  in  a  bank,  is  a  debt  by  the  bank 
to  the  corporation,  and  is  liable  to  attachment  by  a  judgment 
creditor  of  the  corporation.  A  corporation  making  a  deposit 
is  on  the  same  footing  with  the  bank  as  is  an  individual. 
Where  it  is  satisfactorily  shown  that  money  deposited  in  the 
name  of  one  person  is  the  property  of  another,  it  cannot  be 
attached  as  the  property  of  the  depositor.^ 

A  creditor  who  is  a  party  to  a  trust  for  the  benefit  of  cred- 
itors, the  trustees  under  which  were  not  to  make  a  payment 
until  the  property  was  sold  and  the  trust  executed,  has  no 
legal  right  to  the  funds  in  the  hands  of  the  trustee,  before  the 
disposition  of  the  whole  trust  property.  A  merely  equitable 
right  is  not  attachable  by  trustee  process.'* 

§  347.  Injunction  upon  Bank.  —  If  enjoined  from  paying,  of 
course  the  bank  must  wait  till  the  question  of  title  is  settled, 
before  paying.^ 

1  §  34G  A.  First  Xational  Bank  v.  Hayzlett,  40  Iowa,  659  ;  Lamberton 
V.  Merchants'  National  Bank  of  Winona,  24  Minn.  281. 

2  Farmers  &  Mechanics'  National  Bank  v.  King,  57  Pa.  St.  202. 
8  Farmers  &  Mechanics'  National  Bank  v.  Ryan,  64  Fa.  St.  230. 
*  Massachusetts  National  Bank  v.  Bullock,  120  Mass.  86. 

1  §  ?>47.    Springfield  Marine  &  Fire  Ins.  Co.  v.  Peck,  102  111.  265. 

632 


CHAPTER    XXY. 

CLEARING-HOUSE. 

§  348.  Analysis. 

§  349.   Daily  Routine. 

Effect  of  Clearing-House  Rules. 
§  350.    (1)  Non-members  not  bound,  unless  by  agreement  with  special  reference 
§  351.  to  the  rules   (as  wliere  a  non-member  bank  employs  a  member 

§  351  d.     bank  to  make  exchanges  through  the  clearing-house  for  it),  or  by 
a  course  of  dealing.     Nor  can  a  non-member  or  any  outside  party 
§  351.        take  advantage  of  the  rules,  and  the  liabilities  or  forfeitures  for 
which  they  provide. 
(2)  Members  are  bound  by  the  rules  as  by  contracts.     Unless  they  ex- 
§  352.         pressly  declare  that  common  law  rights  for  the  correction  of  mis- 
§  353.        takes,  &c.,  are  forfeited  by  breaking  the  rules  of  the  clearing-house, 
such  rights  will  still  exist,  but  the  bank  in  fault  will  have  to  answer 
to  any  member  that  is  damaged  by  reason  of  the  breach  of  clear- 
ing usages  or  regulations. 
For  example,  a  dishonored  check  or  note  may  be  returned  after  the 
hour   set  in  the   clearing-house  rules  ( unless  the  rules  expressly 
declare  that  such  right  is  forfeited),  and  if  the  bank  that  sent  the 
paper  through  the  clearing-iiouse  has  not  altered  its  position  to  its 
injury,  in  consequence  of  tliere  having  been  no  return  within  the 
usual  hour,  no  damage  is  done,  and  the  rights  of  the  parties  are 
the  same  as  if  there  were  no  such  limitation  of  time.     But  if  the 
hour  set  for  the  return  of  paper  arrives  without  such  return,  and 
the  sending  bank  credits  or  pays  the  depositor  of  the  paper,  or  it 
has  in  any  way  altered  its  position,  or  may  be  at  any  loss  which 
might  possibly  have  be6n  avoided  by  a  return  within  the  hour,  the 
defaulting  bank  must  bear  the  loss. 
§  353.  Notes. 

Payment  of,  through  the  clearing-house. 

In  the  absence  of  evidence  of  uniform  usage  to  regard  the  presenta- 
tion of  notes  through  the  clearing-house  as  a  demand  for  immedi- 
ate payment,  just  like  checks,  such  presentment  is  equivalent  to 
leaving  the  note  for  collection  at  the  bank  where  payable.  The 
maker  has  nil  the  business  iiours  in  which  to  pay,  and  the  bank  is 
in  no  fault  if  it  returns  the  note  as  soon  as  it  is  sure  tliat  it  will 
not  be  paid. 
§  354.  If  there  are  insufficient  funds  to  pay  all  the  demnnds  at  one  clearing 

against  a  given  deposit,  the  bank  cannot  pay  any  of  them.  Qucere, 
whether  it  would  not  be  better  to  establish  a  power  of  paying  those 
of  the  earliest  date  in  their  order,  as  far  as  possible.  When  the 
test  of  prior  presentment  fails,  some  other  should  be  provided. 

633 


§  349 


CLEARING-HOUSE. 


§  349.    Payments   through  the    Clearing-house.  —  In  all  large 

cities  where  the  banking  business  is  sufficiently  considerable 

to  demand  such  a  convenience,  "  clearing-houses  " 

Dailv  rou-  '  "^ 

tine  of  the  are  established.  The  main  purpose  of  these  is  to 
clearing.  render  the  daily  settlements  of  the  banks  with  each 
other  simple  and  expeditious.  The  substantial  character- 
istics of  the  plan  are  these.  At  a  certain  hour  every  morn- 
ing, usually  at  ten  o'clock,  the  deputy  of  each  bank  attends 
at  the  room  of  the  clearing-house,  bringing  with  him  all  the 
checks  upon  other  banks  which  have  been  received  by  his  own 
bank  since  the  same  hour  of  the  preceding  day.  Each  bank 
has  its  drawer  or  box  in  the  room,  and  the  messengers  of  all 
the  other  banks  distribute  all  the  checks  which  they  have  in 
their  possession,  placing  each  of  them  in  the  drawer  or  box 
of  the  particular  bank  upon  which  it  is  drawn.  Each  bank 
is  then  credited  on  the  books  of  the  clearing-house  with  the 
amount  of  checks  upon  other  banks  which  it  has  brought  in 
for  collection,  and  is  debited  with  the  amount  of  the  checks 
drawn  upon  it  which  all  the  other  banks  have  brought.  If 
the  former  amount  exceeds  the  latter,  the  bank  is  then 
declared  to  have  "  gained  "  the  amount  of  the  excess ;  but  if 
the  latter  amount  exceeds  the  former,  the  bank  is  declared 
to  have  "lost"  the  amount  of  the  difference.  It  is  obvious 
that  the  sum  total  of  the  losses  of  the  losing  banks  must  be 
precisely  equal  to  the  sum  total  of  the  gains  of  the  gaining 
banks.  At  a  later  hour  in  the  same  day  the  losing  banks 
are  obliged  to  bring  into  the  clearing-house  the  sums  which 
they  have  respectively  lost;  and  shortly  afterward  the  gam- 
ing banks  come  and  receive  from  the  officers  of  the  clearing- 
house, out  of  the  funds  thus  furnished  by  the  losers,  the 
amounts  of  their  respective  gains.  In  this  manner  the  busi- 
ness of  settling  the  daily  balances  and  exchanges  between  the 
several  banks  is  accomplished  with  extraordinary  rapidity, 
accuracy,  and  cheapness.  The  computation  of  how  much 
each  bank  has  brought  in  against  others,  and  of  how  much 
the  others  have  brought  in  against  it,  is  performed  by  skilful 
clerks  in  a  very  few  minutes.  So  soon  as  it  is  finished,  an 
officer  of  each  bank  takes  from  its  drawer  or  box  all  the 
634 


ROUTINE.  §  350 

checks  against  it  which  have  been  placed  therein  by  the 
other  banks,  and  carries  them  back  to  his  own  bank  to  be 
examined,  for  the  purpose  of  seeing  whether  or  not  any  of 
them  must  be  dishonored  by  reason  of  want  of  funds  of  the 
drawer.  The  casting  of  the  balances  at  the  clearing-house  is 
not  of  course,  as  it  would  be  impossible  that  it  should  be, 
binding  upon  any  bank  as  to  the  genuineness  or  the  honoring 
of  the  checks  which  are  placed  in  its  drawer,  and  which  pur- 
port to  be  honestly  drawn  upon  it  by  depositors  having  funds. 
A  time  is  therefore  set  within  which  each  bank  is  expected  tq 
examine  all  such  checks,  and  to  return  such  as  it  refuses  to 
pay.  The  computation  already  made  at  the  clearing-house  is 
not  affected  by  the  repudiation  in  this  manner  of  checks  by 
any  bank.  But  each  check  before  being  placed  in  the  box  of 
the  drawee  bank  is  marked,  for  the  purpose  of  identification, 
with  the  name  of  the  bank  presenting  it  through  clearing; 
therefore  the  bank  on  which  it  is  drawn  and  which  refuses 
to  pay  it  is  able  at  once  to  send  it  back  to  the  bank  which 
brought  it  in,  and  to  demand  a  repayment  of  its  amount  to  be 
made.  If  the  repayment  is  refused  for  any  reason,  the  ques- 
tion lies  Avholly  between  the  two  banks,  and  the  one  on  which 
the  check  was  drawn  has  no  means  of  satisfaction  afforded 
by  the  clearing-house,  but  must  bring  its  suit  directly  against 
the  other.  ^ 

§  350.  Effect  of  Clearing-house  Rules.  —  A  clearing-house 
may  be  legally  incorporated ;  but  more  commonly  it  is  a  mere 
private  association  organized  among  the  banks  to  suit  their 
own  requirements  and  convenience.  Of  course  the  authority 
of  such  an  association  must  be  very  limited.  In  the  absence 
of  special  legislation  it  is  impotent  by  its  own  arbitrary  and 
original  power  to  alter  any  obligation  of  the  common  law. 
Neither  has  it  any  authority  to  bind  banks  which  are  not 
parties  to  the  association  by  any  by-laws,  rules,  or  usages 
which  it  may  see  fit  to  establish.  Some  of  the  regulations  of 
the  clearing-house  are  embodied  in  by-laws,  others  are  simple 
rules  or  usages  which  are  adopted  and  tacitly  acquiesced  in 
by  the  members.     There  is  no  legal  distinction  between  these 

^  §  349.  ]\Ierchants'  National  Bank  v.  National  Bank  of  the  Common- 
wealth, 139  Mass.  513.  635 


§  351  CLEARING-HOUSE. 

two  classes.  When  once  the  rule  or  usage  has  been  estab- 
lished by  satisfactory  proof,  it  is  as  binding  as  the  formal 
by-law.  The  only  practical  difference  is  in  the  greater  diffi- 
culty which  must  be  experienced  in  proving  with  accuracy 
the  existence  and  extent  of  the  unexpressed  custom, 

§  351.  Effect  on  Non-members.  — The  by-laws,  rules,  and 
usages  are  binding  only  upon  members  of  the  association. 
XT  .  u-  J-        No  outside  bank  is  under  any  degree  of  obIi<2fation 

Not  binding  J         o  o 

except  on        to  obscrve  them.      But,  on  the  other  hand,  no  out- 
members,  •  -111 
unless  by        Side  bank  can  have  any  remedy  against  any  mera- 

or  course  of  bcr  of  the  associatioii  for  a  brcach  of  them.  They 
^*  '°^'  are  in  the  nature  of  a  contract  to  which  the  out- 
sider is  no  party.  The  duty  of  adhering  to  them  runs  from 
each  of  the  members  to  each  and  all  the  rest,  but  to  no  other 
person  or  corporation;  at  least  unless  any  special  and  peculiar 
course  of  dealing  between  any  member  and  any  outside  indi- 
vidual has  operated  to  place  that  member  under  an  express 
and  exceptional  obligation  to  the  outsider  to  adhere  in  all 
matters  in  which  he  is  interested  to  the  regulations  of  the 
clearing-house.  Generally,  "  those  who  are  not  bound  by  such 
usages,  and  have  not  contracted  with  reference  to  them,  have 
no  right  to  avail  themselves  of  them  to  create  an  obligation 
against  those  who  are  parties  to  their  adoption  and  bound  by 
them  inter  sese  only."  But  if  any  bank  or  person  not  a  mem- 
ber of  the  association  can  show  that,  by  virtue  either  of  an 
express  or  an  implied  understanding,  he  did  contract  with  a 
member  "  in  reference  to  "  such  usages,  he  may  hold  the  bank 
to  the  fulfilment  of  this  special  contract. 

In  general,  if  any  person  or  bank  employs  a  member  of  the 
association  to  transact  any  business,  such  employer  is  neither 
bound  by  the  rules,  nor  entitled  to  take  advantage  of  and  en- 
force them  as  against  other  members,  by  reason  of  the  fact 
that  the  agent  is  a  member.  The  fact  of  the  agency  does  not 
"bring  the  case  within  the  operation  of  the  rule,  that  the 
principal  is  entitled  to  the  benefit  of  the  contract  of  the  agent, 
"while  transacting  the  business  of  the  principal.  This  is  un- 
doubtedly true  as  to  all  the  legal  rights  acquired  by  the  agent 
for  the  benefit  of  the  principal ;  but "  the  clearing-house  rules 
636 


EFFECT   OF   RULES,  §  351 

are  "a  mere  labor-saving  usage,  designed  for  the  exclusive 
benefit  of  the  agent,  the  adoption  of  which  could  not  affect 
the  principal  without  his  assent." 

(a)  The  foregoing  principles  were  laid  down  in  a  very- 
satisfactory  opinion  delivered  by  the  Chief  Justice  of  the 
Supreme  Court  of  New  Jersey ;  ^  and  the  facts  of  the  case  in 
support  and  explanation  of  which  they  were  enunciated  are 
well  worth  a  brief  recital.  The  plaintiff  deposited  in  the 
Bank  of  Commerce  in  New  York  City  a  check  drawn  on  the 
defendant  bank,  which  was  situated  in  New  Jersey.  The 
defendant  of  course  was  not  itself  a  member  of  the  New  York 
clearing-house;  but  it  had  as  its  agent  in  New  York  City 
the  Ocean  Bank,  and  it  was  wont  to  receive  and  pay  checks 
drawn  upon  it  through  that  bank.  That  bank  was  a  member 
of  the  clearing-house,  and  used  its  facilities  in  transacting 
the  business  of  the  defendant  bank.  The  check  in  question 
came  from  the  Bank  of  Commerce  through  the  clearing-house 
to  the  Ocean  Bank.  The  rules  of  the  clearing-house  required 
that  any  check  which  was  not  to  be  honored  must  be  returned 
before  ten  o'clock  a.m.  of  the  day  following  that  on  which  it 
was  received  through  clearing;  otherwise  the  bank  on  which 
it  was  drawn  would  be  held  to  pay  it.  If,  therefore,  this 
check  had  been  drawn  directly  on  the  Ocean  Bank,  that  bank 
must  either  have  returned  it  before  ten  o'clock  of  the  next 
day,  or  it  must,  according  to  the  rules,  have  paid  it.  It  was 
returned  a  whole  day  later  than  this  limit,  with  the  state- 
ment that  it  could  not  be  paid  since  the  defendant  had  no 
funds  of  the  drawer.  The  plaintiff,  who  had  lost  the  amount 
of  the  check  by  the  intermediate  failure  of  the  drawer,  sought 
to  hold  the  defendant,  on  the  ground  that,  since  its  agent  was 
a  member  of  the  clearing-house  and  was  uniformly  wont  to 
adhere  to  its  rules  and  use  its  facilities  in  transacting  the 
defendant's  business,  therefore  the  defendant  was  itself  an- 
swerable for  the  agent's  breach  of  such  rules,  and  was  itself 
liable  to  suffer  for  such  breach  according  to  the  terms  pre- 
scribed  by  those  rules.     Besides  laying  down  the  doctrine 

^  §  351.  Overman  v.  Hobokea  City  Bank,  1  Vroom  (N.  J.),  61;  2  id. 
563. 

637 


§  351  CLEARING-HOUSE. 

stated  in  the  three  preceding  paragraphs,  which  directly  mili- 
tated against  any  recovery  by  the  plaintiff,  the  court  further 
criticised  the  suf&ciency  of  the  rule  or  usage  which  he  set  up, 
even  if  it  could  be  applicable  at  all  to  the  defendant  bank,  to 
cover  the  circumstances  of  this  case.  For  the  usage  appeared 
to  be  that,  where  a  check  is  presented  at  the  clearing-house 
"  to  a  bank  against  which  the  said  check  was  drawn,"  then  it 
must  be  returned  within  the  prescribed  time,  or  paid  by  such 
bank.  But  the  proof  in  this  case  showed  a  presentation  not 
"  to  the  bank  against  which  the  check  was  drawn,"  but  to  an 
agent.  "  This  is  an  essential  difference.  For  such  a  purpose 
the  agent  does  not  represent  the  principal.  The  usage,  if 
contemplating  a  presentation  to  the  principal,  may  be  reason- 
able, and  very  unreasonable  if  extending  to  the  agent.  The 
plaintiff  has  failed  to  bring  his  case  within  the  usage."  The 
soundness  of  these  remarks  will  be  seen  at  once,  if  we  suppose 
the  employing  bank,  the  defendant  in  this  case,  instead  of 
being  close  at  hand  in  New  Jersey,  to  have  been  situated  in 
Boston,  or  Chicago,  or  Philadelphia.  The  New  York  agent 
cannot  possibly  know  the  state  of  the  accounts  of  the  deposi- 
tors in  its  principal's  books.  It  cannot  properly  agree  or 
refuse  to  pay  checks  drawn  upon  the  principal,  and  some  day3 
must  be  consumed  in  the  intercommunication ;  meantime 
the  twenty-four  hour  rule,  which  appears  to  be  arbitrary, 
would  have  concluded  the  distant  bank  from  refusing  to  pay 
the  check  long  before  that  bank  was  aware  that  such  a  check 
had  been  drawn.  The  practical  reductio  ad  absurdum  is 
obvious. 

(&)  The  rights  of  a  depositor  in  a  member  bank  are  not 
affected  by  the  clearing  rules.^ 

(c)  Nor  can  he  take  advantage  of  them.  A  note  made 
payable  at  bank  A.  was  discounted  by  bank  B.  When  it  fell 
A  bank's  cus-  duc,  B.  charged  the  amount  to  A.,  and  forwarded 

tomers^cannot  ^j-^g  j^q^q  through  thc  clcaring-house,  to  A.  for  pay- 
take  advan-  5  o  o  ?  i.    •/ 

tage  of  the  mcnt.  The  teller  of  A.,  under  the  mistaken  impres- 
house"mies.     sion  that  the  maker  of  the  note  had  sufficient  funds 

2  Merchants'  National  Bank  v.  National  Bank  of  the  Commonwealth, 
139  Mass.  513. 
638 


EFFECT    OF   RULES.  §  352 

on  deposit  for  its  payment,  stamped  upon  the  face  of  the  note 
the  word  "  Paid."  Later  in  the  day,  discovering  his  error, 
he  sent  word  to  B.,  and  also  to  the  indorser  of  the  note.  The 
note  was  duly  protested.  B.  then  sued  the  indorser,  who, 
upon  the  foregoing  facts,  set  up  payment  by  A.,  and  endeav- 
ored to  take  advantage  of  the  clearing-house  rules.  But  the 
court  held  that  there  was  no  payment,  and  that  the  plaintiff 
should  recover.^  The  customers  of  a  bank  are  not  parties  to 
the  clearing-house  rules,  and  cannot  avail  themselves  of  any 
violation  of  such  regulations. 

(d)  But  when  a  bank  which  is  not  a  member  of  the  clear- 
ing-house gives  authority  to  one  that  is  a  member   ^  member 
to  act  for  it  in    making   exchanges    through    the    »« cleaving 

"  °  .  agent  for 

clearing-house,  the  first  is  bound  as  to  third  par-  non-member, 
ties  by  the  acts  of  the  agent  bank  under  the  said  rules.^ 

§  352.    Effect  of  Clearing-house  Rules  as  between  Members.  — 
In  Massachusetts  ^  a    case    arose    between   two   banks,  both 
members  of  the  clearing-house.     The  rule  on  which  xhey  are  in 
it  was  based  was  embodied  in  a  formal  vote  or  ofco/^/rcols 
article  of  the  association,  in  the  words  following,  'V^d'  ""'f  ^ 

°'    the}'  declare 

to  wit :  "  Whenever  checks  are  sent  through  the  distinctly 
clearing-house   which  are  not  good,  they  shall  be  mon  law 
returned  by  the  banks  receiving  the  same  to  the  foffei^d^a 
banks  from  which  they  were  received,  as  soon  as  J^nTr  a  cYea'r-*' 
it  shall  be  found  that  said  checks  are  not  good,   '"?"''""r^.„ 

°  rule  will  still 

and  in  no  case  shall  they  be  returned  after  one  have  its 
o'clock."     The  plaintiff  bank  returned  the  check,  rights,  but 
as  dishonored,  to  the  defendant  bank,  which  had  flirany  dim- 
presented  it  at  clearing  ;  but  the   messenger  car-  ^  anTther*^ 
rving  the  check  did   not  arrive   at  the  rooms    of  member  by 

•'       ■=■  the  viola- 

the  defendant  bank   until  five    or   seven    minutes  tion. 
after  one  o'clock.      The   bank  sent  the    messenger   out   in 
time,  but  he    mistook   his  errand  and   went  to   the   wrong 

8  Manufacturers'  National  Bank  v.  Thompson,  129  Mass.  438. 

*  Stuyvesant  Bank  v.  National  Meclianics'  Banking  Association, 
7  Lans.  (N.  Y.)  197. 

1  §  352.  Merchants'  National  Bank  v.  Eagle  National  Bank,  101  Mass. 
281. 

639 


§  352  CLEARING-HOUSE. 

bank  first.  The  defendant  bank,  on  the  ground  that  the 
return  was  made  too  late,  under  the  rule,  refused  to  take  back 
the  check  or  to  refund  its  amount.  It  did  not  appear,  how- 
ever, that  the  position  or  relations  of  the  defendant  bank  to 
the  drawer  had  undergone  au}^  change  in  the  few  minutes  that 
had  elapsed  since  one  o'clock.  It  would  have  been  no  worse 
o£f  if  it  had  consented  to  receive  back  the  check  at  five  min- 
utes after  one,  than  it  would  have  been  had  it  been  obliged 
under  the  rule  to  receive  it  back  at  five  minutes  before  one. 
The  court  took  the  view  that  the  articles  of  association  were 
in  the  nature  of  a  contract  between  the  members.  If  the 
plaintiff  had  not  kept  the  check  so  long  that  it  would  at  com- 
mon law  be  held  to  have  adopted  it  and  assumed  to  pay  it, 
the  power  to  refuse  to  pay  it,  and  to  return  it,  still  existed, 
and  could  be  affected  by  the  rule  of  the  clearing-house  asso- 
ciation only  so  far  as  it  should  appear  that  the  defendant 
bank  had  suffered  actual  injury  by  reason  of  the  delay.  To 
the  extent  of  such  actual  injury  it  seems  that  the  defendant 
bank  might  be  entitled  to  a  set-off  against  the  sum  due  from 
it  on  the  check.  Or  it  might  pay  the  check,  and  then  sue  for 
damages  for  the  injury  caused  to  it  by  the  failure  of  the  re- 
turning bank  to  observe  the  terms  of  the  agreement  between 
them,  and  to  return  before  one  o'clock. 

This  case  was  subsequently  discussed  and  affirmed  by  the 
same  court.  The  check  in  this  latter  case  was  returned  at 
half-past  one  o'clock,  with  a  statement  that  it  had  been  re- 
tained and  treated  as  good  under  a  mistake  of  fact,  and  that 
it  was  not  good.  The  bank  which  had  presented  the  check 
had  not  clianged  its  position  in  any  respect  during  the  inter- 
vening half-hour,  and  therefore  really  suffered  nothing  by  the 
return  of  the  check.  The  court  said  that  the  limitation  of 
time  was  only  for  the  protection  of  the  presenting  bank ;  it 
was  the  establishment  of  a  certain  hour,  after  which  hour  the 
presenting  bank,  in  the  absence  of  notice  to  the  contrary, 
might  assume  the  check  to  be  good,  and  would  be  protected 
in  acting  on  that  assumption.  But  if  it  had  taken  no  action 
on  that  assumption,  then  it  had  no  need  of  protection,  and 
was  not  prejudiced  by  the  return  of  the  check.  For,  said  the 
640 


EFFECT   OF   RULES.  §  352 

court,  the  rule  of  the  clearing-house  does  not  say  that  the 
paying  bank  shall  have  no  right  of  reclamation  after  that 
hour,  and  shall  thereafter  forfeit  or  lose  the  rights  which  it 
would  otherwise  possess.  Upon  this  ground,  this  decision 
might,  perhaps,  be  distinguished  from  the  decision  in  Preston 
V.  Canadian  Bank  of  Commerce,^  which  otherwise  certainly  is 
directly  contrary  to  the  Massachusetts  doctrine.^ 

It  is  also  said  that  the  mere  fact  that  the  presenting  bank 
has  credited  the  amount  of  the  check  to  the  depositor,  upon 
its  general  account  with  him,  does  not  constitute  such  an 
act  on  its  part  as  prevents  the  return  of  the  check  after  one 
o'clock.  This  fact  does  not  make  the  depositor  liable  instead 
of  the  bank.  But  apparently  it  might  be  different  if  the  bank 
had  given  any  fresh  and  original  credit  to  the  depositor  upon 
the  strength  of  the  check.^ 

In  Preston  v.  Canadian  Bank,  Judge  Blodgett  said  that 
Massachusetts  overlooked  the  right  of  the  parties  to  agree  on 
a  time  of  return.  Massachusetts  replies  that  she  1-,,^  ^^^^^^ 
does  not  overlook  such  right,  but  interprets  the  ^^  ^^^  '=*^®- 
agreement  in  the  light  of  its  object  and  reason  ;  viz.  to  pro- 
tect the  creditor  bank  in  any  action  it  may  take  in  treating  the 
check  as  paid  after  the  agreed  hour.  As,  for  example,  by  pay- 
ing over  the  money  to  the  depositor  of  the  check ;  but  as  the  cred- 
itor bank  had  not  in  any  way  substantially  altered  its  position, 
the  money  paid  under  mistake  of  fact  could  be  recovered. 

C.  deposited  collaterals  with  a  banking  firm  which  was  a 
member  of  the  Chicago  clearing-house,  arranging  to  draw 
checks  to  within  ten  per  cent  of  their  value.  On  u.  s.  courts. 
August  5  he  drew  his  check  for  $4,000,  which  ^u't  flu  on 
was  deposited  with  the  Canadian  Bank  of  Com-   t^e  bank 

'  ^  that  has 

merce  (also  a  member  of  the  clearing-house)  to  his   f«"'ed  to 
credit,  and  went  into  the  exchanges  for  collection   the  rules  to 
through   the   clearing-house    on    the    morning   of  rgreed!*^  *^ 
August  6.    The  rules  required  each  member  to  pay  its  bal- 

2  23  Fed.  Rep.  179. 

3  Merchants'  National  Bank  v.  National  Bank  of  the  Commonwealth, 
139  Mass.  513.  See  also  National  Exchange  Bank  v.  National  Bank  of 
North  America,  132  Mass.  147.  *  Ibid. 

VOL.  I. —41.  641 


§  352  CLEARING-HOUSE. 

ances  by  twelve  o'clock,  and  any  check  found  not  good 
when  returned  to  the  drawee  bank  was  to  be  returned  to  the 
bank  which  collected  it  through  the  clearing-house  by  half- 
past  one  o'clock  of  the  same  day.  When  C.'s  check  was 
returned  from  the  clearing-house  to  the  firm,  the  collaterals 
were  deemed  sufficient  to  pay  this  and  other  checks  drawn  by 
him  on  the  firm ;  and  they  were  handed  over  to  the  book- 
keeper to  be  charged  upon  his  account.  At  forty-two  minutes 
past  one,  the  firm  heard  that  C.  had  failed,  when  a  second 
examination  of  his  account  disclosed  a  mistake  in  the  first, 
whereupon  the  check  was  sent  to  the  Canadian  Bank,  and 
payment  demanded  at  fifteen  minutes  before  two,  and  refused. 
Held,  that  the  firm  could  not  recover  of  the  collecting  bank. 
The  parties  had  agreed  upon  the  time  within  which  mistakes 
could  be  corrected,  and  the  loss  must  fall  on  the  one  who  had 
failed  to  fulfil  the  contract.^ 

The  M.  bank,  at  nine  o'clock  one  morning,  produced 
$3,700.86  worth  of  checks  against  the  L.  bank,  and  the 
La.  latter  $4,967.57  worth  against  the  M.  Mutual  cred- 

Paymentsby  its  wcre  given.  The  rule  of  the  clearing-house 
its"arthe  of  which  M.  and  L.  were  members  was  that  any 
housTfinnot  bank  unable  to  pay  must  notify  the  manager  of  the 
afterhoursto  cleariug-house  and  the  other  banks  by  ten  o'clock, 
the  detriment   r^^^  1jq](J  j^  trust  the  chccks  it  had  received  from 

of  another 

bank.  other   banks   at  the  morning  exchange.     The  M. 

bank  on  the  morning  mentioned  above  could  not  pay ;  but, 
hoping  to  retrieve  its  fortunes,  neglected  to  give  notice,  and, 
acting  on  its  silence,  the  L.  credited  to  each  depositor  the 
checks  upon  M.  which  it  had  received  and  exchanged.  The 
court  held,  in  an  action  by  M.'s  receiver,  that  L.  had  a  right 
to  act  on  the  silence  of  M.,  and  that,  independently  of  any 
clearing-house  rules,  the  mutual  payment  of  checks  by  ex- 
The  essence  change  of  thosc  on  ouc  bank  against  those  on  the 
of  the  case,  other  could  not  be  revoked  by  either  to  the  detri- 
ment of  the  other,  or  of  the  depositors  for  whom  that  other 
was  acting,  and  to  whom  it  had  given  credits.^ 

«  Preston  v.  Canadian  Bank  of  Commerce,  23  Fed.  Rep.  179  (1883.) 
«  Blaffer  i;.  Louisiana  National  Bank,  35  La.  An.  251  (1883). 
642 


EFFECT   OF   RULES.  §  353 

If  the  rule  or  agreement  goes  so  far  as  to  declare  in  terms, 
as  was  the  fact  in  the  New  Jersey  case,  cited  in  §  359,  that, 
if  the  returning  bank  does  not  return  before  the  hour  named, 
it  shall  altogether  forfeit  the  right  to  return  at  all,  and  shall 
be  held  to  pay  the  amount  of  the  check,  the  entirely  different 
terms  of  the  contract  will  raise  an  entirely  different  issue. 
That  a  usage,  or  even  a  by-law,  to  this  effect  would  be  regarded 
as  in  derogation  of  the  common  law,  in  that  it  would  under- 
take to  make  a  bank  pay  the  check  of  a  drawer  who  had  no 
funds  to  his  credit,  and  that  therefore  the  plaintiff  would  be 
held  to  make  out  his  case  with  great  strictness,  may  be  gath- 
ered from  the  language  of  the  New  Jersey  court.  But  from 
the  same  case  it  may  also  be  gathered  that  if  the  plaintiff 
should  succeed  in  sufficiently  proving  his  case,  the  court  would 
not  deprive  him  of  a  favorable  decision.  Certainly  there  would 
seem  to  be  no  ground  on  which  the  courts  could  reasonably 
undertake  to  annul  a  positive  and  definite  agreement  vol- 
untarily entered  into  between  parties  of  high  intelligence, 
and  believed  to  work  to  the  common  advantage  af  all  con- 
cerned. 

A  usage  among  the  banks  in  the  clearing-house  at  London 
to  return  checks  at  any  time  before  five  o'clock,  P.  M.,  even 
if  they  have  been  cancelled  for  payment  in  the  usual  manner, 
by  drawing  a  line  through  the  drawer's  signature,  provided 
the  words  "  Cancelled  by  mistake "  are  noted  upon  them, 
has  been  recognized  by  the  English  courts  as  good  and 
binding.'^ 

§  353,  Payment  of  Notes  through  the  Clearing-house.  —  The 
rules  of  an  association  of  banks  organiziug  a  clearing-house 
for  tlie  purpose   of   effecting   exchanges   between   a  note  sent 

11  1-1  1    xi         through  the 

themselves  at  one  tune  and  place  daily,  and  the   clearing- 
payment  at  the  same  place  of  the  resulting  bal-   be"re*tu"nYd 
ances,   fixed  a  time   before  noon  for  making  ex-   f/J^^J!  .^^t^in 
changes  at  the  clearing-house,  and  a  time  between   the  rules, 
noon  and  one  o'clock  for  paying  balances  there.     The  prac- 
tice under  the  rules  was  for  the  exchanges  and  payments  to 
be  made  according  to  tickets  accompanying  vouchers   pre- 
'  Fernandez  v.  Glynn,  1  Camp.  426,  n. 

643 


§  353  CLEARING-HOUSE. 

sented  for  exchange,  and  not  from  an  examination  of  the 
vouchers  themselves  in  detail.  The  rules  also  provided,  that 
errors  in  the  exchanges  should  be  adjusted  directly  between 
the  banks ;  and  that,  whenever  checks  which  were  not  good 
should  be  sent  through  the  clearing-house,  the  banks  receiv- 
ing them  should  return  them  to  the  senders  as  soon  as  it 
should  be  found  that  they  were  not  good,  "  and  in  no  case 
'shall  they  be  retained  after  one  o'clock."  Held,  in  the 
absence  of  evidence  of  a  uniform  custom  among  the  banks 
which  were  members  of  the  clearing-house,  to  treat  notes 
the  same  as  checks,  that  the  sending  of  a  note  through  the 
clearing-house  to  a  bank  at  which  it  was  payable  was  not  a 
formal  demand  for  immediate  payment  made  during  busi- 
ness hours,  but  was  equivalent  to  leaving  the  note  at  the 
bank  for  collection  from  the  maker  on  or  before  the  close  of 
banking  hours ;  and  that  the  payment  of  such  a  note  at  the 
clearing-house  was  a  provisional  payment  only,  which  became 
complete  when  the  note  was  paid  in  the  usual  and  ordinary 
course  of  business,  and  if  not  so  paid  the  payment  at  the 
clearing-house  was  to  be  treated  as  a  payment  made  under  a 
mistake  of  fact,  to  the  same  extent  and  subject  to  the  same 
right  of  reclamation,  although  the  note  was  retained  until 
after  one  o'clock,  as  if  it  had  been  made  without  the  inter- 
vention of  the  clearing-house.  Held,  also,  that  even  if  the 
bank  at  which  the  note  was  payable  had  funds  of  the  maker 
of  the  note  on  deposit,  the  retention  of  the  note  until  after 
one  o'clock  did  not  amount  to  payment,  in  the  absence  of 
evidence  that  the  maker  had  authorized  the  bank  to  pay  his 
notes  out  of  his  money  or  deposit. 

"  The  sending  of  such  a  note  through  the  clearing-house, 
not  accompanied  by  any  special  demand  of  payment,  can  give 
no  greater  rights  to  the  bank  that  sends  it  than  if  the  note 
had  been  left  at  the  bank  where  payable,  without  any  demand 
for  payment,  or  any  instructions  in  relation  thereto.  In  such 
a  case  the  maker  would  have,  during  business  hours,  to  pay 
the  note,  and  the  bank  would  be  in  no  default  if  it  returned 
the  note  as  soon  as  it  became  certain  it  would  not  be  paid. 

"A  messenger  was  sent,  before  two  o'clock,  with  the  notes 
644 


NOTES   SENT   THROUGH    THE   CLEARING-HOUSE.  §  354 

to  each  of  the  defendant  banks,  reached  each  bank  before  it 
had  closed,  and  demanded  in  each  case  the  amount  which  the 
plaintiff  had  paid  through  the  clearing-house,  and  tendered 
back  the  note;  but  payment  was  refused  by  the  defendant 
banks,  on  the  ground  that  the  notes  were  returned  too  late, 
that  they  should  have  been  returned  before  one  o'clock.  We 
fail  to  find  any  laches  on  the  part  of  the  plaintiff;  and,  on 
the  facts  presented,  no  injury  resulted  to  the  defendants  be- 
cause the  notes  were  not  returned  earlier.  Carrick,  Calvert, 
&  Co.  had  money  on  deposit  in  the  plaintiff  bank  that  day, 
but  not  enough  to  pay  all  their  notes  made  payable  that  day 
at  its  counter.^ 

§  354,  Checks  sent  through  the  Clearing-house.  —  Insufficient 
Funds.  —  The  payment  of  checks  may  be  affected  by  the  use 
of  the  clearing-house  in  one  important  particular.  Checks, 
as  has  been  seen,  must  be  paid  in  the  order  of  presentment. 
But  when  the  deputy  of  the  bank  takes  from  its  drawer  in  the 
clearing-house  all  the  checks  which  it  has  to  pay,  he  may  re- 
ceive a  considerable  number  of  checks  of  the  same  depositor. 
It  is  clear  that  there  can  be  no  priority  among  these.  They 
are  all  received  at  precisely  the  same  moment.  For  the 
order  in  which  they  are  placed  in  the  drawer  has  nothing  to 
do  with  the  presentment  of  them  to  or  receipt  of  them  by  the 
bank,  indeed  is  in  nearly  all  cases  unknown  to  the  bank. 
The  bank  cannot  look  at  their  dates;  for  priority  of  present- 
ment, not  of  date,  secures  priority  of  payment.  So  if  the 
bank  cannot  pay  all  the  checks  of  any  individual  depositor 
then  coming  through  clearing,  it  must  pay  none  of  them.  It 
has  no  legal  power  or  right  to  select  or  choose  from  among 
them  certain  ones  which  it  will  honor,  or  certain  ones  whrich 
it  will  dishonor.  All  or  none  must  be  paid.  Any  other 
course  would  render  the  bank  liable  to  the  holders  of  the 
dishonored  paper.  A  check  presented  at  the  counter  for 
payment  must  be  paid  at  once,  if  there  are  funds  enough  to 
the  drawer's  credit  to  pay  it  alone ;  but  if  it  is  sent  through 
clearing  it  must  take  its  chance  that  his  funds  shall  be  suffi- 

1  §  353.   National  Exchange  Bank  v.  National  Bank  of  North  Amer- 
ica, 132  Mass.  147,  151. 

645 


§  355  CLEARING-HOUSE. 

cient  to  pay  not  only  it,  but  all  his  other  checks  which  shall 
be  sent  through  clearing  on  the  same  day;  and  failing  this, 
it  must  be  dishonored. 

It  might  seem  advisable  to  incorporate  in  clearing-house 
transfers  a  rule,  that,  if  the  funds  of  a  depositor  are  insuffi- 
cient to  pay  the  whole  of  a  mass  of  checks  coming  against  it 
at  one  clearing,  the  bank  should  pay  those  of  earlier  date  so 
far  as  the  funds  will  go.  Such  a  rule,  though  leaving  some 
checks  out  in  the  cold,  would  seem  better,  as  creating  less 
disturbance  of  business  calculations,  than  to  refuse  payment 
of  the  whole  group.  If  a  hundred  or  a  thousand  men  try  to 
enter  a  hall  and  get  crowded  in  the  way  so  that  none  can 
enter,  a  benevolent  policeman  would  not  make  this  an  excuse 
for  sending  them  all  away  entirely,  but  would  straighten  out 
the  column,  and  let  them  enter  in  file,  so  far  as  the  hall  would 
hold  them. 

That  the  system  of  presentment  through  the  clearing-house 
is  a  legal  presentment  for  payment,  to  the  bank  on  which  the 
check  is  drawn,  — a  matter  which  it  would  seem  could  never 
be  doubted,  — has  been  specifically  ruled  in  England.  ^ 

§  355.  Appropriation  of  Payments  made  by  the  Bank.  —  At 
any  time  it  is  only  the  balance  of  all  the  items  up  to  that 
The  first  sum  ^^^^  *^^^  *^^  customcr  cau  rccovcr  from  the  bank, 
drawn  ap-       or  for  whicli  he  can  draw  his  checks  upon  it.    It  is 

plies  to  the  '■ 

first  sum  the  first  item  on  the  debit  side  that  is  discharged 
or  reduced  by  the  first  item  on  the  credit  side, 
without  regard  to  the  identity  or  disparity  of  any  particular 
sums.i  Simple  as  this  principle  appears,  it  is  sometimes  the 
only  thread  which  can  show  the  way  out  of  complicated  laby- 
rinths, as  is  well  shown  by  the  cited  case  of  Devaynes  v.  Noble. 
There  the  partner  in  a  large  banking-house  died.  The  busi- 
ness was  continued  without  any  real,  or  even  formal  change. 
Some  customers  knew  of  the  death,  some  did  not.  The  daily 
course  of  the  business  continued  in  all  respects  as  before,  till 

1  §  354.    Reynolds  i-.  Chettle,  2  Camp,  596. 

*  §  355.    Devaynes    v.    Noble,    1    Mer.    541 ;  Bodenham   v.    Purchas, 
2  Barn.  &  Aid.  39;  Henniker  (;.  Wigg,  4  Q.  B.  792;  Concord  v.  Concord 
Bank,  16  N.  H.  26 ;  Commercial  Bank  of  Albany  v.  Hughes,  17  Wend. 
(X.  Y.)  94;  Clayton's  Case,  1  Mer.  608. 
646 


APPROPRIATION   OF   PAYMENTS.  §  355 

the  house  failed.  Then  various  customers  sought  to  hold  the 
estate  of  the  deceased  partner  to  satisfy  their  deficits.  The 
question  was  on  what  principle  the  accounts  should  be  made 
up;  for  no  hesitation  was  expressed  as  to  the  necessity  of 
subjecting  the  estate  to  meet  the  unsatisfied  claims  of  all  per- 
sons who  were  customers  at  the  time  of  the  death  of  the 
deceased.  Since  then  some  had  increased,  and  others  had 
decreased,  the  amount  of  their  deposits ;  members  of  each  of 
these  classes  had  received  credits  to  the  amount  of  their  bal- 
ances at  the  time  of  the  death  ;  other  members  had  not.  The 
arguments  of  counsel  were  very  long  and  ingenious ;  the 
court  gave  the  matter  the  most  serious  consideratiou,  but 
regarded  no  solution  as  possible  save  that  of  a  simple  run- 
ning account.  It  decreed  that  every  payment  made  to  each 
Customer  since  the  death  should  be  applied  in  reduction  of  the 
debt  or  balance  owing  to  that  customer  at  the  time  of  the 
death,  and  this  equally  (1)  where  the  customer  had  since 
made  no  deposit,  but  simply  drawn  checks  ;  (2)  where  the 
customer  had  continued  to  deal  with  the  firm  depositing  and 
checking,  but  on  the  whole  increasing  his  balance  ;  and  (3) 
where,  dealing  in  like  manner,  he  had  decreased  his  balance. 
The  principle  was  stated  to  be  unalterable,  that  each  payment 
to  the  customer  should  be  referred  back  and  set  against  the 
earliest  indebtedness  to  him ;  that  the  rule  of  law,  sometimes 
laid  down,  that,  if  at  the  time  of  the  payment  the  debtor 
neglects  to  appropriate  it,  the  creditor  may  afterwards  appro- 
priate it  to  suit  his  own  wishes,  cannot  be  allowed  to  govern 
in  cases  of  banking;  but  that  in  this  business,  in  the  absence, 
of  express  contemporary  arrangement  or  understanding,  it 
will  be  considered  that  the  appropriation  of  each  payment  to 
the  discharge  of  the  earliest  then  subsisting  indebtedness  is 
in  fact  made  by  the  very  act  of  setting  down  the  two  items  in 
their  order  in  the  account.  To  the  same  purport  ciavton's 
also  was  Clayton's  Case,  where,  however,  the  inten-  ^''*^- 
tion  of  the  depositor  was  considered  to  be  more  clearly  estab- 
lished, because,  after  the  death  of  a  partner  in  the  banking 
firm,  the  depositor  continued  to  draw  checks  against  the  sum 
to  his  credit  at  the  time  of  the  death. 

647 


§  355  CLEARING-HOUSE. 

A  lawyer  deposited  on  general  account  in  his  own  name 
£5,000  of  his  client's  money  ;  after  drawing  more  than  X5,000 
Even  though  ^.nd  the  balance  he  had  previous  to  that  deposit,  he 
part  of  the       ^j^  ^j  leaving  a  deposit  of  £2,700.     This  the  client 

lunds  are  in  or  ' 

trust.  claimed  as  a  trust  fund,  but  the  court  held  that  the 

payments  by  the  bank  must  be  appropriated  to  the  sums  paid 
in  by  the  depositor  in  the  order  of  the  latter,  and  therefore  the 
trust  money  had  been  all  drawn  out.^  So  far  as  the  report 
shows,  no  effort  was  made  to  see  if  the  payments  could  be 
accounted  for  without  subtracting  from  the  trust  money  ;  the 
accounts  were  lumped  and  the  rule  of  Clayton's  Case  appears 
to  have  been  strictly  applied. 

But  in  Maine  it  has  been  held  that,  if  one  draws  a  check 
against  a  fund  composed  partly  of  his  own  money 
Contra  as  to  and  partly  of  money  of  another,  the  presumption  is 
that  he  is  drawing  his  own  money .^ 

And  in  England  it  has  been  held  that,  where  money  is  held 
by  a  person  in  a  fiduciary  capacity,  though  not  strictly  as  a 
trustee,  if  he  mixes  it  with  his  own  in  bank  he  will  be  takon 
to  have  drawn  his  own  in  preference  to  the  trust  money,  and 
the  rule  in  Clayton's  Case  will  not  apply.* 

2  Brown  v.  Adams,  L.  R.  4  Ch.  App.  764  (1869)  ;  Pennell  v.  DeffeU, 
4  D.  M.  &  G.  372. 

8  Hall  V.  Otis,  77  Me.  122. 

*  Re  Hallett's  Estate,  KnatchbuU  v.  Hallett,  13  Ch.  D.  696  (1879). 


648 


CHAPTER   XXYI. 

OVERDRAFTS. 

§  356.  Analysis. 

Are  irregular  loans.    Power  to  grant. 
§  357.  Bank  officers  have  no  inherent  power  to  make  such  loans,  and 

even  a  usage  to  tiie  effect  of  giving  such  power  is  bad. 
§  358.  It  is  part  of  the  management,  and  belongs  only  to  the  directors. 

May  be  a  fraud  upon  the  holder  of  an  overdraft,  if  he  is  not  in- 
formed of  its  character  at  the  time  he  accepts. 
§  359.  But  not  on  the  bank,  for  it  has  means  of  ascertaining  the  fact  as 

to  sufficiency  of  funds  by  ordinary  diligence,  and  if  it  relies  on 
the  representation  of  sufficient  funds  implied  by  drawing  a  check. 
it  is  its  own  folly.     This  view,  however,  seems  not  to  be  without 
dissent. 
§  360.  The  bank  may  recover  from  the  drawer  any  over-payment  made 

upon  his  order. 

§357.  Overdrafts.  —  It  18  not  an  uncommon  thing  for  a 
depositor  to  undertake  to  overdraw  his  balance ;  and  if  he 
be  a  depositor  in  good  standing  and  repute,  and  a  good 
customer  of  the  bank,  his  overdraft  may  very  probably  be 
honored  by  it.  Of  course  such  a  payment  is  made  by  the 
bank  wholly  upon  its  own  risk,  and  in  sole  reliance  on  the 
ability  of  the  drawer  to  make  remuneration.  In  fact,  it  is 
nothing  else  but  a  loan,  and  a  loan  of  a  very  dangerous 
and  irregular  description,  wherein  the  bank  has  Are  loans 
no  security  whatsoever  beyond  the  right  of  action  '"eguiar  .-* 
against  the  drawer.  If  a  cashier,  not  authorized,  as  cashiers 
seldom  are,  to  loan  the  funds  of  the  bank,  or  if  the  paying 
teller,  who  probably  never  has  such  authority,  pay  the  over- 
draft of  a  customer  without  specific  power  from  the  govern- 
ment of  the  bank,  but  simply  of  his  own  individual  motion, 
his  act  is,  in  the  eye  of  the  law,  a  breach  of  his  trust.  They 
have  used  the  funds  and  property  of  the  bank  in  a  manner 
which  the  law  does  not  authorize,  and  in  which  they  have 

649 


§  358  OVERDRAFTS. 

not  even  a  color  of  right  to  use  them.  They  have  imperilled 
the  safety  of  corporate  money  by  loaning  it,  and  the  fact  that 
it  is  to  a  customer  whom  they  believe  to  be  rich  and  honest, 
and  a  man  whom  it  is  desirable  to  favor,  does  not  prevent 
the  transaction  from  being  a  transgression  beyond  the  limits 
of  their  power  and  duties. ^  They  probably  would  not  dream 
of  discounting  of  their  own  sole  motion  the  same  customer's 
note,  or  making  him  a  formal  loan,  even  with  security  ;  yet 
here  they  in  fact  make  him  a  very  informal  and  irregular 
Usage  for  loau  without  sccurity.  The  fact  that  in  banking 
officer  to         business  such  things  are  often  done,  and  that  their 

permit  over-  ■^  ' 

draft  bad.  true  character  is  hardly  recognized  or  appreciated 
by  the  actors  in  them,  is  perhaps  a  moral  extenuation,  but 
it  is  certainly  no  legal  excuse.  The  language  of  the  adjudi- 
cated cases  is  not  capable  of  being  explained  away.  Such  a 
course  of  dealing,  long  carried  on  by  a  cashier  or  teller  with 
the  knowledge  and  express  or  tacit  approval  of  the  bank 
direction,  may  possibly  relieve  him  from  liability  to  them. 
This  is  another  and  collateral  question,  by  no  means  devoid 
of  doubt  and  difficulty.  But  however  such  a  usage  or  course 
of  dealing  may  operate  between  the  individual  officer  and  the 
bank  government,  it  is  not  allowed  to  be  introduced  in  any 
other  connection,  for  the  purpose  of  rendering  valid  by  virtue 
of  business  usage  an  act  which  the  law  directly  makes  wrong- 
ful. Evidence  of  such  a  usage  will  be  ruled  out.  For  how- 
ever common  the  practice  might  be  shown  to  be,  it  is  yet  a 
usage  intrinsically  bad  and  illegal,  and  which  no  court  of 
justice  will  recognize.^ 

§  358.  Overdrafts  may  be  arranged  for. — Of  course,  how- 
ever, there  is  a  power  in  the  bank  to  allow  overdrafts.  By 
Directors  negotiating  with  the  authorized  and  proper  officials, 
may  allow.  ^  customcr  may  make  a  legal  and  binding  arrange- 
ment by  which  his  overdrafts,  to  a  certain  amount  named  and 
under  the  circumstances  agreed  upon,  shall  be  honored.    The 

1  §  357.  Eichelberger  r.  Finley,  7  Har.  &  J.  (Md.)  381  ;  Bank  of  St. 
Mary's  v.  Calder,  3  Strobh.  (S.  C.)  403;  Lancaster  Bank  v.  Woodward, 
18  Pa.  St.  357. 

2  Lancaster  Bank  v.  Woodward,  18  Pa.  St.  357. 

650 


OVERDRAFTS.  §  359 

dealing  is  in  the  nature  of  a  loan  ;  it  is  placing  money  at  his 
disposal  and  control.  There  may  be  a  standing  agreement, 
binding  on  the  bank,  for  a  definite  period.  Or  there  may  be 
a  mere  naked  permission,  revocable  at  will.  In  the  latter 
case  it  is  not  what  is  termed  an  "  authority  "  to  overdraw. 
The  bank  is  under  no  obligation  to  honor  the  drawer's  check, 
but  may  at  any  time  refuse  to  do  so.  Neither  is  the  drawer 
warranted  in  stating  absolutely,  solely  on  the  strength  of 
such  an  arrangement,  that  his  check  is  "  good."  ^ 

A  mining  company  may  legally  enter  into  an  arrangement 
with  a  bank  to  pay  its  over-checks,  and  where  such  checks 
are  customarily  signed  by  the  president  and  secretary  with- 
out objection,  the  bank  may  assume  that  they  are  duly 
authorized.^ 

A  depositor  notified  the  bank  not  to  allow  overdraft  beyond 
a  certain  amount.  Checks  however  were  drawn  by  an  author- 
ized agent  beyond  the  limit.  Held^  that  such  notice  did  not 
defeat  the  rights  of  the  holders  of  the  checks,  nor  the  right 
of  the  bank  to  pay  and  charge  the  depositor,^ 

§  359.  Overdraft  may  be  a  Fraud.  —  There  has  been  some 
inclination  to  regard  the  drawing  of  overdrafts  by  depositors, 
without  warning  to  or  understanding  with  the  bank,  as  a 
proceeding  improper,  and  even  fraudulent,  on  the  part  of  the 
depositor.^  It  has  been  well  said  tliat  a  bank  must  often 
be  obliged  to  put  some  reasonable  amount  of  confidence  in  a 
depositor.  And  what  confidence  is  more  reasonable  than 
that  his  drafts  are  drawn  bona  fide  against  his  deposits,  un- 
less the  bank  has  been  notified  in  some  manner  to  expect 
the  contrary.  Such  a  rule  would  probably  be  regarded  as 
severe  by  the  business  community.     But  it   has    been   said, 

1  §358.  Ballard  v.  Fuller,  32  Barb.  (N.  Y.)  68;  Industrial  Trust, 
etc.  Co.  V.  Weakley,  103  Ala.  465  (1893)  ;  Springfield  Marine  Bank  v. 
Mitchell,  48  111.  App.  486. 

2  Mining  Company  v.  Anglo-California  Bank,  104  U.  S.  192  (Novem- 
ber, 1887). 

8  Bremer  County  Bank  v.  Mores,  34  N.  W.  (Iowa)  863 ;  Bremer 
County  Bank  v.  Mores,  73  Iowa,  289. 

1  §  359.  Peterson  v.  Union  National  Bank,  52  Pa.  St.  206  ;  True  v. 
Thomas,  16  Me.  36. 

651 


§  359  OVERDRAFTS. 

oUter,  by  the  Supreme  Court  of  the  United  States,  discussing 
the  difference  between  a  bill  of  exchange  and  a  check,  that 
the  drawing  of  a  check,  payable  instantly,  by  a  drawer  who 
has  no  funds,  is  a  fraud.^  This  is  hardly  a  stronger  case 
than  the  overdrawing  by  a  drawer  who  is  known  to  have 
funds,  which  the  bank,  relying  upon  him,  may  suppose  to  be 
sufficient,  and  so  be  carelessly  misled  into  an  erroneous 
payment.^ 

It  is  clearly  not  the  drawing,  but  the  issuing,  that  may 
be  fraudulent.  And  it  seems  very  doubtful  whether  the 
Supreme  Court  had  any  thought  of  saying  that  drawing  a 
check  with  no  funds  or  insufficient  funds,  can  be  a  fraud  on 
the  hank.  There  are  in  the  bank  full  means  of  information ; 
it  has  no  right  to  rely  on  the  representation  of  the  drawer 
as  to  a  fact  concerning  which  it  has  even  superior  oppor- 
tunities of  knowledge.  The  bank  must  be  held  to  have  notice 
of  what  its  books  show,  and  no  one  has  a  right  to  rely  on  the 
representation  of  another,  the  falsity  of  which  is  known,  and 
if  the  truth  or  falsity  of  the  statements  might  have  been 
tested  by  ordinary  vigilance  and  attention,  it  is  the  bank's 
own  folly  if  it  neglects  to  do  so.* 

But  a  check-holder  has  not  equal  means  of  information  ; 
he  has  a  right  to  suppose  that  a  check  is  drawn  against  funds 
(for  tliat  is  the  presumption  of  law)  unless  otherwise  in- 
formed at  the  time  he  accepts  it,  and  it  has  therefore  been 
held  in  England  that  if  a  sale  of  goods  be  made  for  ready 
money,  and  the  buyer  gives  his  check  to  the  seller,  knowing 
that  he  has  not  funds  in  the  bank  sufficient  to  meet  it,  he 
thereby  does  what  is  equivalent  to  a  false  representation  of 
a  material  fact.  This  will  vitiate  the  sale,  and  entitle  the 
seller  to  rescind  the  contract.  The  rule  is  asserted  with  con- 
siderable rigor,  for  it  is  declared  to  be  applicable  even  though 
the  drawer,  at  the  time  of  giving  the  check  not  drawn  against 
actual  funds  in  the  bank  to  his  credit,  nevertheless  had  rea- 

2  Merchants'  Bank  v.  State  Bank,  10  Wall.  60t,  at  p.  647. 
8  Peterson  v.  Union  National  Bank,  52  Pa.  St.  206. 
*  Moore  v.  Turbeville,  2  Bibb  (Ky.),  602;   Saunders  v.  Ilatterman, 
2  Ired.  (N.  C.)  32 ;  Farrar  v.  Alston,  1  Dev.  (N.  C.)  69. 
652 


OVERDRAFTS.  §  359 

sonable  cause  to  suppose  that  it  would  be  paid.^  The  fraudu- 
lent character  of  the  transaction  in  this  case  is  only  in  its 
aspect  towards  the  seller.  Whether  or  not  there  is  any  fraudu- 
lent aspect  as  towards  the  bank  is  quite  a  different  question. 

There  is  never  fraud  upon  one  merely  by  his  reliance  on 
what  he  had  no  right  to  rely  on.  The  bank  has  even  better 
means  of  information  as  to  the  state  of  the  drawer's  deposit 
than  the  drawer  has  himself,  shice  he  may  not  know  what 
checks  have  been  presented  nor  collections  made  for  him. 
It  seems  clear,  therefore,  that  the  bank  has  no  right  to  re- 
gard a  check  as  an  affirmation  of  funds  in  respect  to  itself, 
though  it  is  clearly  such  an  affirmation  as  to  an  innocent 
holder.  The  case  of  Peterson  v.  Union  National  Bank  clearly 
decides  that  drawing  a  check  in  the  absence  of  funds  is  a 
fraud  07%  the  hank  as  well  as  on  the  holder,  but  it  seems  mani- 
fest that  the  decision  on  the  facts  required  no  such  broad 
statement.  The  drawer  and  holder  both  knew  there  were  no 
funds.  The  bank  did  not  pay  the  check,  but  credited  the 
holder  and  charged  the  drawer.  The  drawer  had  absconded 
before  the  check  was  presented,  and  the  holder  knew  this  fact. 
Now,  although  a  check  does  not  seem  to  us  an  affirmation  to 
the  lank  of  funds  in  the  hank  at  the  time  of  presenting,  it  seems 
equally  clear  that  it  is  an  affirmation  to  the  bank  that,  if  there 
are  no  funds,  or  insufficient  funds,  and  the  banker  honors  the 
check,  the  drawer  will  reimburse  the  bank ;  and  if  one  draws 
a  check,  or  presents  it,  knowing  that  there  are  no  funds,  that 
the  remedy  over  of  the  bank  against  the  drawer  is  worthless, 
the  fraud  is  very  clear.  Such  was  the  case  sometimes  cited 
for  the  very  different  doctrine  that  drawing  a  check  without 
funds  is  a  fraud  on  the  bank. 

The  case  of  True  v.  Thomas  decided  that,  when  the  drawer 
has  no  reasonable  expectation  that  his  check  will  be  honored, 
the  drawing  and  issuing  is  so  far  a  fraud  on  the  holder  that 
he  is  relieved  of  the  duty  of  demand  and  notice  so  far  as  the 
drawer  himself  is  concerned,  and  may  bring  suit  against  him 
at  once.  The  question  of  fraud  on  the  bank  was  not  raised  in 
that  case. 

5  Loughnan  v.  Barry,  6  Ir.  R.  C.  L.  457. 

653 


§  360  OVERDRAFTS. 

§  360.     Bank    may  recover   Overdraft    from    the    Drawer.  — 

A  bank  can  recover  the  amount  of  an  overdraft  from 
the  drawer/  or  from  one  who  has  received  it  with  knowl- 
edge of  a  fraudulent  overdrawing  and  without  considera- 
tion ;  2  and  if  money  has  been  by  overdraft  fraudulently 
obtained  and  deposited  elsewhere,  it  can  be  followed  and 
claimed.^ 

The  view  noticed  above  —  that  it  is  wrongful  in  the  deposi- 
tor to  overdraw  —  leads  to  the  conclusion  that  the  bank  may, 
if  it  choose,  sue  him  in  tort  to  recover  the  amount  which  it 
has  paid  on  his  overdraft.  There  is  no  doubt  that  it  may  sue 
him  in  indebitatus  assumpsit  for  money  paid  to  his  use,  the 
promise  to  pay  being  implied.^"  A  suit  brought  in  this  shape, 
however,  operates  as  a  waiver  of  the  tort,  and  in  it  the  depos- 
itor may  avail  himself  of  all  his  general  rights  of  set-off.* 

It  is  presumed  that  a  deposit  made  subsequent  to  an  over- 
draft is  received  toward  the  payment  of  such  overdraft.^ 

No  interest  is  allowed  on  the  overdraft  except  by  agree- 
ment.^ 

In  an  action  on  an  overdraft  the  bank  is  entitled  to  have 
the  whole  account  go  to  the  jury,  together  with  all  vouchers 
sustaining  it,  as  checks,  drafts,  and  notes.  The  bank-book  is 
also  evidence  as  showing  a  settlement.'^ 

1  §  360.    Franklin  Bank  v.  Byram,  39  Me.  489. 

2  Mechanics'  Bank  v.  Levy,  3  Paige  (N.  Y.),  606. 

3  Tradesman's  Bank  v.  Meiritt,  1  Paige  (N.  Y.),  302. 
3«  Thomas  v.  International  Bank,  46  111.  App.  461. 

4  Bank  of  the  United  States  v.  Macalester,  9  Pa.  St.  475. 
6  Nichols  V.  State,  46  Neb.  715  (1894). 

6  Owens  V.  Stapp,  32  111.  App.  653  ;  Chicago,  etc.  Ry.  Co.  v.  Ayers, 
39  111.  App.  607. 

7  Jack  V.  Moyer,  187  Pa.  St.  87  (1898). 


654 


CHAPTER   XXVII. 


CHECKS    IN    GENERAL. 


§  362.   Analysis. 

Definition,  Nature,  Essentials,  Kinds. 

Definition. 

A  check  is  an  unconditional  order  on  a  bank  or  banker  to  pay  a 
specified  sum  of  money  to  a  person  named,  or  order,  or  to  bearer 
on  demand. 

A  bill  of  exchange  may  be  on  demand  or  not,  on  a  banker  or  not ; 
§  373.  a  check  is  an  instrument  combining  these  two  attributes,  from 
which  the  law  presumes  that  it  is  drawn  against  funds  actually 
deposited.  It  may  be  more  philosophic  to  treat  bills  as  the  genus 
and  checks  a  species,  but  it  will  conduce  to  clearness  to  use  the 
words  exclusively,  which  we  shall  do. 

CONTKAST    WITtI    BiLLS. 


§§  378-380.  ChecL-s. 

1.  Never  have  grace. 

2.  Must    be    drawn    upon   a 

bank. 

3.  Holder   may   sue   drawee 

before  acceptance.  (?) 

4.  Drawer  not  discharged  by 

laches  in  presentment, 
except  so  far  as  actu- 
ally damaged  thereby. 

5.  Drawer  must  check  against 

funds,  or  he  is  guilty  of 
fraud. 

6.  Holder  cannot  demand  ac- 

ceptance, but  only  pay- 
ment. 

7.  Payee  of  a  check  does  not 

gain  any  time  by  giving 
it  to  a  bank  to  collect. 

8.  Death  of   drawer  is   held 

to  revoke.  (?) 


Bills. 

May  or  may  not. 

May  or  may  not  be  so  drawn. 

Holder  cannot   sue  drawee  on  a  bill 

before  its  acceptance. 
Drawer  absolutely  discharged  by  such 

laches. 


Drawer  need  not  have  funds  in  draw- 
ee's hands. 

A  bill  is  of  right  presentable  for  ac- 
ceptance. 

Payee  of  a  bill  gains  one  day  by  so 
doing. 


Death  of  drawer  does  not  affect  the  du- 
ties of  the  other  parties  ;  the  drawee 
should  accept  just  the  same. 
An  Instrument  (I.)  drawn  upon  a  Banker,  and  payable  at  a  future 
§  381.  day  certain,  is  the  subject  of  much  conflict.     The  better  opinion  is, 

§§  382-386.      that  it  has  grace.     It  is  certainly  a  very  different  instrument  from 

655 


§  362 


CHECKS   IN   GENERAL. 


a  post-dated  check,  which,  after  the  arrival  of  its  date,  is   the 
same  as  an  ordinarj^  check,  and  payable  at  any  time  within  rea- 
sonable limits,  while  I.  is  payable  upon  one  fixed  day.     Whether 
I.  should  be  considered  presentable  for  acceptance   like  a  bill 
before  its  maturity,   or  unpresentable   like  a   post-dated   check, 
may  be  open  to  question,  though  there  seems  to  be  no  reason  as 
§  367  b.     yet  given  sufficient  for  considering  I.  anything  other  than  a  bill 
of  excliange  upon  a  banker,  except  in  those  cases  where  usage 
controls. 
When  the  usages  of  business  men  are  not  sufficiently  clear  to  guide 
decision  in  such  matters,  simplicity  and  consistency  in  the  law 
should  be  regarded,  and  in  this  case  they  place  I.  on  the  list  of 
bills,  and  give  it  grace. 
§  363.   Description  and  Elements  of  a  Check. 
(a)  Indorsement. 
{b)  Form  of  check  so  unusual  as  to  be  suspicious,  bank  should  have 

time  for  inquiry, 
(c)  Distinction  between  refusal  to  pay  and  request  for  delay. 
§  364.  Essentials. 

§  365.  Signature.     §§  430,  432  et  seg. 

(a)  Representative  additions,  agent,  &c.,  whose  check. 
{b)  When  the  check  discloses  the  name  of  the  principal, 
(c)  Parol  evidence  admissible  to  show  Avho  is  bound. 
§  366.  Sum  certain,  "£,"  "$,"  written  sum  controls,  &c. 

§  367.  Address 

To  cashier, 
(a)  Must  be  to  a  bank  or  banker  still  doing  business.     See  §  4. 
{b)  Writing  controls. 

(c)  Parol  admissible  to  show  who  is  the  drawee. 
§  368.  Date. 

§  369.  On  demand. 

§  370.  Payee. 

(a)  Fictitious. 
§  .371.  Words  of  Ordering. 

§  372.  Surplusage. 

§  37-3.  Presumptively  drawn  against  a  deposit. 

§  374.  Negotiability.     Missouri  statute,  &c. 

§  375.  Instrument  drawn  on  bank  in  another  State  still  a  check. 

§  376.  Instruments  in  form  of  checks,  but  not  so  really,  because  the  bank 

was  closed. 
§  377.   Checks  as  Bills  of  Exchange.    Days  of  grace. 
§  378.  United  States  Supreme  Court  summary  of  the  likeness  and  differ- 

ence between  checks  and  bills. 
§  379.  C.  J.  Shaw's  opinion. 

§  380.  Grant's  summary. 

§  .381.   Instruments  Payable  at  a  Day  Certain. 

§  382  a.        The  best  view  gives  grace,  except  where  usage  is  to  the  contrary. 
§  383.  New  York,  Georgia,  Missouri,  Oregon. 

656 


ANALYSIS.  §  362 

Ohio  and   California  hold  such  usage  bad;   probably  very  weak 
usage  was  in  evidence. 
§  381  b.  §  384.    Story,  Sharswood  in  Pennsylvania,  and  the  Rhode  Island  courts 
§  385.        hold  such  instrument  a  check,  and  payable  without  grace. 
§  386.   Discussion  of  the  question. 

§  387.   Evidence  of  usage  should  be  received  on  this  subject. 
§  388.   Memorandum  Checks. 

As  to  the  bank,  they  are  the  same  as  any  other  check. 

As  to  the  drawer,  they  are  like  promissory  notes,  and  suit  may  be 

brought  against  him  without  previous  presentment. 
Parol  not  admissible  to  show  that  an  ordinary  check  was  really  a 
"  mem." 
§  389.   Ante-dated  and  Post-dated  Checks. 
(a)  Bank  pays  before  date  at  its  own  risk. 

(c)  Post-dated  check  cannot  be  presented  for  acceptance  before  its  date. 

(d)  Authority  to  an  agent  to  draw  "  checks  "  or  to  draw  "  bills  "  does 

not  give  power  to  draw  post-dated  checks  in  his  principal's  name. 
§  390.  Issue. 

Checks  take  effect  from  their  issue,  or,  if  this  is  conditional,  then 

as  to  those  with  notice,  from  the  fulfilment  of  the  condition. 
A  check  is  issued  when  it  is  in  the  hands  of  one  who  may  demand 

payment. 
So  far  as  concerns  the  bank,  it  is  issued  even  in  the  hands  of  a  thief, 

if  the  bank  pays  it  bonajide  without  notice. 
Conditional  delivery  may  be  shown  by  parol,  as  between  the  original 
parties  or  those  having  notice. 
Indorsement  of  Checks. 
§  391.  The  effect  of  indorsement  depends  on  the  actual  intent  as  to  those 

having  notice  of  such  intent,  and  on  the  presumptions  arising  from 
the  course  of  business  as  to  others  in  cases  where  the  actual  intent 
differs  from  that  presumed,  as  where  A.  indorses  in  blank  for  col- 
lection purposes.  As  to  the  bank  knowing  the  purpose,  A.  is  not 
bound  as  an  indorser,  but  as  to  a  subsequent  holder  for  value  with- 
out notice  A.  is  bound. 
An  indorsement  is  often  a  mere  receipt. 

A  check  payable   to  A.  or  bearer  may  be  indorsed,  and  if  it  is  done 
animo  indorsandi,  A.  will  be  bound. 
§  392.         Indorsement  by  a  lunatic  not  under  guardianship  held  to  pass  no 
rights  to  a  bonajide  holder  without  notice.     Quoire  as  to  the  jus- 
tice of  this. 
§  393.   Checks  payable  to  Bearer. 
Pass  by  delivery. 

Prima  facie  the  holder  is  the  owner. 

May  be  indorsed,  but  the  intent  to  become  liable  must  appear  or  be 
shown  ;  usually  such  indorsement  is  only  a  receipt. 
§  394.   Money  given  to  the  Drawer  of  a  "Woethless  Check. 
§  395.  Transfer  of  Check  by  Mail. 
§  395  A.   Lost  Checks.    §  633,  C.  6. 

True  owner  may  recover  from  drawer,  unless  the  check  has  come  to 
VOL.  I. —42  657 


§  363  CHECKS   IN    GENERAL. 

a  bona  fide  holder,  and  equity  will  compel  the  drawer  to  give  a 
new  check  on  proper  indemnity  being  given  him. 
If  a  lost  check  is  paid  on  a  forged  indorsement,  the  true  owner  may 
sue  the  bank  but  not  the  drawer. 
§  395  B.    Conversion  of  Check. 

§  863.  Description  and  Elements  of  a  Check.  —  A  clieck  is 
the  instrument  by  which,  customaril}-,  a  depositor  seeks  to 
withdraw  his  funds,  or  any  part  thereof,  from  the  bank.  It 
is  a  draft  or  order  on  the  bank  requiring  it  to  pay  a  sum 
named.  It  may  be  made  payable  "  to  bearer,"  or  "  to  A.  or 
bearer,"  or  "  to  A.  or  order,"  or  "  to  the  order  of  A."  In  the 
two  latter  forms  it  must  be  paid  to  A.  in  person,  or  to  one 
deriving  title  from  him  through  his  indorsement.  It  is  cus- 
tomary to  indorse  even  when  the  payee  makes  the  present- 
ment and  demand,  the  indorsement  then  having  the  effect  of 
a  receipt. 

(a)  The  rules  governing  indorsement  in  cases  of  bills  of 
exchange,  promissory  notes,  and  other  business  paper  made 
Indorse-  payable  to  order,  govern  checks  also.  Thus  a 
meiit.  check  may  be  indorsed  generally,  or  in  blank,  or 

to  the  order  of  B.,  who  again  may  indorse  generally,  or  in 
blank,  or  to  the  order  of  C.  Any  bona  fide  holder  of  the 
check  indorsed  in  blank  may  fill  in  a  special  direction  above 
the  indorsement,  making  it  payable  to  himself  or  order ;  and 
in  suing  thereon,  though  he  has  not  written  in  such  direction, 
he  may  declare  upon  it  as  indorsed  to  himself,  and  will  suffi- 
ciently support  his  declaration  by  showing  that  it  was  indorsed 
in  blank,  and  that  he  is  the  holder  for  value,  and  in  due  course 
of  business. 

If  a  bank  refuses,  without  sufficient  excuse,  to  pay  a  check 

§  363.  Note.  —  In  using  this  chapter  it  should  be  borne  in  mind  that 
it  does  not  profess  to  treat  exhaustively  the  entire  subject  of  checks  con- 
sidered as  a  species  of  commercial  paper.  To  do  so  would  be  to  trespass 
more  largely  upon  the  domain  of  works  on  Promissory  Notes,  Bills,  &c., 
than  our  space  permits.  It  is  of  the  law  of  checks  so  far  as  banks  are 
parties  to  them,  and  owe  duties,  assume  obligations,  or  enjoy  rights  in 
respect  to  them  and  to  transactions  into  which  they  enter,  that  we  design 
to  treat.  Beyond  these  limits  this  chapter  does  not  pretend  to  state  the 
law  or  cite  authorities.  —  Author. 
658 


ORDERS  UNUSUAL  IN  FORM.  §  363 

of  its  depositor,  it  is  liable  to  him  (as  will  be  seen  hereafter) 
in  substantial  damages.     It  is  therefore  of  the  first 
importance  that   it  should  be  clearly  understood   and  mere 
by  the  paying  officers  of  banks  what  are  essential    ""^"^  "^*^^" 
requisites  going  to  the  validity  of  a  check,  and   what  are 
merely  customary  formalities  which  may  yet  be  legally  dis- 
pensed with.     For  if  the  check  be  lacking  in  any  of  the  for-  hi  /       .  . 
mer  class  of  characteristics,  the  bank  is  not  only  justified  in 
refusing  to  pay  it,  but  if  it  does  pay  it  and  there  turns  out   ^ 
to  have  been  anything  wrong  about  it,  rendering  the  payment    j^^.  ,.^^<.A< 

improper,  the  bank  must  bear  the  loss,  and  restore  to  the       ^  -.«^'r* 

drawer's  credit  the  amount  paid.  But,  upon  the  other  hand,  -U  2^-'^^'^ 
though  some  of  the  latter  class  of  characteristics  may  be  want- 
ing, yet  the  bank  is  not  thereby  excused  from  its  obligation  to 
pay ;  for  the  order  being  good  at  law,  though  in  an  unusual 
form,  is  competent  to  draw  the  money  of  the  depositor.  If 
the  bank  refuses  to  pay  upon  such  an  order,  it  must  still,  in 
strict  law,  be  held  to  answer  in  damages.  Clearly  this  is  the 
logical  sequence  of  the  reasoning,  and  yet,  though  there  is  now 
no  judicial  authority  for  saying  so,  it  seems  highly  probable 
that  in  cases  where  this  rule  would  operate  with  excessive 
and  unreasonable  severity  upon  the  bank  it  may  be  relaxed. 
There  is  no  question  but  that  a  bank  is  entitled  to  exercise 
great  care  and  caution  to  avoid  being  imposed  upon  and 
robbed  by  fraudulent  and  irregular  orders.  There  is  no  ques- 
tion that  it  ought  to  have  the  right  to  demand  of  its  deposi- 
tors reasonable  assistance,  and  a  conformity  to  some  moderate 
degree  of  consistency  of  conduct  in  drawing  their  orders,  in 
order  to  render  this  difficult  task  of  the  bank  at  least  a  prac- 
ticable possibility.  It  cannot  be  said,  that,  because  a  depositor 
ordinarily  uses  a  certain  form  of  blank  check,  therefore  the 
occasional  use  of  a  check  of  a  different  form  would  authorize 
the  bank  in  rejecting  it,  or  in  suspending  payment  till  it  could 
satisfy  itself  of  the  authenticity  of  the  instrument.  Such  devi- 
ations from  routine  continually  occur,  and  are  to  be  expected. 
But  if  the  order  be  couched  in  any  very  peculiar  and  un- 
wonted shape,  and  bear  upon  its  face  such  marks  of  peculi- 
arity as  naturally  to  cast  upon  it  a  high  degree  of  suspicion 

659 


§  364  CHECKS   IN   GENERAL. 

in  the  minds  of  the  bank  officers,  it  seems  only  just  that  they 
should  have  time  to  assure  themselves  of  its  regularity. 

(6)  The  depositor,  having  by  his  own  eccentricity  given 
sufficient  cause  for  the  suspicion,  should  not  be  suffered  to 
avail  himself  of  his  own  improper  act  to  recover 
bank^ shourd'  damages  from  the.bani<;,  or  to  put  it  to  the  vexation 
inquire.  ^^^   expcuse   of   a   lawsuit.     This   rule   certainly 

seems  perfectly  accordant  with  equity,  and  not  discordant 
with  law.  At  worst,  it  cannot  be  doubted  that  the  law  could 
limit  the  amount  recoverable  to  nominal  damages.  A  very 
strong  case,  however,  ought  to  be  made  out  by  the  bank  in 
order  to  give  it  the  privilege  of  availing  itself  of  such  a  rule 
to  its  full  extent.  For  a  bank  is  held  to  know  its  customer's 
handwriting,  and  any  order  in  his  handwriting,  having  the 
legal  requisites,  is  a  defence  to  the  bank  if  it  pays  thereon. 
So  that  the  peculiarity  in  an  instrument  of  this  description 
ought  to  be  considerable  in  order  to  make  out  a  satisfactory 
case  for  temporary  refusal.  But  any  noteworthy  peculiarity 
might,  perhaps,  be  properly  admitted  in  evidence  in  a  suit  at 
law  by  way  only  of  mitigation  of  damages,  if  the  bank  should 
show,  as  a  fact,  that  it  was  exclusively  by  reason  of  this  char- 
acteristic, though  the  same  did  not  constitute  a  legal  defence, 
and  not  from  any  other  default  on  its  own  part,  that  it  refused 
to  make  the  payment.  For  clearly  a  bank  has  a  right  to  de- 
mand some  duties  from  its  customer  in  such  an  important 
matter  as  that  of  protection  from  fraud  in  a  business  where 
frauds  of  a  peculiarly  artful  and  ingenious  nature  are  conti- 
nually in  the  course  of  perpetration. 

(c)  Further,  distinctions  may  properly  be  drawn  between 
an  absolute  refusal  to  pay,  and  a  demand  for  a  reasonable 
Distinction  delay.  Sufficient  only  to  enable  the  bank  to  satisfy 
refiTslund  itsclf  of  the  corrcctncss  of  the  instrument  pre- 
deiaj-.  sented.     The  latter  may  often  be  proper  when  the 

former  could  not  be  considered  so. 

§  364.    Essentials.  —  At  common   law  no  precise  form  is 

indispensable  to  the  validity  of  a  check,  though  there  are  some 

few  elements  which  are  essential,  and  which  must  be  present 

to  secure  its  legal  sufficiency.     In  England  the  statutes  define 

660 


ESSENTIALS.  §  365 

certain  requisites.  In  this  country  no  such  enactments  have 
yet  been  passed.  They  are,  however,  the  less  missed,  because 
adjudicated  cases  have  pretty  thoroughly  covered  the  ground. 

§  365.  Signature.  —  In  the  first  place,  the  signature  of  the 
drawer  is  necessary. ^  But  it  is  not  indispensable  that  this 
signature  should  appear  in  the  ordinary  form  at  the  foot  of 
the  check.  It  may  be  embodied  in  the  instrument,  as,  for 
example,  "  I,  A.  B.,  direct,"  or  "  A.  B.  requests."  If  it  be  thus 
written  in  an  order,  otherwise  sufficient  and  in  the  handwrit- 
ing of  the  drawer,  it  is  enougii.  But  the  handwriting  of  the  ; ! 
drawer  is  the  safeguard  of  the  bank  in  making  its  payment  ;|i 
so,  though  the  instrument  be  not  under  seal,  and  the  deposi- 
tor may  give  a  simple  parol  authority  to  another  to  sign  his 
name,  which  if  it  could  be  shown  by  the  bank  would  justify 
its  payment  on  the  order  so  signed,  yet  this  signature  does 
not  render  it  incumbent  on  the  bank  to  pay.  The  signature 
in  the  handwriting  of  the  drawer,  or  by  his  attorney,  whose 
power  has  been  duly  notified  to  the  bank,  is  an  element  which 
the  bank  may,  and  for  its  own  safety  ought  to,  insist  upon. 

(a)  Annexing  "Agent,"  "  Trustee,"  "  Treasurer,"  &c.,  to  a 
signature,  docs  not  of  itself  notify  parties  that  the  signer  acts 
only  as  a  representative,  when  he  does  not  disclose   Representa- 
his  principal.    It  Is  mere  descriptio  persona;.    But  if   [Iq^s'^*^^'" 
the  addition  expresses  the  fact,  and  he  has  been  in   Whose 

'  check. 

the  habit  of  signing  in  that  way  in  dealing  with  a 
particular  party   who  recognizes    him  in   his   representative 
character,  "  it  would  be    contrary   to   justice    and   truth    to 
construe  the  document  thus  made  as  his  personal  obligation, 
contrary  to  the  intent  of  the  parties."  ^ 

In  this  case  a  personal  recovery  was  sought  on  a  check 
signed  "  E.  P.  A.,  Secretary,"  and  "  W.  S.  W.,  Vice  Prest."  ; 
and  Judge  Bradley  said  that  such  signatures  were  very  un- 
usual in  individual  transactions,  and  pointed  so  clearly  to  an 
official  origin  that  it  might  be  doubted  if  any  holder  could 
claim  ignorance  of  the  real  character  of  the  check  ;  but  in  this 

1  §  365.    Taylor  v.  Dobbins,  1  Strange,  399 ;  Saunderson  v.  Jackson, 
2  B.  &  P.  238 ;  Grant  on  Bankers  and  Banking,  27. 
•■i  Metcalf  V.  Williams,  104  U.  S.  93. 

661 


§  366  CHECKS   IN   GENERAL. 

case  it  was  unnecessary  to  decide  that  point,  as  the  holder  act- 
ually knew  the  origin  of  the  check,  and  "  the  plea  that  the 
name  of  the  principal  was  not  disclosed  on  the  face  of  the 
paper  cannot  be  made  by  him,  for  he  knew  all  about  it."  ^ 

(b)  When  the  check  discloses  the  name  of  the  corporation 
principal,  and  is  signed  with  an  official  addition,  it  is  usually 
held  to  be  a  corporate  check,  as  where  "  ^tna  Mills  "  was 
printed  in  the  margin  and  the  signing  was  "  J.  D.  F.,  Treas."  ^ 
So  where  "  Office  of  Portage  Lake  Manftg.  Co."  was  printed 
at  the  top  of  bills,  and  they  were  signed  "I.  R.  J.,  Agent  "  ;* 
and  where  "  Pompton  Iron  Works  "  was  in  the  margin,  and  the 
draft  was  signed  "  W.  B.,  Agt.  ;  "  ^  and  where  the  draft  said, 
"  Charge  the  same  to  Swanzey  Paper  Co.,  J.  H.,  Agt."  ^ 

Where  a  check  was  signed  by  three  directors  individually, 
their  official  character  nowhere  appearing,  and  also  by  the 
secretary  with  his  addition  "  Secretary,"  and  the  name  of  the 
principal  was  not  disclosed,  it  was  held  not  to  be  a  corporate 
check.7 

(c)  Where  it  is  doubtful  on  the  face  of  a  check  whether  it 
is  intended  as  an  individual  obligation  or  not,  parol  evidence  is 
admissible  to  show  who  was  intended  to  be  bound ;  as  where 
the  signature  was  "  J.  K.,  Prest.  Eliztn.  &  S.  R.  R.  Co." » 

§  366.     For  a  Sum  certain The  sum  to  be  paid  must  be 

set  forth  with  that  degree  of  precision  which  will  enable  the 
bank  to  know  with  certainty  what  it  is.  It  must  be  in  terms 
of  the  national  money  of  account,  and  not  of  foreign  money. 
A  check  drawn  on  one  of  our  banks  by  a  depositor  living  here, 
and  expressed  in  sovereigns  or  in  francs,  would  properly  be 
refused  payment.  ^  But  familiar  and  unmistakable  abbrevia- 
tions may  be  used.     Thus  in  England  the  marks  "  X.  s.  d.,'' 

*  Carpenter  v.  Farnsworth,  106  Mass.  561. 

*  Slawson  v.  Loring,  5  Allen  (Mass.),  343. 
^  Fuller  V.  Hooper,  3  Gray  (Mass.),  334. 

«  Tripp  V.  Swanzey  Paper  Co.,  13  Pick.  (Mass.),  291.  See  also  Bank 
of  British  North  America  v.  Hooper,  5  Pick.  (Mass.),  567. 

7  Serrell  v.  Derbyshire  R.  R.  Co.,  19  L.  J.  C.  P.  377. 

8  Lazarus  v.  Shearer,  2  Ala.  718 ;  Keen  v.  Davis,  21  N.  J.  Law,  683. 

1  §  366.    Rastell  v.   Draper,  Yelv.   SO ;    Moore,  775  ;   Cro.   Jac.   88 ; 
Grant  on  Bankers  and  Banking,  16,  and  note. 
662 


ESSENTIALS.  §  367 

without  more,  have  been  held  sufficiently  to  signif}'  pounds, 
shillings,  and  pence.^  In  our  own  country,  it  has  been  sub- 
stantially held  that  the  sign  "  $  "  intends  "  dollars,"  although 
the  word  itself  nowhere  appears  in  any  other  form  throughout 
the  instrument.^  One  case  has  gone  much  farther  even  than 
this, —  it  may  in  fact  prove  rather  dangerously  far,  when  it  is 
considered  how  easily  a  dot  may  slip  in  where  it  is  not  in- 
tended, or  where  a  comma,  which  signifies  a  very  different 
matter,  may  have  been  meant  to  be  placed.  An  order  was 
drawn  simply  for  "  37.89,"  in  figures,  without  even  the  mark  $, 
and  the  court  said  that  it  would  intend  therefrom  that  these 
numbers  were  used  as  whole  numbers  and  as  decimals,  to  ex- 
press United  States  currency.*  But  though  a  court  may  have 
been  willing,  in  a  certain  case,  to  prefer  this  interpretation  to 
the  necessity  of  otherwise  holding  an  instrument  void  for  un- 
intelligibility,  it  hardly  follows  that  a  bank  miglit  not  be  held 
fully  justified  in  declining  to  pay  a  draft  so  indistinctly  ex- 
pressed on  the  ground  of  an  uncertainty  so  great  that  it  could 
not  surely  know  what  its  customer's  order  really  was.  This 
might  well  be  adduced  as  an  example  of  one  of  those  cases, 
where,  even  if  the  court  should  still  hold  the  instrument  suf- 
ficient to  have  drawn  payment  from  the  bank,  yet  the  cus- 
tomer's carelessness  must  preclude  him  from  recovering 
damages  from  the  bank  for  refusing  to  pay. 

The  written  sum  controls  that  in  figures.^  On  the  margin 
of  a  check  was  "  2136.00  "  while  in  the  body  were  the  words, 
"  Twenty -one  and  thirty-six  in  exchange  dollars  "  ;  held,  that 
the  words  contradicted  and  controlled  the  figures.^ 

§  367.  Address.  —  It  has  been  held  in  England,  and  it  is 
undoubtedly  law  also  in  the  United  States,  that  a  check  must 
be  addressed.  Ordinarily  our  bank  checks,  in  the  common 
forms,  bear  at  the  top  in  large  type  the  name  of  the  bank  on 

2  Kearney  v.  King,  2  Barn.  &  Aid.  301. 
8  Corgan  v.  Frew,  39  111.  31. 
♦  Northrop  v.  Sanborn,  22  Vt.  433. 
6  Smith  V.  Smith,  1  R.  I.  398. 

5  National  Bank  v.  Second  National  Bank  of  Lafayette,  69  Ind.  479 
(1880). 

663 


§  367  CHECKS   IN   GENERAL. 

which  they  are  drawn,  and  usually,  either  before  this  name  or 
in  the  lower  left-hand  corner,  also  the  words,  "  To  the  cashier 
of,"  or  "  To  the  cashier."  Whether  or  not  these  words,  "  To 
the  cashier,"  are  indispensable  to  a  perfect  check,  has  never 
been  decided  ;  it  may  be  supposed  that  they  are  not.  No  per- 
son or  institution  not  addressed  in  a  check  or  order  is  called 
upon  to  cash  it,  or  could  be  protected  in  erroneously  doing  so. 
A  payment  so  made  is  simply  a  gratuitous  payment,  which  the 
payer  can  recover  from  no  person.^ 

(a)  A  check  must  be  drawn  upon  a  banker,2and  on  a  bank 
that  is  not  closed.-^ 

(b}  Where  a  printed  form  upon  the  "  First  National  Bank 
of  Milwaukee  "  was  used  by  crossing  the  words  •'  First  Na- 
tional "  and  writing  "  0.  M.  Tyler  "  over  them  in  pencil,  it  was 
held  that  the  maxim  Falsa  demonstratio  non  7iocet  applied, 
and  the  drawee's  name  was  sufficiently  certain,  although  the 
words  "  Bank  of  Milwaukee  "  remained  uncrossed.^ 

That  the  instrument  is  drawn  upon  a  bank  or  banker  is  not 
of  itself  enough  to  distinguish  it,  since  a  bill  of  exchange  may 
be  addressed  to  a  banker.^  If  the  addressee  is  really  a  banker, 
this  is  sufficient  to  make  the  instrument  a  check,  though  his 
character  does  not  appear  in  the  paper,^  except  as  against  a 
holder  without  notice. 

(c)  A  check  drawn  on  "  A.  B.,  Bank  of  Milwaukee,  "  there 
being  no  such  person  or  bank,  was  held  to  be  an  order  on  A.  B., 
and  that  parol  was  admissible  to  explain  the  matter 
and  show  who  was  the  addressee.' 

A  check  dated  at  "  Lafayette,  Ind.,"  and  drawn  on  the 
"  First  National  Bank,"  was  presumed  to  be  a  check  on  the 

^  §  367.    Grant  on  Bankers  and  Banking,  p.  14,  and  authorities  cited. 
2  Roberts  v.  Austin,  26  Iowa,  315;  Planters'  Bank  v.  Keesee,  7  Heisk. 
(Tenn.)  200 ;  Espy  v.  Bank  of  Cincinnati,  18  Wall.  620. 

*  Harmanson  v.  Bain,  1  Hughes,  188.  A  draft  on  a  bank  in  liquida- 
tion is  merely  an  assignment  of  a  chose  in  action,  or  evidence  of  it. 

*  Cork  V.  Bacon,  45  Wis.  192. 

5  Georgia  National  Bank  v.  Henderson,  46  Ga.  495. 

*  Planters'  Bank  v.  Keesee,  7  Heisk.  (Tenn.)  200. 
7  Cork  V.  Bacon,  45  Wis.  192. 

6^4 


ESSENTIALS.  §  370 

First  National  Bank  of  Lafayette,  and  parol  was  admissible  to 
show  that  there  was  such  a  bank.^ 

§  3G8.  Date.  —  A  check  must  be  dated.  It  may  be  dated 
either  on,  before,  or  after  the  day  it  is  issued.  But  it  would 
seem  that  if  a  check  is  not  dated  at  all,  and  contains  no  state- 
ment of  a  date  when  it  is  to  be  paid,  it  is  never  payable.  For 
a  check  is  payable  either  on  the  day  of  its  date,  or  else  on  some 
other  day  specifically  designated  in  it.  So,  if  it  is  not  dated  at 
all,  and  if  no  designation  occurs,  expressed  in  the  body,  which 
might  perhaps  operate  to  supply  the  deficiency  of  a  formal  dat- 
ing, it  is  reasonable  to  say  that  it  can  never  become  due,  and 
payment  can  never  be  demanded.  If  this  rule,  which  is  not 
directly  asserted  in  any  adjudication,  goes  all  too  far,  it  is 
nevertheless  utterly  impossible  to  doubt  that  a  bank  would 
be  fully  justified  in  refusing  to  pay  a  check  showing  an  un- 
explained deficiency  of  so  important  a  character.  It  has  been 
said  that  a  check  may  be  dated  on  Sunday,  though  it  cannot  be 
payable  on  that  day.^ 

§  369.    On   Demand.  —  The   essential    characteristic    of   a 
check  is  that  it  shall  be  instantly  payable  on  demand.^ 

A  draft  on  a  bank  payable  at  a  future  time  is  not  a  check, 
but  a  bill.2 

§  370.  Payee  must  be  named.  —  Where  no  payee  is  indi- 
cated, the  instrument  is  not  a  check.^ 

(a)  It   may  be  that  a  check  is  neither  made  payable  to 
bearer,  nor  to  the  order  of  any  person.     That  is,  it  may  be 
made  payable  to  the  order  of  A.  B.,  being,  or  in-   Fictitious 
tended  and  supposed  to  be,  a  fictitious  name.     In   p^-^^®- 
such  case  no  indorsement  is  required,  for  the  check  is  re- 
garded as  equivalent  to  a  check  made  payable  to  bearer.^     In 

8  Culver  V.  Marks,  122  Ind.  551. 

1  §  368.  Begbie  v.  Levi,  1  C.  &  J.  180.  See  also  Grant  on  Bankers 
and  Banking,  p.  14.     See  below,  tit.  "  Post-dated  Checks." 

1  §  369.    Merchants'  National  Bank  v.  Ritzinger,  118  111.  486. 

2  Harrison  v.  Nicollet  Bank,  41  Minn.  488. 

1  §  370.    Mcintosh  v.  Lytle,  26  Minn.  336. 

2  Coggill  V.  American  Exchange  Bank,  1  Comst.  (N.  Y.),  113;  Plets  v. 
Johnson,  3  Hill  (N.  Y.),  112;  Foster  v.  Shattuck,  2  N.  H.  466;  Vere  v. 
Lewis,  3  Term,  182;  Minet  v.  Gibson,  id.  481,  and  s.  c.  1  H.  Bl.  509; 
CoUis  V.  Emett,  1  H.  Bl.  313.  665 


§  372  CHECKS   IN   GENERAL. 

fact,  a  check  drawn  to  the  order  of  a  mere  name,  representing 
no  actual  individual,  is  not  drawn  to  the  order  of  any  person, 
but  to  the  order  of  mere  words.  It  is,  therefore,  incapable  of 
indorsement  by  a  payee,  and  is  of  like  character  with  the 
checks  forthwith  to  be  mentioned  in  this  connection. 

So  checks,  being  filled  in  on  printed  blanks  and  intended 
also  to  serve  as  memoranda  of  the  purpose  for  which  they 
are  drawn,  are  often  made  payable  to  words  in  themselves 
meaningless  in  the  connection  in  which  they  are  used ;  e.  g. 
"  to  the  order  of  bills  payable,"  or  of  "  rent,"  or  "  of  1658," 
or  any  other  words  not  signifying  either  existing  persons  or 
a  corporation.  In  all  such  cases  the  checks  are  regarded  at 
law  as  if  they  had  been  made  payable  simply  to  bearer,  and 
they  have  all  the  legal  characteristics  of  checks  actually  so 
made.^ 

Equitable  ownership  may  be  shown  to  be  in  a  person  other 
than  the  payee  named  in  the  check.^ 

§  371.  "Words  of  Ordering.  —  Finally,  it  seems  almost  super- 
fluous to  remark,  in  closing  the  list  of  indispensable  requisites, 
that  there  must,  of  course,  be  sufficient  words  of  ordering  or 
requesting  to  signify  the  intent  of  the  drawer  that  the  bank 
should  pay  the  sum  named  in  the  manner  named.  This  is 
elementary,  and  has  never  required  the  support  of  a  judicial 
decision. 

§  372.  Surplusage.  — Provided  the  check  combines  all  these 
characteristics,  it  is  not  the  less  a  check,  nor  is  it  invalidated 
as  an  order  on  the  bank,  because  it  contains  other  immaterial 
matter ;  such,  for  example,  as  the  statement  that  it  is  given 
for  value  received,  or  a  mention  of  the  consideration.^ 

Where  a  check  contained  the  words  "  original "  and  "  sec- 
ond unpaid,"  it  was  urged  that  these  expressions  made  its 
payment  conditional,  and  that  it  was  not  a  check.  But  the 
court  said :  ^  "  The  practice  of  making  more  than  one  copy  of 

3  Story  on  Promissory  Notes,  §  488 ;  Willets  v.  Phoenix  Bank,  2  Duer 
(N.  Y.),  121 ;  Mechanics'  Bank  v.  Straiton,  3  Keyes  (N.  Y.),  365;  Vers  v. 
Lewis,  3  Term,  182  ;  Minet  v.  Gibson,  id.  481 ;  1  H.  Bl.  569. 

*  Mackey  v.  Craig,  144  Ind.  203. 

1  §  372.    Wells  V.  Brigham,  6  Cush.  (Mass.)  6. 

2  Merchants'  National  Bank  v.  Ritzinger,  118  III.  487. 

6Q6 


SURPLUSAGE.  §  374 

an  instrument  ordering  or  requesting  the  payment  of  money, 
we  concede,  is  generally  confined  to  foreign  bills  of  exchange ; 
but  there  is  nothing,  in  our  opinion,  in  the  purpose  or  effect 
of  that  practice,  which  should  render  it  inapplicable,  under  all 
circumstances,  to  checks.  The  purpose  is  to  guard  against 
loss  or  question  in  case  of  miscarriage,  the  chances  of  the  bill 
reaching,  in  due  season,  the  party  to  whom  it  is  transmitted, 
being  increased  by  the  number  of  copies.  But  this  does  not 
render  the  instrument  a  condition  alone,  in  any  sense.  The 
whole  of  the  set  constitutes,  in  law,  but  one  bill,  and  therefore 
payment  or  cancelling  of  either  of  the  set  is  a  discharge." 

An  instrument  is  not  less  a  check  because  it  orders  pay- 
ment "  on  account  of  A."  ^ 

§  373.  Presumptively  drawn  against  a  Deposit.  —  A  check 
purports  to  be  drawn  against  a  deposit.  It  may  not  really  be 
drawn  against  funds,  but  if  it  purports  to  be  it  is  a  check. ^ 

A  check  is  presumptively  drawn  on  a  previous  deposit,^* 
and  is  an  absolute  appropriation  of  it  to  the  amount  of  the 
check.2 

The  giving  of  a  post-dated  check  is  not  a  representation  that 
the  maker  has  the  funds  then  in  the  bank,  but  it  is  a  repre- 
sentation that  it  is  a  solid  order  for  the  amount  named,  and 
that  the  existing  state  of  facts  is  such  that  in  ordinary  course 
the  check  will  be  met.^ 

§  374.  Negotiability.  —  In  Missouri  by  statute  the  words 
"  for  value  received  "  are  essential  to  negotiability. ^ 

An  instrument  payable  "  in  bank  bills,"  or  "  in  currency," 
has  been  held  not  to  be  negotiable.^  But  the  better  opinion  is 
that  the  words  "  payable  in  currency,"  or  "  in  current  funds," 

8  109  111.  479. 

1  §  373.  Champion  v.  Gordon,  70  Pa.  St.  476 ;  White  v.  Ambler, 
8N.Y.  170. 

i«  McClain  v.  Lowther,  35  W.  Va.  297  (1891)  ;  hidustrial  Trust,  Title, 
&  Savings  Co.  v.  Weakley,  103  Ala.  458  (1893). 

2  Stevens  v.  Park,  73  111.  387;  Lester  v.  Given,  8  Bush  (Ky.),  357. 
s  Barton  v.  People,  35  111.  App.  573. 

1  §  374.    International  Bank  v.  German  Bank,  3  Mo.  App.  362. 

2  Little  V.  Phcenix  Bank,  2  Hill  (N.  Y.),  425 ;  Bank  of  Mobile  v. 
Brown,  42  Ala.  108. 

667 


I  376  CHECKS   IN  GENERAL. 

do  not  impair  the  negotiability  of  a  bank  check ;  such  terms 
mean  money. ^ 

An  order  qualified  on  its  face  by  the  words,  "  the  bank-book 
of  the  depositor  must  accompany  this  order,"  is  not  nego- 
tiable.* And  so  where  in  the  upper  margin  of  the  order  is 
printed,  "  Return  notice  ticket  with  this  order,"  and  in  the 
lower  margin,  "  Deposit  must  be  at  the  bank  before  money 
can  be  paid."  ^ 

The  negotiable  character  of  a  check  raises  a  prima  facie 
presumption  that  it  is  founded  on  a  valuable  considera- 
tion.^ 

§  375.  Payable  in  another  State.  —  The  fact  that  the  instru- 
ment is  payable  in  another  State  than  the  one  in  which  it  is 
drawn,  does  not  change  its  character  as  a  check.^ 

§  376.  Instruments  having  the  Form  of  Checks.  — An  instru- 
ment may  have  in  every  respect  the  form  of  a  check,  and  may 
yet  not  have  this  character  as  matter  of  law.  An  instance 
of  this,  and  perhaps  the  only  description  of  such  instances 
likely  to  occur,  is  furnished  by  the  following  case.  A  bank, 
after  having  ceased  to  do  business  for  ten  years,  resumed, 
but  only  for  the  purpose  of  liquidation.  In  this  process  seven 
years  more  were  consumed,  during  which  time  deposits  due 
from  the  bank  were  treated,  practically,  as  commodities, 
were  bought  and  sold  in  the  market  like  bonds  or  stocks, 
were  never  redeemed  in  money  by  the  bank,  but  were  only 
sought  by  parties  indebted  to  the  bank  in  order  that  they 
might  be  availed  of  in  set-off.  It  was  held  that  a  draft  drawn 
against  these  deposits,  though  in  form  a  check,  yet  was  not  so 
in  law,  inasmuch  as  it  was  not  in  fact  payable  in  money,  nor 
was  it  drawn  on  a  bank  properly  so  described ;  also  because  it 

3  Bull  V.  First  National  Bank,  123  U.  S.  105. 

4  White  V.  Gushing,  88  Me.  339. 

5  Iron  City  National  Bank  ih  McCord,  139  Pa.  52. 

6  Lamp  Co.  v.  Manufacturing  Co.,  61  Mo.  App.  115. 

1  §  375.  Merchants'  National  Bank  v.  Ritzinger,  118  111.  486;  National 
Bank  of  America  v.  Indiana  Banking  Co.,  114  111.  483;  Union  National 
Bank  V.  Oceana  County  Bank,  80  111.  212;  Planters'  Bank  v.  Keesee, 
7  Heisk.  (Tenn.)200;  2  Parsons,  B.  &  N.  58,  59;  Roberts  i'.  Austin,  26 
Iowa,  315;  Bowen  v.  Needles  National  Bank,  87  Fed.  (1898),  437. 
668 


DATS   OF   GRACE.  §  378 

was  of  limited  negotiability.     It  was  said  to  be  simply  evi- 
dence of  an  assignment  of  a  chose  in  action.^ 

§  377.  Checks  as  Bills  of  Exchange :  Days  of  Grace.  — 
Checks  are  constantly  stated  to  be  like  bills  of  exchange,  and 
to  be  governed  by  the  same  rules  ;  sometimes  they  have  even 
been  said  actually  to  be  bills  of  exchange.^  Other  authorities 
content  themselves  with  stating  that  the  analogy  between  these 
two  instruments  is  very  close.  Much  laxity  and  diversity  of 
language  will  be  found  in  the  opinions  of  the  courts  in  this 
respect.  The  judges  will  be  found  to  say  that  a  check  is  like 
a  bill  of  exchange,  except  in  certain  characteristics,  and  then 
each  judge  will  mention  the  characteristic  which  happens  at 
the  moment  to  occur  to  his  mind  as  presenting  a  point  of 
distinction.  But  the  controversy  seems  to  be  little  more  than 
one  of  language.  It  makes  very  little  difference  whether  it  be 
stated  that  a  bill  of  exchange  and  a  check  are  substantially 
one  and  the  same  instrument,  but  that  they  differ,  by  reason 
of  the  usages  of  business  and  the  manner  of  drawing  them,  in 
some  very  material  points  ;  or  whether,  on  the  other  hand,  it  be 
stated  that  they  are  distinct  instruments,  but  that  they  have 
very  many  and  very  strong  points  of  resemblance  and  even  of 
identity.  The  one  statement  is  simply  based  on  a  recognition 
of  the  points  of  resemblance  as  forming  a  bond  of  union  strong 
enough  to  overcome  the  repulsion  of  the  points  of  difference. 
The  other  grows  out  of  tiie  view  that  the  substantial  differences 
are  more  powerful  to  sunder  the  two  classes  of  instruments 
than  the  points  of  similarity  are  to  unite  them.  It  follows 
that  so  long  as  all  are  agreed  on  what  are  in  fact  the  points  of 
resemblance,  and  what  are  in  fact  the  points  of  difference, 
this  is  all  that  is  really  essential  in  the  matter. 

§  378.  United  States  Summary  of  Likeness  and  Difference.  — 
The  Supreme  Court  of  the  United  States,  in  a  leading  case, 
says  :  "  Bank  checks  are  not  inland  bills  of  exchange,  but  have 
many  of  the  properties  of  such  commercial  paper ;  and  many 
of  the  rules  of  the  law  merchant  are  alike  applicable  to  both. 

1  §  376.    Harmanson  v.  Bain,  15  Nat.  Bankr.  Reg.  (E.  Dist.  Va.)  173. 
1  §  377.    Rogers  v.  Ourant,  140  U.  S.  298  (1891);  Peoples.  Kemp,  76 
Mich.  40  ;  First  National  Bank  v.  Northwestern  Bank,  152  111.  296. 

669 


§  379  CHECKS   IN   GENERAL. 

Each  is  for  a  specific  sum  payable  in  money.  In  both  cases 
there  is  a  drawer,  a  drawee,  and  a  payee.  Without  acceptance 
no  action  can  be  maintained  by  the  holder  upon  either  against 
the  drawee.  The  chief  points  of  difference  are  that  a  check 
is  always  drawn  on  a  bank  or  banker;  no  days  of  grace  are 
allowed.  The  drawer  is  not  discharged  by  the  laches  of  the 
holder  in  presentment  for  payment,  unless  he  can  show  that 
he  has  sustained  some  injury  by  tlie  default.^  It  is  not  due 
until  payment  is  demanded,  and  the  Statute  of  Limitations 
runs  only  from  that  time.  It  is  by  its  face  the  appropriation 
of  so  much  money  of  the  drawer  in  the  hands  of  the  drawee 
to  the  payment  of  an  admitted  liability  of  the  drawer.  It  is 
not  necessary  that  the  drawer  of  a  bill  should  have  funds  in 
the  hands  of  the  drawee.  A  check  in  such  a  case  would  be 
a  fraud."  2  Further,  it  is  admitted  without  dispute  that  a 
check  is  "  never  presentable  for  acceptance,  but  only  for  pay- 
ment " ;  ^  that  is  to  say,  the  holder  has  no  right  to  demand 
anything  save  a  cash  payment ;  he  has  no  claim  upon  the  bank 
to  accept. 

§  379.  Opinion  of  C.  J.  Shaw.  —  A  check  is  an  order  to 
pay  the  holder  a  sum  of  money  at  the  bank  on  presentment  of 
the  check  and  demand  of  the  money  ;  no  previous  notice  is 
necessary  ;  no  acceptance  is  required  or  expected  ;  it  has  no 
days  of  grace.  It  is  payable  on  presentment,  and  not  before. 
Mere  notice  to  the  bank  that  a  party  holds  a  check  without 
presentment  and  demand  will  not  bind  the  bank,  and  if  there 
be  funds,  when  notice  is  thus  given,  without  presentment  for 
payment  by  the  holder,  and  in  the  mean  time  other  checks 
of  the  same  drawer  are  presented  and  the  fund  paid  out  upon 
them,  the  bank  is  not  liable.  Checks  are  not  payable  in  the 
order  of  the  priority  in  which  they  are  given,  but  in  that  in 
which  they  are  presented."  ^ 

1  §  378.  See  also  Keene  v.  Beard,  8  C.  B.  n.  s.  372;  Laws  v.  Rand, 
3  id.  442;  Robinson  v.  Hawksford,  9  Q.  B.  52. 

2  Merchants'  Bank  ?;.  State  Bank,  10  Wall.  G04,  at  p.  647.  See  Espy 
V.  Bank  of  Cincinnati,  18  Wall.  604,  at  p.  620. 

«  ^Nlorse  r.  Massachusetts  National  Bank,  1  Holmes  C.  C.  209. 
1  §  379.    Shaw,  C.  J.,  in  Bullard  v.  Randall,  1  Gray  (Mass.),  606. 
670 


CONTRAST   WITH    BILLS.  §  380 

Bank  checks  are  in  form  and  effect  bills  of  exchange,  not 
direct  promises  to  pay,  but  only  in  case  the  drawee  does  not 
pay.2 

§  380.  To  our  mind  the  differential  traits  decidedly  pre- 
ponderate ;  and  the  more  correct  method  is  to  treat  the  check 
as  an  altogether  independent  and  distinct  instrument  from 
the  bill  of  exchange,  admitting  at  the  same  time  that  in  some 
few  specific  matters  the  resemblance  between  the  two  instru- 
ments is  sufficiently  strong  to  cause  one  and  the  same  rule  to 
cover  and  include  them  both.  Mr.  Grant  would  appear,  how- 
ever, to  be  of  the  contrary  mind.     He  says,  "  Checks 

.  .  .  J  Grant. 

are,  by  recent  legislation  imposing  a  stamp  duty 
upon  them,  and  creating  a  class  payable  to  order,  nearly  on 
the  same  footing  as  bills  of  exchange ;  and  the  decisions  of 
the  courts  have  been  of  late  in  favor  of  putting  them  on  the 
same  footing  as  to  their  general  legal  incidents  and  char- 
acteristics." ^  Yet  he  follows  this  statement  with  such 
a  formidable  array  of  the  points  of  dissimilarity  as  would 
seem  to  show  that  it  is  impossible  thus  to  unite  the  two  in- 
struments into  a  single  legal  entity  without  creating  infinite 
confusion,  inconsistency,  and  doubt.  His  list  is,  briefly,  as 
follows :  — 

First.   No  days  of  grace  are  allowed  upon  checks. 

Second.  The  payee  of  a  check  does  not  obtain  any  more 
time  by  employing  a  banker  to  present  it ;  whereas  the  holder 
of  a  bill,  by  the  same  course,  would  obtain  an  extra  day.^ 

Third.  The  death  of  a  drawer  of  a  check  revokes  the 
drawee's  authority  to  pay  ;  whereas  the  death  of  the  drawer 
of  a  bill  has  no  effect  upon  the  duties  of  the  other  parties  to 
the  instrument.^ 

Fourth.  A  check  must  be  drawn  against  funds  of  the 
drawer  in  the  hands  of  the  drawee;  whereas  there  need  be 
no  funds  of  the  drawer  in  the  hands  of  the  drawee  of  a  bill* 

2  Foster  v.  Paulk,  41  Me.  428. 

1  §  380.    Grant  on  Bankers  and  Banking,  3d  ed.,  p.  103  et  seq. 

2  Alexander  v.  Burchfield,  7  M.  &  G.  1061. 
«  Billing  V.  Devaux,  3  M.  &  G.  571. 

*  Keene  v.  Beard,  8  C.  B.  n.  s.  372,  381. 

G71 


§  380  CHECKS   IN   GENERAL. 

Fifth.  The  drawer  of  a  bill  is  discharged  by  "want  of  due 
presentment  to  the  drawee  ;  whereas  the  drawer  of  a  check 
is  not  discharged  by  any  length  of  delay  in  presentment,  at 
least  unless  he  can  show  actual  loss  or  injury  to  himself  by 
reason  of  such  delay  ;  as,  for  example,  by  the  failure  of  the 
drawee  in  the  interval.^ 

Sixth.  Bills  of  exchange,  payable  on  a  fixed  day,  differ  in 
this  respect  from  a  check,  which  is  not  due  before  payment  is 
demanded.^ 

The  points  of  resemblance  between  checks  and  bills  of 
exchange,  noted  by  Mr.  Grant  in  the  same  connection,  are 
as  follows :  — 

First.  That  notice  of  nonpayment  of  the  check  and  non- 
acceptance  of  the  bill  may  be  dispensed  with,  if  the  drawer 
had  no  funds  or  no  sufficient  reason  to  expect  the  payment 
or  acceptance.^ 

Second.  That  checks  may  be  accepted  (though  infrequently), 
and  may  pass  by  delivery.^ 

Thi7'd.  That  the  holder  of  a  check  is  affected  by  equities 
and  infirmities,  in  like  manner  as  would  be  the  holder  of  a 
bill.  9 

The  main  point  of  difference,  upon  which  there  is  no  diver- 
sity of  authority,  is  that  a  check  has  no  days  of  grace.  It  is 
payable  immediately  upon  demand,  on,  or  at  any  day  after, 
the  day  of  its  date ;  and  this  equally  though  the  words  "  on 
demand"  are  not  expressed. ^^     There  can  be  no  question  of 

5  Keene  v.  Beard,  8  C.  B.  n.  s.  372,  381;  and  see  post,  title  "  Present- 
ment, the  Time  within  which  it  should  be  made  and  the  Effect  of  Delay." 

6  Boehm  v.  Sterling,  7  T.  R.  430;  Alexander  v.  Burchfield,  7  M.  &  G. 
at  p.  1067. 

7  Thomas  i'.  Fenton,  5  D.  &  L.  28 ;  Kemble  v.  Mills,  1  M.  &  G.  757; 
9  Dowl.  446 ;  Carew  v.  Duckworth,  4  L.  R.  Exch.  313 ;  Robinson  v. 
Hawksford,  9  Q.  B.  52. 

8  Keene  v.  Beard,  8  C.  B.  n.  s.  372,  380. 

9  Whistler  v.  Forster,  14  C.  B.  n.  s.  248. 

10  Moyser  v.  Whitaker,  9  Barn.  &  Cr.  409  ;  Sutton  v.  Toomer,  7  id. 
416  ;  Down  V.  Hailing,  4  id.  330;  Dixon  v.  Nuttall,  1  C.  M.  &  R.  307; 
Hare  v.  Copland,  13  Irish  C.  L.  426 ;  Grant  on  Bankers  and  Banking, 
p.  25;  Story  on  Promissory  Notes,  §  489  ;  Ex  parte  Brown,  2  Story,  503; 
Woodruff  V.  Merchants'  Bank,  25  Wend.  (N.  Y.)  673 ;  Salter  i;.  Burt,  20 
672 


INSTRUMENTS   PAYABLE    AT   A    DAY   CERTAIN.  §  381 

this  rule  ;  the  aiitlioritics  are  overwhelming.  But  it  often 
happens  that  instruments  otherwise  in  the  form  of  checks 
are  yet  in  some  way  made  payable  at  a  day  later  than  that 
of  their  issue,  and  sometimes  later  than  that  of  their  date. 
They  may  be  made  payable  at  a  day  later  than  that  of  their 
issue,  but  on  that  of  their  date,  by  being  dated  on  a  day  sub- 
sequent to  that  of  their  issue,  but  in  no  other  respect  what- 
soever differing  from  a  check  payable  immediately.  Post-dated 
These  are  called  post-dated  checks  ;  they  are  a  fa-  checks, 
miliar  instrument,  and  will  be  fully  discussed  hereafter.  It 
suffices  for  our  present  purpose  to  say,  that  such  are  always 
payable  on,  or  at  any  time  after,  the  day  of  their  date. 

§  381.  Instruments  payable  at  a  Day  certain.  —  But  often 
an  instrument,  in  its  form  substantially  like  a  check,  is  made 
payable  at  a  day  subsequent  to  that  both  of  its  date  and  of 
its  issue,  either  by  naming  such  a  date  in  the  body  of  the 
instrument,  or  by  making  it  payable  so  many  days  after  date. 
In  such  cases  it  is  often  a  question  whether  or  not  grace  is 
to  be  allowed.     But  though  this  is  the  question,  it 

-,  lie  ■•       1     11  •  Instruments 

does  not  take  the  lorm  ot  whether  or  not  grace  is  to  payable  at  a 
be  allowed  on  such  a  check,  but  whether  or  not  such  ^^  '^^^ '''"" 
an  instrument  is  a  check  at  all.  For  if  it  is  a  check,  that 
simple  fact  is  conclusive  of  the  fact  that  it  is  payable  imme- 
diately on  demand,  on  the  day  named,  without  grace.  A  check 
is  and  must  be  always  so  payable.  But  if  it  be  not  a  check, 
then  it  will  probably  have  the  customary  grace  of  the  place 
where  it  is  made  payable,  and  will  be  called  a  bill  of  exchange.^ 
The  various  cases  present  every  variety  of  instrument,  each 
diverging  in  a  greater  or  less  degree,  and  in  its  own  peculiar 
manner,  from  the  ordinary  form  of  a  bank  check  dated  and 
payable  on  the  day  of  its  issue. 

{a)  Treating  generally  of  an  instrument  dated  on  a  certain 
day,  and  by  some  form  of  words  made  payable  at  a   jhe  best 
day  certain  thereafter,  it  is  probable  that  between   "^'*^^^- 

Wend.  (N.  Y.)  205;  Morrison  v.   Bailey,  5  Ohio  St.  13;  Westminster 
Bank  V.  Wheaton,  4  R.  1.  30;  Chapman  v.  White.  2  Seld.  (X.  Y.)  412; 
3  Kern   (N.  Y.)  290;  Harrison  v.  Nicollet  Bank,  41  INIinn.  488. 
1  §  381.    Harker  v.  Anderson,  21  Wend.  (N.  Y.)  372. 
VOL.  I.  — 43  673 


§  381  CHECKS    IN    GENERAL. 

the  array  of  opposing  authorities  the  preponderance  will  be  con- 
sidered to  lie  in  favor  of  the  doctrine  that  such  paper  is  not 
to  be  considered  as  a  check,  but  as  an  inland  bill  of  exchange, 
and  therefore  entitled  to  grace.  We  cite  below  the  cases 
which  sustain  this  view,  and  it  will  be  seen  that  they  are  nu- 
merous, and  that  some  of  them  have  been  rendered  by  tribu- 
nals entitled  to  command  great  respect.^  Of  the  cases  cited 
the  one  carrying  the  most  weight  certainly  is  the  New  York 
case  of  Bowen  v.  Newell.  Tliis  cause  was  litigated  by  the 
parties  with  great  pertinacity ;  it  is  in  the  Reports  four  dif- 
ferent times.  It  first  appears  in  5  Sandford,  326,  where  the 
court  held  that  the  instrument,  being  an  order  upon  a  bank 
to  pay  on  a  future  day  certain,  was  a  check,  and  not  entitled 
to  grace.  The  decision  in  5  Duer,  584,  was  to  the  same  effect. 
But  in  4  Selden,  190,  a  contrary  opinion  was  rendered.  The 
court  said  that  the  decision  of  Judge  Story  in  the  Matter  of 
Brown  (which  will  be  discussed  hereafter)  was  the  only  au- 
thority for  holding  such  a  document  to  be  a  check,  and  as 
such  not  entitled  to  grace;  that  this  doctrine  was  untenable, 
and  that  the  contrary  must  be  pronounced.  The  case  came 
up  once  more  upon  a  side  issue,  reported  in  3  Kernan,  290  ; 
and  here  the  court  took  pains  to  say  that  their  decision  in 

4  Selden  was  to  the  effect  that  by  the  principles  of  the  law 
merchant  the  instrument  was  entitled  to  grace,  and  that  they 
were  still  of  the  same  mind,  though  now  they  allowed  local 
usage  to  control  the  law  merchant.  The  instrument  in  ques- 
tion was  drawn  in  New  York  upon  a  bank  in  Connecticut,  but 
this  fact  of  a  difference  of  States  was  not  availed  of  as  fur- 
nishing any  additional  reason  for  considering  it  a  bill  of  ex- 
change. The  decision  was  based  strictly  upon  the  wording 
of  the  document,  which  called  for  payment  on  a  day  certain 
after  the  date.     In  the  Pennsylvania  case,  Bradley  v.  Dela- 

2  Morrison  v.  Bailey,  5  Ohio  St.  13;  Andrew  v.   Blachly,  11  id.  89; 
Bowen  v.  Newell,   4  Seld.   (N.  Y.)   190,    overruling   the   same   case  in 

5  Sandf.  (N.  Y.)  320  ;  again  affirmed  in  same  case  in  3  Kern.  (N.  Y.)  290; 
Brown  v.  Lusk,  4  Yerger  (Tenn.),  210  ;  Daniels  v.  Kyle,  1  Kelly  (Ga.), 
304;  Woodruff  v.  ]\Ierchants'  Bank,  25  Wend.  (N.  Y.)  673;  Minium  v. 
Fisher,  4  Cal.  35  ;  Bradley  v.  Delaplaine,  5  Harr.  (Del.)  305 ;  Georgia 
National  Bank  v.  Henderson,  46  Ga.  487. 

674 


GRACE.  §  381 

plaine,  the  words  "  ninety  days  after  date  "  were  inserted  in 
an  ordinary  bank  check  before  the  words  directing  payment. 
The  court  said  it  was  a  bill  of  exchange. 

(&)  Upon  the  other  side  the  authorities  are  few,  and  derive 
their  weight  chiefly  from  the  influence  which  attaches  itself 
to  the  opinion  of  one  who  has  had  so  much  to  do  Contra, 
with  the  moulding  of  American  law  as  Mr.  Justice  ^^°'"^' 
Story.  His  opinion,  delivered  in  the  Matter  of  Brown,^  is 
an  elaborate  disquisition,  in  which  many  questions  concerning 
the  law  of  checks  are  treated  with  much  learning  and  clear- 
ness. He  lays  down  very  positively,  in  an  argument  of  con- 
siderable length,  that  an  instrument  having  the  general  form 
and  characteristics  of  a  check,  save  that,  being  drawn  and 
dated  on  a  certain  day,  it  is  made  payable  on  a  future  day 
named,  is  payable  on  and  after  such  day,  immediately  upon 
presentment,  without  grace.  He  well  remarks  that  the  par- 
ties, by  using  the  common  form  of  a  bank  check,  an  instru- 
ment to  which  the  peculiarity  of  carrying  no  grace  is  well 
known  to  be  inseparably  attached,  signify  that  they  propose 
to  execute  and  issue  a  bank  check,  and  not  any  other  species 
of  business  paper  whatsoever ;  wherefore  they  impliedly  au- 
thorize and  direct  the  bank  to  treat  the  document  as  a  check ; 
that  is,  to  pay  it  immediately  upon  presentment  and  demand 
on  any  day  on  ar  after  that  specially  named  for  payment.  At 
the  time  of  the  rendition  of  this  decision,  the  only  contrary 
authority  was  that  contained  in  the  decision  in  Brown  v.  Lusk, 
4  Yerger  (Tenn.),  210,  which  Judge  Story  certainly  could  ven- 
ture to  overrule,  and  which  he  did  not  hesitate  thus  to  dispose 
of.  In  Harker  v.  Anderson  (sMy^m),  Judge  Cowen  referred  to 
this  opinion  of  Judge  Story  with  respect,  and  evidently  in- 
clined to  indorse  it  fully,  though  the  facts  immediately  before 
him  did  not  render  it  wholly  necessary  for  him  to  do  so. 
Speaking  also  of  Brown  v.  Lusk,  cited  above,  he  said  that  the 
decision  in  that  case  was  based  upon  a  citation  from  Chitty, 
which  upon  examination  proved  insufficient  to  support  the 
doctrine  so  built  upon  it.     But  the  judge's  general  line  of 

8  2  Story,  502. 

6T5 


§  382  CHECKS   IN   GENERAL, 

argument  was  chiefly  applicable  to  post-dated  checks,  about 
wiiich,  as  before  stated,  the  law  is  well  settled. 

§  382.  New  York,  Ohio,  and  California.  —  It  will  be  observed 
that  the  latest  decisions  tend  quite  uniformly  to  the  view  that 
all  such  hybrid  instruments,  which  are  ordinary  checks  in  all 
save  the  naming  of  a  future  day  for  payment,  but  in  that 
respect  are  bills  of  exchange,  take  their  legal  character  from 
this  last  important  feature,  and  bear  grace  accordingly.  The 
influence  of  New  York  decisions  upon  matters  of  financial  law 
is,  of  course,  of  immense  weight ;  and  these,  backed  by  the 
troop  of  lesser  authorities  which  have  already  adopted  the 
same  view,  will  doubtless  finally  suffice  to  settle  the  law  for 
the  country.  The  advantage  of  having  the  question  defini- 
tively settled  would  be  so  great  that  the  community  will  prob- 
ably be  well  satisfied  with  a  conclusion  in  either  direction. 
The  courts  in  New  York  are  always  anxious  to  carry  out  and 
legalize  so  far  as  possible  what  is  known  to  be  the  common 
understanding  of  business  men.  Nowhere  else  is  evidence  of 
usage  and  custom,  in  business  causes,  so  readily  admitted  or 
so  much  deferred  to.  It  is  a  wise  and  wholesome  habit  of  the 
courts.  So  in  this  matter  of  checks  payable  at  a  future  day 
named,  when  the  courts  had  held  that  they  should  bear  grace, 
it  was  at  once  proposed  to  offer  evidence  of  tlie  usage  and 
custom  among  business  men  not  to  regard  such  paper  as 
entitled  to  any  such  privilege.  So  in  the  case,  above  discussed, 
of  Bowen  v.  Newell,^  evidence  of  the  custom  of  the  banks  of 
Connecticut  to  regard  such  orders  as  payable  instantly  was 
offered.  In  the  last  decision  which  was  rendered  in  the  case 
(3  Kernan  (N.  Y.),  290)  it  was  said  that  it  appeared  from  the 
findings  of  the  lower  court  that  the  law  in  Connecticut  gave  no 
grace  on  paper  of  this  description,  that  therefore  of  course 
there  could  be  none  ;  and  that  these  findings  of  the  lower  court 
were  "  upon  evidence  derived  from  the  best  sources,  and  of 
the  most  unquestionable  character."  This  admirable  evidence 
was  simply  evidence  of  usage. 

The  3  Kernan  rule  is  both  the  best  in  sense  and  the  latest 
in  time,  and  may  be  regarded  as  conclusive  of  the  views  of 
1  §382.   Ante,%  381. 

676 


GRACE.  §  384 

the  New  York  judiciary.  But  in  Ohio  and  California  an  op- 
posite rule  has  been  laid  down,  and  a  local  custom  to  regard 
such  orders  as  checks,  and  so  payable  at  once,  was  held  bad ; 
and  evidence  thereof  was  declared  inadmissible.^ 

§  383.  In  Pennsylvania  and  Rhode  Island,  a  draft  on  a 
banker  payable  so  many  days  after  date,^  or  after  sight,^  has 
been  held  a  check,  and  not  entitled  to  grace.  But  in  Ohio,^ 
Georgia,*  California,^  Missouri,^  and  Oregon,'^  as  well  as  in 
New  York,  a  draft  on  a  bank  payable  at  a  day  certain  is 
held  entitled  to  grace,  at  all  events  unless  local  usage  varies 
the  rule. 

§384.  Sharswood's  View.^  —  "The  ordinary  commercial 
form  of  a  bill  of  excliange  payable  at  a  future  day  is  at  so 
many  days'  or  months'  notice  after  date  or  sight.  An  order 
so  drawn,  whether  upon  a  banker  or  any  other  person,  ought 
to  be  regarded  as  a  bill,  with  all  the  privileges  and  liabilities 
which  by  the  law  merchant  are  incident  to  a  bill.  The 
drawer,  by  adopting  this  usual  form,  must  be  held  so  to  in- 
tend. So  if  an  order  be  drawn  on  a  merchant  or  other  per- 
son not  a  banker,  with  whom  the  drawer  keeps  money  on 
deposit  subject  to  draft,  payable  at  a  future  day  named,  there 
exists  no  reason  why  the  same  rule  should  not  apply.  But 
there  is  a  good  reason  why  there  should  be  a  difference  be- 
tween an  order  so  drawn  upon  a  banker,  which  certainly  must 
be  presumed  to  be  by  a  person  who  keeps  money  on  deposit  with 
such  banker,  subject  to  draft,  and  an  order  on  a  merchant  or 
other  person. 

"If  such  an  order  drawn  upon  a  bank  payable  at  a  future 
day  named  in  it  must  be  considered  as  an  inland  bill  of  ex- 

2  Morrison  v.  Bailey,  5  Ohio  St.  13  ;  Minturn  v.  Fisher,  4  Cal.  35. 

1  §  383.    Westminster  Bank,  4  R.  I.  30. 

2  Herring  v.  Kesee,  South.  Law  Rev.  614,  Oct.,  1872. 

3  Morrison  v.  Bailey,  5  Ohio  St.  13. 

■*  Georgia  National  Bank  v.  Henderson,  40  Ga.  496. 

5  Minturn  v.  Fisher,  4  Cal.  36. 

6  Ivory  V.  Bank  of  the  State,  36  Mo.  475.  See  Bradley  v.  Delaplaine, 
5  Harr.  (Del.)  305;  Work  v.  Tatraan,  2  Houst.  (Del.)  304. 

"  Hawley  i'.  Jette,  10  Oregon,  31. 

1  §  384.    Sharswood,  iu  Champion  v.  Gordon,  70  Pa.  St.  474. 

677 


§  385  CHECKS   IN   GENERAL.  ' 

change  and  not  a  check,  then  the  payee  or  holder  has  a  right 
to  present  it  at  once  for  acceptance,  protest  it  at  once  for 
non-acceptance,  and  sue  the  drawer  immediately.  Should  it 
be  accepted,  however,  the  funds  of  the  drawer  in  the  bank 
would  necessarily  be  thereby  tied  up  until  the  day  of  pay- 
ment. All  the  objects  of  directing  payment  at  a  future  day 
would  thus  he  frustrated.  What  the  drawer  undertakes  is 
that  on  a  day  named  he  will  have  the  amount  of  the  check  to 
his  credit  in  the  bank.  In  the  mean  time  he  wants  the  full 
and  free  use  of  his  entire  deposit.  It  is  not  denied  that  a 
post-dated  check  cannot  be  presented  for  acceptance.  That 
is  by  implication  payable  on  a  future  day.  Why  then  is  a 
check  expressly  so  made  payable  to  stand  on  different  ground  ? 
In  the  case  before  us,  an  ordinarily  printed  form  of  a  bank 
check  was  evidently  used,  and  the  day  of  presentment  written 
in  one  of  the  blanks.  This  is  the  most  convenient  form,  for 
it  calls  the  attention  of  the  cashier  or  paying  teller  to  the  fact 
which  he  would  be  likely  to  overlook  if  it  were  expressed  only 
by  the  date.  ...  If  we  determine  that  an  order  like  that  be- 
fore us  is  not  presentable  for  acceptance  before  maturity,  we 
settle  the  question.  It  is  a  check,  and  not  a  bill  of  exchange." 
§  385.  Rhode  Island.  — "  Ninety  days  after  date,  pay  to 
the  order  of  James  Wheaton,  four  hundred  and  fifty  dollars 

• cents.    $450.    Sinope  Mills."    Indorsed  in  blank,  "  James 

Wheaton,  per  B.  Cozzens,  Agent."  The  court  held  this  a 
check,  saying :  "A  check  is  an  order  drawn  upon  a  banker, 
or  a  person  acting  as  a  banker  in  England,  or  in  this  country 
upon  such  a  person  or  upon  a  bank.  It  was  originally  part 
of  the  definition  of  a  check  that  it  was  payable  on  demand. 
It  was  afterwards  held  that  it  might  be  post-dated  and  still 
be  a  check.  In  such  case  it  was  payable  immediately  after 
date,  though  days  had  elapsed  since  it  came  to  the  payee's 
hands.  Still  later,  it  was  held  to  be  a  check,  though  payable 
on  a  day  certain  after  date,  if  drawn  upon  a  bank  or  banker. 
The  instrument  in  suit  differs  from  the  last  in  this  only,  that 
the  day  when  it  is  payable  is  not  named,  but  it  is  payable 
a  certain  number  of  days  after  date,  and  that  the  precise 
day  of  payment  is  to  be  ascertained  by  calculation ;  all  the 
678 


GRACE.  §  386 

elements  of  such  calculation  being  contained  in  the  paper 
itself.  Substantially  and  for  all  practical  purposes  it  is  the 
same,  since  the  day  may  be  made  certain  from  the  paper 
itself.  At  this  day  the  only  distinguishing  difference  be- 
tiveen  a  general  hill  of  exchange  and  a  check  is  that  a  check 
must  he  drawn  upon  a  hank,  or  upon  a  hanker  or  one  acting 
as  a  hanker^  ^ 

§  386.  Discussion  of  the  Grace  Question.  —  Story's  argument 
seems  to  us  very  weak  :  the  rule  that  a  check  has  no  grace  is 
a  result  of  the  fact  of  its  being  payable  on  demand.  It  is 
a  general  principle  of  commercial  law  that  demand,  paper 
shall  not  have  grace,  and  it  is  not  a  peculiarity  of  a  check, 
but  belongs  to  all  paper  possessing  the  attribute  from  which 
this  sub-attribute  flows.  It  is  not  proper,  then,  to  argue  that 
a  merchant  drawing  an  instrument  payable  at  a  day  certain 
must  be  presumed  to  contemplate  that  it  will  have  no  grace 
because  it  is  on  check  paper.  That  is  to  argue  that  we  must 
decide  contrary  to  the  recognized  principles  of  law,  because 
it  is  likely  that  the  parties  misconceived  those  principles. 
Since  the  law  presumes  knowledge  of  itself,  it  would  seem 
more  proper  to  say,  that  as  it  is  a  well-settled  principle  that 
all  paper  on  demand  has  no  grace,  and  that  all  paper  payable 
at  a  day  certain  has  grace,  the  parties  must  be  presumed  to 
have  contracted  in  reference  to  that  principle  and  have  in- 
tended the  instrument  to  have  grace.  Such  would  seem  to 
us  the  proper  reasoning  as  to  the  intent  of  the  parties,  looking 
at  the  question  as  though  it  had  arisen  for  the  first  time. 

When  we  turn  to  the  broader  aspect  of  the  question,  and 
ask  what  rule  it  is  best  to  establish  to  secure  in  the  greatest 
degree  the  benefits  at  which  the  law  aims,  we  note  that, 
other  things  equal,  simplicity  is  valuable  in  legislation,  as 
rendering  conformity  to  law  easier,  favoring  prevision,  and 
lessening  litigation ;  without  some  good  reason,  then,  out- 
weighing this,  the  rule  of  the  law  merchant  previously  es- 
tablished should  be  applied,  and  an  instrument  payable  at  a 
day  certain  should  have  grace,  whatever  color  the  paper  may 
be  on  which  it  is  written. 

1  §  385.   Westminster  Bank,  4  R.  I.  30. 

679 


§   386  CHECKS   IN    GENERAL. 

Nothing  cau  be  gained  by  an  opposite  rule  but  a  senseless 
inconsistency  in  the  law.  If  the  drawer  wishes  the  instru- 
ment to  be  payable  without  grace,  he  can  accomplish  the 
object  by  post-dating  it.  It  is  perfectly  clear  that  every 
instrument  drawn  on  a  banker  is  not  a  check.  Authority  is 
clear  that  a  bill  may  be  drawn  on  a  banker,  and  the  char- 
acter of  the  paper  on  which  an  instrument  is  drawn  surely 
cannot  determine  its  character  in  opposition  to  its  words 
and  their  legal  effect,  and  it  is  perfectly  clear  that  if  the 
instruments  in  the  above  cases  had  been  drawn  on  ordinary 
white  paper  they  would  never  have  been  considered  cliecks. 

But,  on  the  other  hand,  because  such  drafts  are  clearly 
within  the  principle  allowing  grace,  and  are  not  checks  (if 
we  keep  that  word  to  designate  a  class  of  instruments  payable 
on  demand,  and  it  does  seem  a  pity  to  pour  confusion  into 
the  law  by  loosely  applying  terms  to  new  varieties,  and  then 
arguing  that  they  must  possess  all  the  attributes  connoted 
by  those  terms),  it  does  not  follow  that  they  must  neces- 
sarily possess  all  the  other  characteristics  of  ordinary  bills  of 
exchange.  There  is  nothing  to  prevent  the  discovery  of  new 
species  of  commercial  paper,  any  more  than  the  discovery 
of  new  forms  of  animal  life ;  and  it  would  be  just  as  rea- 
sonable for  naturalists  in  case  of  a  new  species,  B.,  interme- 
diate in  its  characteristics  between  A.  and  C,  to  say  that  it 
must  belong  to  A.  because  it  is  most  like  A.,  and  therefore  it 
must  be  deemed  to  have  all  the  attributes  of  the  members 
of  A.  already  known,  or  for  other  naturalists  to  class  it  in 
the  same  way  with  B.,  as  for  lawyers  and  judges  to  declare 
that  an  instrument  in  some  respects  like  an  ordinary  bill  of 
exchange  and  in  other  respects  like  a  check  is  to  be  consid- 
ered either  one  or  the  other. 

There  is  a  reason  for  eacli  attribute  that  has  been  adjudged 
to  belong  to  a  bill  or  a  check  :  if  the  reason  exists  in  the  new 
instrument,  let  tlie  attribute  be  attached,  otherwise  not.  So 
while  the  paper  under  discussion  has  grace,  it  may  very  prop- 
erly be  held  to  be  unlike  an  ordinary  bill  in  that  it  is  not  pre- 
sentable until  the  day  named.  This  would  satisfy  all  that  is 
of  force  in  Sharswood's  opinion  above,  though  whether  it  is 
680 


GRACE.  §  387 

best  to  introduce  this  addition  to  the  law  merchant  when  the 
purpose  can  so  easily  and  clearly  be  attained  by  the  words 
"  without  acceptance,"  or  by  post-dating,  may  perhaps  be  open 
to  argument. 

After  all,  the  really  important  matter  is  to  secure  a  uniform, 
well-settled  rule,  and  this  seems  not  likely  soon  to  be  obtained, 
though  ultimately,  no  doubt,  usage  and  legislation  will  bring 
the  music  of  the  States  into  harmony. 

§  387.  Evidence  of  Usage  as  to  the  question  of  grace  has 
been  offered  in  several  cases.  The  difficulty  in  admitting 
such  testimony  has  been  considered  to  lie  in  the  fact,  that  it 
is  the  proper  province  of  the  court  to  declare  what  is  the 
legal  character  of  such  documents,  whether  they  are  checks 
or  bills  of  exchange.  The  law,  it  is  considered,  must  make 
them  imperatively  either  the  one  or  the  other,  and  according 
to  the  decision  must  be  the  equally  imperative  assertion  as  to 
whether  or  not  they  shall  bear  grace.  Usage  therefore  has 
been  deemed  inadmissible,  because  its  only  effect,  if  it  should 
have  any  at  all,  must  be  to  control  a  rule  of  law.  A  few 
authorities  sustain  this  view.^  It  was  certainly  the  view 
which  the  court  of  New  York  were  inclined  to  take  at  the 
time  of  the  earlier  decision  in  Bowen  v.  Newell.  No  one  who 
reads  that  opinion  can  fail  to  gather  this  conclusion  from  it ; 
and  it  was  upon  the  strength  of  this  that  the  Ohio  case  was 
decided.  But  the  latest  authority  in  New  York  is  the  decision 
in  the  case  of  Bowen  v.  Newell  as  last  rendered  and  revised, 
published  in  3  Kernan,  290.  Here  the  court  say  that  the 
lower  court  have  found  that  the  law  in  Connecticut,  where 
the  paper  was  payable,  gives  no  days  of  grace  upon  it ;  that 
this  finding  of  the  law  was  "  upon  evidence  derived  from  the 
best  sources,  and  of  the  most  unquestionable  character."  By 
turning  to  the  report  of  the  cause  in  the  lower  court,=^  we  find 
that  this  so  emphatically  excellent  evidence,  which  was  al- 
lowed so  thoroughly  to  settle  the  law,  was  simply  evidence  of 

1  §  387.  Morrison  v.  Bailey,  5  Ohio  St.  13 ;  Minturn  v.  Fisher,  4  CaL 
35.  See  also  Woodruff  v.  Merchants'  Bank,  25  Wend.  (N.  Y.)  673; 
Bowen  v.  Newell,  4  Seld.  (N".  Y.)  190 ;  3  Kern.  (N.  Y.)  290. 

2  2  Duer  (N.  Y.),  584. 

681 


I  388  CHECKS   IN   GENERAL. 

the  usage  of  banks  and  of  persons  dealing  with  banks  in  Con- 
necticut. The  court  escape  the  trouble  of  reconciling  this 
view  witli  their  former  contrary  one  by  the  arbitrary  assertion 
that  in  4  Selden  they  only  held  that,  hy  the  law  mercharit,  the 
instrument  was  not  entitled  to  grace.  This  assertion  will 
satisfy  nobody  ;  for  it  is  not  true.  But  its  degree  of  accuracy 
is  a  matter  of  little  moment,  since  the  last  ruling,  in  3  Kernan, 
is  too  clear  and  positive  to  leave  any  doubt  as  to  the  law  in 
New  York. 

The  doubt  is,  simply,  whether  or  not  the  allowance  or  dis- 
allowance of  grace  upon  a  certain  anomalous  description  of 
paper  is  a  proper  subject  of  usage.  Why  it  should  not  be  so, 
it  is  difficult  to  say.  It  is  clear  that  such  paper,  whether  it  be 
called  a  check  or  a  bill  of  exchange,  is  a  materially  modified 
form  of  either.  It  is,  in  fact,  an  independent  and  anomalous 
species  of  paper.  When,  therefore,  it  is  considered  that  the 
entire  principle  which  gives  days  of  grace  upon  particular 
species  of  commercial  paper  was,  in  its  origin,  wholly  a  matter 
of  the  usage  of  bankers,  there  seems  no  reason  why  the  same 
usage,  if  actually  shown  to  exist,  should  not  be  properly  ex- 
tended to  still  another  species  of  paper,  of  comparatively 
modern  origin.  Even  if  the  instrument  is  a  check,  it  is  a 
peculiar  alteration  of  the  common  form  of  checks.  It  is  clear 
that  the  allowance  of  grace  on  business  paper  is  a  proper  sub- 
ject of  usage,  since  it  owes  its  very  existence  to  usage.  Wliy, 
then,  are  not  checks  equally  a  proper  subject  for  usage,  and, 
if  so,  why  may  not  usage  draw  distinctions  in  this  respect 
between  two  different  descriptions  or  classes  of  checks  which 
vary  from  each  other  in  so  important  a  trait  that  very  many 
courts  are  unwilling  to  apply  the  common  name  of  check  to 
each  of  them,  but  reserve  it  for  the  more  usual  kind,  and  pre- 
fer to  describe  the  others  as  bills  of  exchange  ? 

§  388.  Memorandum  Checks.  —  "  Memorandum  checks,"  so 
called,  are  instruments  of  quite  common  use  in  business  cir- 
cles. Their  character  and  legal  effect  depend  somewhat 
upon  the  parties  between  whom  the  questions  concerning 
them  arise.  As  between  the  drawer  and  the  payee  they  are  a 
species  of  evidence  of  indebtedness.  They  are  practically  in- 
682 


"MEM."    CHECKS.  §  388 

tended  as  such,  and  the  courts  recognize  them  as  such.  They 
are  usually  given  either  for  money  borrowed,  or  for  a  debt 
contracted  in  the  course  of  dealings.  They  are,  in  fact  and 
in  law,  equivalent  to  the  drawer's  promise  to  pay,  for  value 
received.  The  holder  may  sue  upon  them  as  upon  a  promis- 
sory note,  and  by  reason  of  their  peculiar  character  he  is  not 
held  to  present  them  at  the  bank  for  payment  prior  to  bring- 
ina:  his  suit  against  the  maker.^  Presentment  and  notice  are 
waived. 

(a)  But  as  between  the  drawer  and  a  person  other  than 
the  payee  receiving  the  check,  though  bona  fide  and  for  value, 
the  facts  that  the  abbreviation  "  mem."  is  written  on  its  face, 
and  that  it  is  two  and  one  half  years  old,  have  been  declared 
sufficient  to  put  such  taker  upon  his  inquiry,  and  to  entitle  the 
drawer  to  set  up  as  against  such  taker  all  equities  and  defences 
which  he  could  have  set  up  as  against  the  original  payee.^ 

(h)  But  though  they  are  thus  a  complete  and  perfect  evi- 
dence of  indebtedness  as  between  these  parties,  as  between 
the  bank  and  the  payee  they  are  still  ordinary  checks,  noth- 
ing less  nor  more.  The  fact  that  the  word  "  memorandum  " 
or  the  abbreviation  "  mem."  is  written  on  a  check  is  sufficient 
in  law  to  render  it  a  memorandum  check.  But  the  bank  is 
not  bound  to  pay  any  attention  to  these  words,  or  to  recog- 
nize any  contract  as  implied  by  them  between  the  maker  and 
payee  which  gives  to  the  check  any  peculiar  character.  If 
such  a  check  is  presented  for  payment,  and  the  drawer  has  to 
his  credit  funds  sufficient  to  meet  it,  the  bank  must  honor  it 
precisely  like  any  ordinary  check.  If  the  agreement  or  under- 
standing between  the  drawer  and  the  payee  is  that  it  shall 
not  be  presented  for  payment,  any  remedy  of  the  drawer  for 
the  breach  is  solely  against  the  payee.     If  the  check  is  once 

1  §388.  Franklin  Bank  v.  Freeman,  16  Pick.  (Mass.)  535;  Gushing 
V.  Gore,  15  Mass.  69.  In  Kelley  v.  Brown,  5  Gray  (Mass.),  108,  the  court 
simply  say  that  the  pleadings  are  so  imperfectly  drawn  that  the  questions 
which  the  plaintiff  wished  to  have  decided  in  his  favor  could  not  arise 
upon  them  at  all.  The  decision  is  not  in  any  respect  at  variance  with  the 
foregoing  authorities. 

2  Skillman  v.  Titus,  3  Vroom  (N.  J.),  96. 

683 


§  389  CHECKS   IN   GENERAL. 

drawn  and  delivered,  the  drawer's  reliance  that  it  will  not  be 
presented  at  the  bank  can  rest  only  upon  the  good  faith  of 
the  holder.  He  cannot  drag  in  the  bank  as  a  partner  in  the 
arrangement,  nor  alter  the  duty  of  the  bank  to  pay  his  drafts 
out  of  his  deposit.  This  is  a  rule  of  law.  Usage,  or  the  cus- 
tomary understanding  of  business  men  to  the  contrary,  cannot 
operate  to  change  it.^ 

(c)  An  ordinary  check  cannot  be  shown  by  parol  to  be  a 
"  mem."  *  The  practice  of  banks  not  to  regard  the  word 
"  mem."  or  "  memorandum "  on  checks  has  the  sanction  of 
law.^ 

§  389.  Ante-dated  and  Post-dated  Checks.  —  A  check  may 
be  either  ante-dated  or  post-dated.  An  ante-dated  check  is 
payable  immediately.^  A  post-dated  check  is  payable  on,  or 
at  any  time  after,  the  day  of  date.  There  is  no  question  but 
that  a  post-dated  check  is  in  the  United  States  a  perfectly 
legal  and  proper  instrument.'-^  In  England  a  statute  used  to 
require  that  a  post-dated  check  should  be  stamped  like  a  bill 
of  exchange,  and  otherwise  declared  it  invalid.^  But  no  such 
rule  has  ever  obtained  in  our  own  country.  A  post-dated 
check  on  its  date,  or  after  it,  is  payable  immediately,  just  like 
any  other  check.  We  are  now  speaking  of  post-dated  checks 
strictly,  and  not  of  instruments  having  the  general  form  of 
checks  but  naming  a  day  certain,  or  a  certain  number  of  days 
after  date,  for  their  payment.  The  construction  and  legal 
qualities  of  these  instruments  have  been  already  discussed. 
But  the  simple  post-dated  check  proper  has  none  of   their 

8  Dykers  ?'.  Leather  Manufacturing  Co.,  11  Paige  (N.  Y.),  612 ;  Story 
on  Promissory  Notes,  §  499;  Byles  on  Bills,  p.  *21,  Sharswood's  note. 

*  Kelley  v.  Brown,  4  Gray  (Mass.),  108. 

6  State  National  Bank  v.  Reilly,  124  111.  464;  11  West.  Rep.  733. 

^  §  389.    Story  on  Promissory  Notes,  §  490. 

^  Story  on  Promissory  Notes,  §  490 ;  Harker  i\  Anderson,  21  Wend. 
(N.  Y.)  372;  Mohawk  Bank  v.  Broderick,  10  id.  304;  13  id.  133;  Salter 
V.  Burt,  20  id.  205 ;  In  the  Matter  of  Brown,  2  Story,  502. 

**  Grant  on  Bankers  and  Banking,  p.  22;  Watson  v.  Poulson,  7  Eng. 
L.   &  Eq.  585;  15  Jur.  1111;  Allen  v.  Keeves,  1  East,  435;  Martin  v. 
Morgan,  3  Moore  (Eng.),  635;  Byles  on  Bills,  p.   *17,  text  and  note 
(Sharswood's  ed.). 
684 


POST-DATED    CHECKS.  §  389 

traits;  neither  is  it  subject  to  any  of  th3  questions  which 
have  been  mooted  concerning  sucli  other  nondescript  or  mon- 
grel documents.  There  is  no  possible  pretence  for  claiming 
days  of  grace  upon  it.  It  is  simply  and  unquestionably  paya- 
ble on  demand,  so  soon  as  the  day  of  the  date  comes  round.'* 

(a)  But  it  is  the  bank's  own  risk  if  it  pay  before  that  day. 
Such  a  payment  is  irregular,  and  circumstances  may  easily 
supervene  under  wiiich  the  bank  will  be  held  to  pay  payment  be- 
the  amount  again,  or  to  restore  it  to  the  credit  of  arbaS^s'^ 
the  drawer,  if  it  has  debited  him  with  it ;  which,  ""''• 
however,  it  has  no  right  to  do.  For  it  is  unquestionable  that 
in  the  interval  between  such  irregular  payment  and  the  day 
of  the  date  wlien  the  payment  could  be  properly  made,  the 
amount  ought  still  to  be  left  standing  to  the  credit  of  the 
drawer.  The  bank  has  no  right  to  charge  him  with  the  dis- 
bursement till  the  time  comes  when  the  disbursement  could 
be  properly  made  on  his  account.  His  check  is  no  order  till 
it  has  matured.  So  if  in  the  interval  he  continues  to  draw 
checks,  the  bank  must  continue  to  honor  them  upon  present- 
ment, so  long  as  his  account,  without  decrease  by  the  debit 
of  this  item,  is  sufficient  to  meet  them,  until  the  day  of  the 
date  arrives.  When  that  day  does  arrive,  the  bank  may  of 
course  appropriate  the  sum  it  has  paid  out.  But  if  then  the 
intervening  drafts  have  so  diminished  the  depositor's  balance 
that  the  remainder  is  not  enough  to  meet  the  amount  of  the 
post-dated  check,  the  deficiency  must  be  the  loss  of  the  bank.^ 
Its  only  source  of  restitution  is  from  the  depositor.  Even  the 
right  to  demand  reinbursement  from  him  may  be  taken  away 
by  his  revocation  in  the  interval  before  the  maturity.  If  after 
the  bank  has  paid,  but  before  the  date  of  the  instrument  gave 
it  the  right  to  pay,  the  drawer  countermands  his  immature 

*  Mohawk  Bank  v.  Broderick,  10  Wend.  (N.  Y.)  304;  13  id.  133; 
Harker  v.  Anderson,  21  id.  372  ;  Story  on  Promissory  Notes,  §  490  ;  In 
the  Matter  of  Brown,  2  Story,  502. 

5  Grant  on  Bankers  and  Banking,  p.  64 ;  Da  Silva  v.  Fuller,  Chitty 
on  Bills,  180  (10th  Eng.  ed.),  cited  in  Morley  v.  Culverwell,  7  M.  &  W. 
178;  Godin  v.  Bank  of  the  Commonwealth,  6  Duer  (N.  Y.),  76;  Byles 
on  Bills,  p.  *14  (Sharswood's  ed.). 

685 


§  389  CHECKS   IN   GENERAL. 

order  and  forbids  payment,  it  is  certain  that  the  anticipatory 
action  of  the  bank  cannot  operate  to  deprive  him  of  this  right. 

(b)  If  a  post-dated  checlc  falls  due  on  a  Sunday  or  on  a 
legal  holiday,  presentment  for  payment  cannot  be  made  until 
the  day  following.  Presentment  on  the  day  preceding  is 
irregular.  The  bank  is  not  bound  to  pay  on  that  day.  Ac- 
cordingly a  demand  then  made  is  so  far  erroneous  that  it  will 
operate  to  discharge  an  indorser,  unless  it  should  be  cured 
by  a  second  demand  properly  made  on  the  correct  day  sub- 
sequent.^ 

(e)  A  bona  fide  transferee  of  a  post-dated  check  taking 
before  date  for  an  existing  debt  takes  free  of  equities,  and 
can  recover  of  the  maker  though  the  check  was  without 
consideration." 

A  post-dated  check  cannot  be  presented  for  acceptance 
before  its  date.^  This  fact  that  the  payee  or  holder  cannot 
go  at  once  to  the  bank  and  have  the  check  certified,  illus- 
trates the  only  difference  between  ordinary  checks  and  those 
which  are  post-dated.  The  latter  are  not  different  in  any 
respect  after  the  day  of  their  date  arrives,  but  before  that 
the  depositor  has  a  right  to  draw  against  his  deposit  freely, 
witliout  regard  to  the  outstanding  check,  and  the  bank  cannot 
by  certification  before  date  withdraw  funds  from  his  control. 

(t^)  Authority  to  an  agent  to  draw  checks  does  not  confer 
power  to  draw  post-dated  checks.  Even  authority  to  make 
Authoritj'  time  paper  will  not  cover  post-dated  paper.  When 
driTw^'ost-  authority  to  make  one  kind  of  instruments  is  given, 
dated  checks,  j^  order  that  another  shall  be  within  the  power,  not 
only  must  the  legal  effect  be  the  same,  but  all  their  incidents 
so  far  identical  that  both  may  fairly  be  supposed  to  have  been 
in  the  mind  when  the  authority  was  given.  The  fact  that  a 
post-dated  check  or  bill  would  not  be  forwarded  at  once  for 
acceptance,  like  an  ordinary  check  or  bill,  was  taken  advan- 

6  Salter  v.  Burt,  20  Weud.  (X.  Y.)  205. 

">  Mayer  v.  Mode,  14  Hun  (N.  Y.),  155  ;  Schepp  v.  Carpenter,  51  N.  Y. 
602. 

8  See  Sharswood's  opinion  in  Champion  v.  Gordon,  70  Pa.  St.  474, 
above  quoted,  §  384. 

686 


INDORSEMENT   OF    CHECKS.  §  391 

tage  of  by  the  agent  to  hide  for  a  time  his  breach  of  trust  in 
drawing  a  check  for  his  own  benefit.^ 

Authority  to  draw  "  bills  "  does  not  give  a  right  to  draw 
post-dated  checks ;  the  legal  effect  is  not  identical ;  bills  of 
exchange  have  grace,  post-dated  checks  no  grace-^"  Post- 
dating does  not  interfere  with  the  validity  or  negotiability  of 
chccks.^^ 

§  390.  Issuing.  —  As  promissory  notes  and  deeds  require 
delivery  to  complete  their  validity  as  between  the  immediate 
parties  to  them,  so  also  does  a  check  require  delivery,  or,  as  it 
is  more  commonly  called,  "  issuing."  ^  It  is  said  that  a  check 
is  "  issued  "  when  it  is  in  the  hands  of  any  person  entitled 
to  demand  cash  for  it.^  Thus,  if  it  be  stolen,  or  if  after  being 
lost  by  the  drawer  it  is  found  by  some  other  person,  it  is  not, 
in  the  hands  of  the  thief  or  of  the  finder,  "  issued  "  as  against 
the  drawer.  But  so  far  as  concerns  the  bank  it  would  be 
considered  as  issued,  and  the  bank  would  be  protected  in  pay- 
ing it,  provided  it  did  so  bona  fide,  and  with  no  knowledge  of 
the  precedent  circumstances.  The  law  presumes  that  a  check 
operates  from  its  delivery,  but  it  may  be  shown  by  pg,;^,gj.^  ^^ 
parol  that  the  delivery  was  not  intended  to  put  condition. 
the  check  in  operation  until  a  certain  event  should 
transpire.  As  between  the  original  parties,  or  those  having 
notice,  it  is  competent  to  show  that  the  delivery  was  condi- 
tional.^ 

§  391.    Of  the  Indorsement  of  Checks.  —  A  check  may  be  in- 
dorsed with  various  effects,  according  to  the  inten-   intent  gov- 
tion  of  the  indorser.     If  the  indorsement  be  made   onri^avilig"^ 
animo  indorsandi,  with  the  intention  of  guarantee-   ^'^^"^^  °^  '^• 

9  New  York  Iron  Mine  v.  Citizens'  Bank,  44  Mich.  344  (1880).  See 
Forster  v.  Mackreth,  L.  E,.  2  Exch.  163. 

i«  Salter  v.  Burt,  20  Wend.  (N.  Y.)  205;  Taylor  v.  Sip,  30  N.  J.  284. 
11  Burns  v.  Kahn,  47  Mo.  App.  214. 

0  §  390.    Iloit  V.  Mclntire,  50  Minn.  466. 

1  Grant  on  Bankers  and  Banking,  p.  14,  citing  Ex  parte  Bignold, 
1  Deac.  735;  2  Mont.  &  A.  633. 

^  Sweet  V.  Stevens,  7  R.  T.  375;  Wallis  v.  Littell,  5  Law  T.  Rep.  n.  s. 
489  ;  ]\Iurray  v.  Earl  of  Stair,  2  Barn.  &  Cr.  82  ;  Pym  v.  Campbell,  25 
L.  J.  Q.  B.  N.  s.  277. 

687 


§  391  CHECKS   IN   GENERAL. 

ing,  it  will  bind  the  indorser  as  a  guarantor  substantially 
in  like  manner  as  the  indorser  of  a  promissory  note  is 
bound.  The  case  has  arisen  where  a  check  payable  to  "  A.  or 
bearer"  was  by  A.  indorsed  and  delivered  to  B.,  and  by  B. 
transferred  to  the  plaintiff.  Upon  presentment  for  payment 
it  was  dishonored,  and  plaintiff  sued  A.  as  an  indorser.  An 
elaborate  argument  was  made  to  show  that  A.  could  not  be 
held  as  the  indorser  of  a  negotiable  instrument,  but  the  court 
held  the  contrary.  It  was  admitted  that  the  indorsement  had 
been  made  animo  indorsandi.  The  case  was  decided  upon  the 
analogy  of  bills  of  exchange.^  It  is  probable  that  this  de- 
cision covers  not  only  the  indorsement  made  by  the  jjayee  of 
the  check,  but  by  another  person  who  should  indorse,  with 
the  intention  of  becoming  an  indorser ;  for  the  check,  in  this 
instance,  being  payable  to  A.  or  hearer,  did  not  require  the 
indorsement  of  A.  as  a  receipt  or  preliminary  to  payment, 
which  would  have  been  the  case,  at  least  by  custom,  had  it 
been  payable  to  A.  or  order. 

The  payee  is  liable  on  his  indorsement  although  the  holder 
before  accepting  the  check  obtains  the  assurance  from  the 
drawee  that  the  check  is  good  and  will  be  paid.^" 

But  an  indorsement  not  made  animo  indorsa7idi,  but  for 
some  other  special  purpose,  will  not  bind  the  party  to  the 
When  in-  liability  of  a  guaranteeing  indorser,  at  least  as  to- 
dorsement       ^ards  anv  person  chargeable  with  notice  of  such 

IS  a  mere  J    r  o 

receipt.  special  intention.     Thus,  if  a  check  be  made  paya- 

ble to  "  A.  B.  or  order,"  and  A.  B.  himself  presents  it  at  the 
bank  for  payment,  the  strict  construction  of  the  phraseology 
of  the  check  would  entitle  him  to  receive  his  money  without 
indorsing.  Yet  it  is  customary  to  request  A.  B.  to  indorse. 
It  is  usually  understood  that  this  indorsement  is  intended  to 
operate  as  A.  B.'s  receipt  or  acknowledgment  that  he  has 
received  the  money,  and  if  such  be  the  intent  the  indorsement 
will  have  no  other  effect.^     If  it  be  intended  as  a  guaranty  of 

1  §  391.  Keene  r.  Beard,  8  C  B.  N.  s.  372;  Bank  of  State  of  New 
York  V.  Muskingum  Branch  of  Bank  of  State  of  Ohio,  29  X.  Y.  G32. 

i«  Bankr.  Carter,  88  Tenn.  289  (1889). 

2  Aubert  v.  Walsh,  i  Taunt.  293;   Lloyd  v.  Saudilands,   Gow,  13; 

688 


INDORSEMENT   OF   CHECKS.  §  391 

the  genuineness  of  the  check,  it  may  be  operative  as  such.  Or 
if  it  be  put  on  for  any  other  specific  purpose,  its  scope  and 
consequences  will  be  limited  to  such  purpose,  at  least  in  the 
hands  of  any  person  having  knowledge  of  tlie  purpose.  For 
example,  where  A.  indorsed  a  check  in  the  firm  style  of 
"  B.  &  C."  "  per  A.,"  and  the  cashier  of  the  drawee  bank  re- 
quired A.  to  identify  himself,  A.  went  out  with  the  check,  and 
returned  with  it  bearing  the  indorsement  of  D.,  and  presented 
it  in  this  shape  as  furnishing  a  sufficient  identification  of  him- 
self by  D.  Thereupon  the  check  was  paid.  A.  had  in  fact  no 
authority  to  indorse  the  name  of  "  B.  &  C."  The  court  held 
that  D.,  by  his  indorsement,  had  undertaken  only  for  the  iden- 
tity of  A.,  not  for  A.'s  authority  to  indorse,  present,  and  col- 
lect the  check.^  Neither  possession  nor  authority  to  accept 
constitutes  authority  to  indorse  a  check. ^" 

But  when  a  check  was  drawn  payable  to  the  order  of  A., 
and,  in  consequence  of  its  dishonor  by  the  bank,  A.  was  sued 
by  a  subsequent  holder,  no  defence  was  suggested,  either  by 
counsel  or  by  the  court,  on  the  ground  that  A.  might  not  have 
written  his  name  on  the  back  animo  indorsandi.  Nothing  was 
said  about  this,  but  he  was  treated  as  an  indorser  guaranteeing 
payment.  ETe  was,  however,  allowed  to  escape  on  the  ground 
that  the  check  had  not  been  presented  with  sufficient  prompt- 
ness after  his  indorsement  had  been  placed  upon  it.*  Also  it 
was  held  that  the  burden  of  showing  such  due  presentment 
was  on  the  plaintiff.  From  this  case  it  may  be  inferred 
that  the  presumption  is  that  the  indorser  of  a  check  in- 
tended to  guarantee  unless  some  other  intent  be  affirmatively 
shown. 

Where  a  collecting  agent  indorses  simply  his  name  without 
adding  the  word  "  agent,"  he  is  not  chargeable  as  an  indorser 
if  it  appears  by  a  restrictive  indorsement  already  upon  the 

Keene  v.  Beard,  8  C.  B.  N.  s.  372  ;  Grant  on  Bankers  and  Banking,  p.  27; 
Byles  on  Bills,  p.  *24. 

3  Commercial  Press  v.  Crescent  City  National  Bank,  20  La.  An.  744. 

3«  Commercial  National  Bank  v.  Lincoln  Co.,  67  111.  App.  166. 

*  Veazie  Bank  v.  Winn,  40  Me.  62 ;  but  see  Emery  v.  Hobsou,  62  id. 
578. 

VOL.  I.  — 44  689 


§  392  CHECKS   IN   GENERAL. 

check  that  the  agent  has  taken  no  title  and  is  simply  acting 
as  agent.^ 

The  transfer  of  a  bank  check  payable  to  a  married  woman 
or  bearer  does  not  pass  her  title  to  it  in  Alabama,  unless  it 
is  transferred  with  the  consent  of  both  husband  and  wife  by 
indorsement.^ 

§  392.  Effect  of  Indorsement  by  a  Lunatic.  —  B.  was  a  luna- 
tic not  under  guardianship.  D.  obtained  by  fraud  his  indorse- 
ment of  a  certificate  of  deposit.  The  bank  that  purchased  the 
certificate  was  a  bona  fide  holder  for  value.  But  the  court 
held  that  no  holder  could  be  protected  in  such  case  any  more 
than  in  a  case  of  forgery,  as  the  essential  element  of  contract, 
viz.  assent,  was  wanting,  and  as  for  negligence  there  could  be 
none,  "  for  one  who  is  incapable  of  prudence  cannot  be  guilty 
of  negligence."  ^ 

This  we  think  an  error.  We  might  with  equal  force  say  that 
one  is  incapable  of  goodness  who  cannot  be  bad,  or  one  is  in- 
capable of  lying  who  cannot  tell  the  truth ;  on  the  contrary, 
that  is  just  what  they  are  capable  of.  The  aim  of  the  law  is 
to  favor  virtue,  prudence,  and  foresight,  and  throw  their  nat- 
ural consequences  upon  imprudence  and  imbecility ;  and  only 
where  an  arm  of  protection  must  be  thrown  about  one  as  yet 
undeveloped,  not  because  he  is  weak  alone  (that  of  itself  is 
no  good  reason),  but  because  he  is  weak  now  and  promises 
strerigth  and  value  if  cared  for,  just  as  a  florist  cares  for  his 
budding  plants,  is  there  a  just  exception.  Applying  this  basic 
principle  to  the  case  of  lunacy,  if  we  consider  only  the  lunatic 
and  the  bona  fide  holder,  there  is  certainly  no  reason  to  throw 
loss  upon  a  bona  fide  holder  in  case  it  must  be  borne  by  such 
holder  or  the  lunatic  ;  let  the  latter  recover  from  the  wrong- 
doer if  he  can.  Virtue  and  sanity  should  not  be  burdened 
that  lunacy  may  lie  upon  the  lap  of  luxury,  but  the  natural 
consequences  of  lunacy  should  be  visited  upon  it.     If  B.  was 

6  National  City  Bank  v.  Wescott,  118  N.  Y.  468. 

6  First  National  Bank  v.  Nelson,  105  Ala.  199  (1894),  citing  Scharf 
V.  Moore,  102  Ala.  468 ;  Steiner  v.  Tranum,  98  Ala.  315. 

1  §  .392.    Anglo-California  Bank  v.  Ames.  27  Fed.    Rep.   727.     See 
Wirebach  v.  First  National  Bank,  97  Pa.  St.  543. 
690 


INDORSEMENT   BY   LUNATIC.  §  393 

only  a  little  below  par,  the  law  would  make  him  bear  the  con- 
sequence of  his  own  short-coming-s  and  so  help  nature  to  ex- 
terminate human  inferiority  ;  but  if  he  is  entirely  gone,  the 
law,  according  to  the  above  decision,  will  nurse  him  and  pet 
him,  as  it  does  a  rosy  boy  who  bears  in  his  breast  a  future 
noble  manhood.  This  is  much  like  saying,  Let  us  throw  away 
an  apple  if  it  has  a  speck  in  it,  but  if  it  is  rotten  to  the  core 
let  us  eat  it. 

Moreover,  the  real  parties  benefited  by  such  decisions  are 
the  relatives  of  the  lunatic,  and  they  are  surely  guilty  of  neg- 
ligence in  not  taking  better  care  of  him  ;  while  the  bank  had 
no  actual  notice,  nor,  as  the  indorser  was  not  under  guardian- 
ship, not  even  the  remotest  constructive  notice.  Negotiable 
paper  obtained  by  fraud  or  theft  is  good  in  the  hands  of  a 
bona  fide  holder.  Why  does  such  a  case  as  this  call  for  more 
protection  ? 

But  although  the  reasons  assigned  for  the  decision  above 
will  not  bear  inspection,  it  is  nevertheless  true  that,  when  we 
consider  the  necessity  of  repressing  the  fraudulent  conduct  of 
those  who  take  advantage  of  lunacy,  the  case  wears  a  different 
aspect.  In  ordinary  cases  of  fraud,  commerce  may  be  left  free 
without  the  hampering  requirement  that  each  new  taker  of 
negotiable  paper  shall  examine  the  circumstances  under  which 
previous  titles  were  acquired  ;  the  interest  and  intelligence  of 
the  person  defrauded  may  well  be  relied  on  as  a  security 
against  such  conduct ;  but  when  these  barriers  are  burned 
away  by  the  fires  of  lunacy,  it  becomes  necessary  to  oppose 
the  tendency  to  fraud  witli  the  interest  and  intelligence  of  the 
taker  of  the  paper.  It  is  better  that  commerce  should  be  a 
little  burdened,  than  that  the  door  of  fraud  should  be  left  wide 
open  with  no  sentinel  on  guard.  The  same  considerations 
apply  to  the  case  of  forgery  of  the  drawer's  or  maker's  name. 

§  393.  Checks  payable  to  Bearer.  —  Checks  written  payable 
to  bearer  pass  by  mere  delivery.  Prima  facie,  the  holder  is 
the  owner.  They  are  commercial  paper,  and,  as  such,  a  valu- 
able consideration  is  presumed  until  proof  of  suspicious  cir- 
cumstances is  introduced.  Also  it  is  presumed  that  they  were 
issued  by  the  maker.     Possession  is  prima  facie  proof  of  title ; 

691 


§  393  CHECKS   IN   GENERAL. 

but  the  plaintiff  in  a  suit  upon  the  check  must  show  that  he 
received  it  for  value,  and  in  due  course  of  business.^  Even 
where  a  check  was  not  addressed  to  any  particular  bank,  it 
was  yet  ruled  that  a  holder  for  value  might  recover  against 
the  drawer  on  a  count  for  money  had  and  received.^ 

A  check  payable  to  bearer  does  not  require  indorsement. 
Nevertheless  it  may  be  indorsed,  and  the  indorsee  may  be 
held  by  a  subsequent  holder,  as  may  also  the  indorsee  of  a 
check  payable  to  order.  To  this  end,  however,  the  animus 
indorsando,  the  indorser's  intent  to  render  himself  liable  as  a 
guarantor,  must  appear  to  be  shown.  This  is  by  no  means  a 
necessary  inference  from  the  mere  writing  of  the  name  across 
the  back  of  the  instrument,  which  may  often  be  done  for  other 
purposes.  Thus  in  England  it  is  customary  for  the  holder  of 
a  check,  upon  receiving  payment  of  the  same  from  the  banker, 
to  write  his  name  upon  the  back,  and  the  usage  of  business 
gives  to  this  simply  the  signification  of  his  receipt  for  the 
money.  Such  an  indorsement  of  course  creates  no  liability 
of  any  description  further  than  that,  if  any,  which  could,  under 
the  peculiar  circumstances  of  any  individual  case,  grow  out  of 
a  receipt  expressed  in  full,  in  ordinary  form.^ 

It  seems  that,  as  between  the  holder  and  indorser  of  a 
check,  diligence  in  presentment  must  be  used  to  enable  the 
former  to  hold  the  indorser  in  the  event  of  dishonor.*  But 
notice  of  nonpayment  apparently  need  not  be  given  to  the  in- 

1  §  393.  Byles  on  Bills,  p.  *18  ;  Keene  v.  Beard,  8  C.  B.  ,n.  s.  372; 
Woods  V.  Schroeder,  4  Harr.  &  J.  (Md.)  276 ;  Cruger  v.  Armstrong, 
3  Johns.  Cas.  (N.  Y.)  5;  Conroy  v.  Warren,  id.  259  ;  Merchants'  Bank 
V.  Spicer,  6  Wend.  (N.  Y)  445 ;  Sutcliffe  v.  McDowell,  2  Nott  &  M.  C. 
(S,  C.)  251;  Murray  v.  Judah,  6  Cow.  (N.  Y.)  484;  Glenn  v.  Noble, 
1  Blackf.  (Md.)  104 ;  Humphries  v.  Bicknell,  2  Litt.  (Ky.)  299  ;  Shrieve 
V.  Duckham,  1  id.  194;  Mouran  v.  Lamb,  7  Cow.  (N.  Y.)  174;  Hoyt  v. 
Seeley,  18  Conn.  353. 

2  Ellis  V.  Wheeler,  3  Pick.  (Mass.)  18. 

8  Aubert  v.  Walsh,  4  Taunt.  293 ;  Lloyd  v.  Sandilands,  Gow,  13  ; 
Keene  v.  Beard,  8  C.  B.  n.  s.  372  ;  Grant  on  Bankers  and  Banking, 
p.  27 ;  Byles  on  Bills,  p.  *24. 

4  Little  V.  Phoenix  Bank,  2  HUl  (X.  Y.),  425;  3  Kent's  Comm.  *105, 
note  c. 

692 


CHECKS   PAYABLE   TO    BEARER.  §  393 

dorser  with  any  especial  promptitude,  provided  actual  loss  is 
not.  caused  to  him  by  the  delay .^ 

Checks  are  commercial  paper,  and  are  generally  affected  by 
the  rules  which  affect  commercial  paper.  Thus  the  holder 
of  a  check  payable  to  bearer,  or  indorsed  in  blank,  is  pre- 
sumed to  be  the  owner,  bona  fide,  and  for  value.  It  is  only 
after  proof  that  the  original  issue  of  the  check  was  a  fraud, 
or  that  it  was  lost  by  the  drawer  before  issue,  that  such  a 
holder  will  be  required  to  show  his  hona  fides,  to  prove  that 
he  has  given  value  for  the  check,  and  that  he  has  come  into 
possession  of  it  in  the  usual  course  of  business.  If,  being 
obliged  to  show  these  facts,  he  does  so  successfully,  it  then 
makes  no  difference  under  what  circumstances  of  fraud  or 
loss  the  check  originally  left  the  drawer's  hands ;  the  holder 
shall  retain  and  shall  recover  upon  it,  at  least  as  much  as  he 
has  paid  for  it.  Even  where  in  the  chain  of  title  there  is  a 
gift,  known  to  the  holder,  who  nevertheless  had  no  reason  to 
suspect  any  irregularity  for  this  reason,  and  who  paid  value 
in  the  due  course  of  business,  he  shall  still  hold  and  recover.^ 
These  principles  of  law  will  be  found  fully  elucidated  and  car- 
ried out  in  all  their  details  in  works  on  bills  and  notes.  They 
are  usually  discussed  in  considering  questions  which  arise  be- 
tween the  maker  or  drawer  of  the  paper  and  a  subsequent 
holder  thereof.  The  general  principles  are  broadly  stated  here, 
simply  because  from  them  follows  as  an  unavoidable  corol- 
lary, the  rule  that  if  a  bank  pays  a  check  payable  to  bearer 
or  indorsed  in  blank,  upon  presentment,  to  the  holder  thereof, 
having  at  the  time  no  reasonable  cause  for  suspecting  any 
irregularity  or  any  cause  for  refusing  such  payment,  it  will  be 
protected  in  doing  so,  no  matter  what  facts  unknown  to  it 

6  Small  V.  Franklin  Mining  Co.,  99  Mass.  277.  It  must  be  acknowl- 
edged that  this  is  not  a  very  satisfactory  case,  either  in  the  decision  or  in 
the  opinion. 

«  Fuller  V.  Hutchings,  10  Cal.  523 ;  Case  v.  Mechanics'  Banking  Asso- 
ciation, 4  Const.  (N.  Y.)  166;  Ross  v.  Bedell,  5  Duer  (N.  Y.),  462; 
Goodman  v.  Simonds,  20  How.  343  (case  of  a  bill  of  exchange) ;  Gray's 
Administrator  v.  Bank  of  Kentucky,  29  Pa.  St.  365  (do.)  ;  Fulweiler  v. 
Hughes,  17  id.  440  ;  Stephens  v.  McNeill,  26  Barb.  (N.  Y.)  651 ;  Towns- 
end  V.  Billinge,  1  Hilton  (N.  Y.),  353. 

693 


§  395  CHECKS   IN   GENERAL. 

may  have  occurred  prior  to  the  presentment.  Even  if  the 
party  presenting  be  the  very  individual  who  stole  the  check, 
before  issue,  from  the  drawer,  or  who  found  it  after  the 
drawer  had  lost  it,  still,  since  the  bank  has  no  possible  oppor- 
tunity of  learning  these  facts,  the  drawer  shall  suffer  the  loss. 
A  check  payable  to  bearer  or  payable  to  order,  and  indorsed 
by  the  payee  in  blank,  passes  by  delivery,  just  as  fully  and  as 
freely  as  a  bank  note.'^  Neitlier  does  the  rule  of  law,  that  an 
order  or  bill  drawn  on  a  particular  fund  is  not  negotiable, 
cover  the  case  of  a  check ;  for  this  is  drawn  not  against  a 
particular  fund,  but  against  a  general  credit  or  account.^  It 
might  be  added,  too,  that  the  custom  of  the  banking  business, 
which  has  been  sometimes  held  even  to  give  the  holder  of  a 
check  a  right  of  action  thereon  against  the  bank,  authorizes 
the  negotiability,  and  renders  it  part  of  the  contract  between 
the  bank  and  the  depositor  that  his  checks  shall  be  paid  when 
presented,  no  matter  through  how  many  hands  they  may  have 
passed  in  the  course  of  business  negotiation. 

§  394.  Money  given  to  Drawer  of  Worthless  Check.  —  Where 
money  is  paid  to  a  person  in  exchange  for  his  own  check 
which  is  worthless,  and  is  known  to  him  at  the  time  of  the 
transaction  to  be  worthless,  the  title  to  the  money  neverthe- 
less passes  to  him.  This  rule  was  laid  down  in  bankruptcy 
proceedings  ;  the  person  who  gave  the  check  upon  his  bankers 
(who  had  for  some  time  refused  to  honor  his  checks)  went 
into  bankruptcy,  and  the  party  to  whom  he  gave  it,  and  who 
gave  him  cash  for  it,  filed  a  petition  for  reimbursement  in 
full,  on  the  ground  that  the  title  to  the  money  did  not  pass. 
But  the  court  held  that  tlie  title  did  pass  in  spite  of  the  known 
worthlessness  of  the  check,  that  the  money  was  part  of  the 
general  assets  of  the  bankrupt,  and  that  the  check-holder 
could  only  come  in  as  an  ordinary  creditor  and  take  his 
dividend.^ 

§  395.      Transfer  of  Check  sent  by  Mail The  title  is  in  the 

sender  until  the  check  comes  to  the  hands  of  the  drawee, 

T  Munn  V.  Burch,  25  111.  35. 

8  Keene  v.  Beard,  8  C.  B.  n.  s.  372. 

1  §  39i.   In  re  King,  8  Xat.  Baukr.  Reg.  285  (Ga.). 
694 


TRANSFER   OF   CHECK   SENT   BY   MAIL.  §  395 

unless  the  latter  has  requested  the  sender  to  forward  money 
to  him  by  mailed  check ;  in  that  case,  the  title  vests  in  the 
drawee  when  the  check  is  placed  in  the  mail  according  to  his 
instructions.^ 

If  a  depositor  requests  the  bank  to  remit  by  draft,  and  the 
bank  addresses  the  remittance  according  to  the  address  con- 
tained in  the  letter  of  the  depositor,  it  is  not  liable.  The  risk 
of  transmission  is  upon  the  depositor.^ 

If  A.  directs  B.  to  send  money  by  check,  and  B.  puts  a 
letter  containing  the  check  in  the  post,  properly  directed,  it 
becomes  at  once  the  property  of  A.^ 

Where  A,  in  London  wrote  to  B.  in  Suffolk,  asking  "  to  be 
favored  with  a  check  in  the  course  of  a  week,"  and  the  check 
was  stolen  in  transit  and  paid  on  a  forged  indorsement,  it 
was  held  that,  as  the  distance  was  too  great  to  send  a  special 
messenger  with  the  check,  the  debtor  was  entitled  to  regard 
the  request  as  an  order  to  send  by  mail,  and,  having  con- 
formed to  this  implied  command,  the  post-office  was  the  agent 
of  both  parties,  and  judgment  must  be  entered  for  the  debtor 
in  a  suit  by  A.  to  recover  the  money.*  The  loss  as  between 
A.  and  B.  very  properly  fell  upon  A.,  as  it  was  a  loss  without 
B.'s  fault,  and  falling  upon  the  property  of  A.  Res  perit 
domino. 

A.  sent  a  check  on  the  B.  bank  to  the  said  bank,  saying, 
"  Please  send  me  a  check  on  some  Boston  bank  for  the  en- 
closed check."  B.  sent  by  mail  a  check  drawn  by  C.  on  a 
Boston  bank,  and  the  balance  in  currency.  It  was  lost,  and 
C.  would  not  give  a  duplicate.  Held,  that  the  bank  should 
have  sent  its  own  check  for  the  whole.  A  check  was  less 
liable  to  be  stolen  than  bills,  and  if  its  check  had  been  lost  it 
could  have  been  duplicated  without  depending  on  the  will  of 

1  §  395.  Talbot  v.  Bank  of  Rochester,  1  Hill  (N".  Y.),  295;  Graves  v. 
American  Exchange  Bank,  17  N.  Y.  208. 

2  Jung  V.  Second  Ward  Savings  Bank,  55  Wise.  364  (1882).  See 
First  National  Bank  v.  McManigle,  69  Cal.  156;  Gurney  v.  Howe,  9  Gray, 
404;   Warwicke  v.  Noakes,  Peake  N.  P.  98;  Burr  v.  Sickles,  17  Avk.  4f28. 

*  Indiana  National  Bank  v.  Holtschaw,  98  Tnd.  87. 

*  Norman  v.  Ricketts,  46  Lond.  Bk.  Mag.  (June,  1886),  497. 

695 


§  395  A  CHECKS   IN    GENERAL. 

a  third  person.  A.  recovered  in  a  suit  for  money  had  and 
received.^ 

§  395  A.  Lost  Checks.  —  If  a  check  be  lost  by  the  lawful 
owner  thereof,  and  subsequently  come  into  the  hands  of  a 
bo7ia  fide  holder  for  value  and  without  notice,  he  will  be  en- 
titled to  receive  the  amount  from  the  bankers.  If  they  refuse 
to  pay  him,  by  reason  of  instructions  to  this  effect  given  them 
by  the  drawer,  the  holder  may  recover  the  amount  from  the 
drawer.! 

The  fact  that  a  check  has  not  been  presented  or  paid,  and 
has  been  presumably  lost  after  delivery  by  the  drawer  to  the 
payee,  and  after  it  had  been  sent  by  the  payee  to  a  third 
party,  does  not  constitute  a  sufficient  consideration  for  the 
drawer's  promise  to  such  third  person  to  give  him  a  new 
check  for  the  like  amount.^  But  it  seems  that,  under  strong 
circumstances  of  equity  and  necessity,  the  drawer  might  be 
compelled  to  give  a  new  check  in  place  of  a  lost  one,  upon 
receiving  a  proper  indemnity  from  the  third  party  from  whose 
possession  tlie  check  was  lost.^ 

So  where  the  lost  or  destroyed  check  was  one  issued  by  the 
accountant-general  in  chancery,  and  had  been  so  long  out- 
standing that  it  would  not  be  paid  upon  presentment,  the 
Court  of  Chancery  ordered  a  new  check  to  be  issued.* 

If  a  check  given  in  absolute  payment  by  clear  agreement 
is  lost,  and  paid  on  a  forged  indorsement,  the  true  owner 
Check  paid  ^^^  rccover  of  the  bank,  but  not  of  the  drawer, 
to  tiie  wrong   Jn  casc  the  check  was  taken  without  special  ao-ree- 

party.  _         '  ° 

Payee's  mcut,  and  was  therefore  only  conditional  payment, 

we  think  the  same  rule  should  hold.  The  drawer 
has  done  his  duty  ;  it  is  through  no  fault  of  his  that  the  payee 
does  not  get  his  money  ;  the  very  payment  of  the  check  proves 
that  the  drawer  was  faultless  in  his  undertaking ;  the  check 
was  good  for  the  money,  and,  if  accident  or  fraud  deprive  the 

6  Ames  V.  York  National  Bank,  103  Mass.  326. 

1  §  395  A.    Grant  v.  Vaughan,  3  Burr.  1525,  1526 ;  3  T.  R.  177,  182. 

2  Johns  V.  Mason,  9  Hare,  29. 

8  Rhodes  v.  Morse,  14  Jur.  800. 
*  Taylor  r.  Scrivens,  1  Beav.  571. 

696 


CONVERSION    OF   CHECKS.  §  395  B 

holder  of  it,  surely  the  loss  should  remain  upon  him,  rather 
than  on  the  drawer.  Only  by  leaving  losses  where  they  fall 
as  to  innocent  parties  can  care  be  encouraged ;  but  in  most 
cases  the  payee  could  recover  from  the  bank. 

However,  in  New  York  it  is  thought  that  the  holder  should 
recover  of  the  drawer,  except  where  the  check  was  taken  in 
absolute  extinguishment  of  the  debt.^ 

§  395  B.  Conversion  of  Checks.  —  A  judgment  for  the  con- 
version of  a  check  indorsed  in  blank  may  be  given  for  its  face 
value  in  the  absence  of  evidence  showing  its  collection  or  real 
value.^ 

5  Thomson  v.  Bank,  82  N.  Y.  8.  See  the  account  of  Norman  v. 
Kicketts  under  " Title  to  Check  sent  by  Mail." 

1  §  395  B.   Lovell  v.  Hammond  Co.,  60  Conn.  500  (1895). 


697 


CHAPTER   XXVIIL 

REVOCATION    OF   CHECKS. 

§  396.   Akaltsis. 

(1)  By  Countermand. 

§  397.  Good  against  a  donee  or  mala  fide  holder,  or  when  the  condition  of 

§  398.  delivery  is  not  fulfilled. 

Otherwise,  the  drawer  has  no  right  to  revoke  as  against  a  hova  fide 
holder;  but  if  he  does,  blie  best  opinion  is  that  it  is  a  question  be- 
tween liimself  and  the  holder,  with  which  the  bank  lias  nothing  to 
do,  and  that  it  should  maintain  strict  neutrality,  as  in  the  case  of 
any  otlier  adverse  claim,  paying  neither  party  till  it  is  secured  or 
the  question  settled. 
§  398.  Authority,  however,  is  in  conflict. 

Illinois  holds  tliat  a  countermand  is  no  excuse  to  a  bank  for 

refusal  to  pay. 
Most  courts  hold  that  the  bank   must  obey  the  countermand 
if  received  before  payment  or  acceptance,  and  that  the  funds 
remain  under  the  entire  control  of  the  depositor. 
§  399.  Power  to  revoke  ceases  with  certification,  but  the  certification  must 

be  complete.  If  the  check  is  only  marked,  and  not  yet  delivered 
when  the  notice  of  revocation  is  received  by  the  bank,  no  liability 
has  been  incurred  by  tlie  bank,  and  the  revocation  takes  effect. 

(2)  By  Death.     See  §§  549-551. 

§  400.  The  death  of  the  drawer  is  usually  held  a  revocation  of  tlie  bank's 

authority  to  pay  his  uncertified  checks,  but  the  reason  of  the  case 
is  all  the  otlier  way,  and  it  is  to  be  hoped  the  law  will  soon  be 
cured  by  legislative  medicine.  One  who  takes  a  check  from  a 
man  doing  business  alone  may  have  to  wait  two  or  three  years  to 
get  his  money,  till  the  estate  of  the  drawer  can  be  settled  up,  if 
the  drawer  dies,  and  the  drawee  knows  it  before  presentment. 
(3)  By  Insolvency  of  Drawee. 

§  400  A.      Bank's  authority  to  pay  on  the  depositor's  uncertified  order  ceases 
upon  notice  of  his  insolvency. 

§397.  Revocation  of  a  Check.  —  By  Countermand.  —  By 
Death. — This  is  a  subject  upon  which  authorities  con|iict. 
The  Illinois  doctrine  is,  that  the  order  of  a  drawer  to  the  bank 
not  to  honor  a  certain  check  (A.)  is  no  sufficient  excuse  to 
the  bank  for  refusal  to  pay  the  same  when  subsequently  pre- 
sented. The  general  current  of  authority  is  very  strong  to  the 
698 


COUNTERMAND.  §  308 

effect  that  the  drawer  may  countermand.  And  much  as  we 
hesitate  to  differ  with  the  Illinois  courts,  which  seem  perhaps 
the  least  hampered  with  mere  technicalities  and  the  most  open 
to  the  light  of  reason  and  modern  life  of  any  of  the  State  judi- 
ciaries, yet  we  think  in  this  matter  the  pendulum  has  swung 
too  far.  The  drawer  can  make  a  subsequent  check,  B.,  and, 
by  presenting  it  before  the  check  A.,  cut  off  the  latter  ;  or  he 
can  order  the  bank  to  transfer  his  deposit  to  the  account  of 
another  depositor,  or  to  hold  it  as  a  special  or  specific  deposit, 
as  for  the  payment  of  a  note,  or  to  transmit  it  at  once  to  some 
point,  and  when  A.  is  presented  after  such  order  has  come 
to  the  bank,  the  check  will  not  be  paid  because  of  insufficient 
unincumbered  funds.  And  not  only  can  the  drawer  in  other 
ways  accomplish  the  purpose  of  a  direct  countermand,  but 
even  if  he  could  not,  the  question  is  properly  one  that  lies  en- 
tirely between  the  depositor  and  the  check-holder,  and  with 
which  the  bank  should  not  be  called  upon  to  interfere. 

A  countermand  may  be  upon  good  cause,  as  when  a  check 
is  a  gift,  or  was  not  to  take  effect  except  on  some  condition 
that  has  failed.  Is  the  bank  to  be  required  at  its  peril  to  look 
into  such  questions  ?  Must  it  pay  at  peril  of  accounting  to 
the  drawer  if  his  order  was  proper,  or  refuse  to  pay  in  peril 
of  accounting  to  the  holder  if  the  order  was  improper  ?  We 
think  it  is  clear  that  the  business  of  the  bank  should  not  be 
hampered  in  such  manner,  and  that  the  only  safe  course  is 
to  hold  in  all  cases  of  adverse  claims  that  the  bank  may  keep 
the  fund  until  the  parties  settle  the  question  between  them- 
selves, or  one  of  them  gives  the  bank  a  satisfactory  bond  of 
indemnity. 

Perhaps  a  good  plan  would  be  to  allow  the  depositor  a  cer- 
tain number  of  days  to  deposit  a  bond  in  some  court,  with  the 
provision  that  on  order  from  the  court  the  bank  should  hold 
the  deposit  free  from  the  claim  of  the  check,  and  if  the  depos- 
itor did  not  avail  himself  of  the  privilege,  then  the  holder 
might  do  the  same ;  but  in  no  case  ought  the  bank  to  be 
subject  to  suit  except  for  improperly  paying  the  fund  with 
notice  of  an  adverse  claim. 

§  398.  Cases  on  Countermand.  —  A  check  is  simply  a  written 

699 


§  398  REVOCATION   OF   CHECKS. 

order  of  a  depositor  to  his  bank  to  make  a  certain  payment. 
It  is  executory,  and  as  such  it  is  of  course  revocable  at  any 
time  before  the  bank  has  paid  or  committed  itself  to  pay  it. 
But  after  the  bank  has  paid,  or  has  placed  itself  under  an 
obligation,  or  has  incurred  a  liability  to  comply  with  the  order, 
the  drawer's  power  to  revoke  is  at  an  end.  Thus,  after  the 
bank  has,  by  acceptance  of  the  check,  directly  undertaken 
and  promised  the  holder  to  honor  it,  the  drawer  is  as  much 
deprived  of  his  right  to  countermand  it  as  if  actual  payment 
had  been  made.  The  remark  once  fell  from  Judge  Story, 
in  the  oft-cited  Matter  of  Brown,  that  the  drawer  of  a  check 
had  no  right  to  countermand  payment  at  the  bank.  It  was 
obvious  from  the  context,  that  the  judge  referred  rather  to 
moral  right  than  to  legal  right.  He  meant,  simply,  that  a 
debtor  who  had  given  to  his  creditor  a  check  in  payment  of 
the  debt  had  no  right  as  towards  that  creditor,  "  right "  be- 
ing considered  as  a  matter  of  honesty,  to  order  nonpayment 
of  the  check.  The  language  of  the  judge,  taken  in  isolation 
from  the  circumstances  of  the  case,  and  from  tlie  remainder 
of  the  opinion,  seems  to  admit  a  different  meaning,  and  is 
therefore  capable  of  a  misinterpretation  and  misuse,  which 
have  sometimes  been  feebly  attempted.  But  if  such  a  mis- 
understanding is  possible,  still  the  authorities  to  the  contrary 
effect  are  numerous,  and  leave  no  shadow  of  doubt  upon  the 
point.  The  bank  is  the  drawer's  agent.  Its  primary  duty  Is 
to  hold  or  to  pay  his  money  as  he  directs.  Primarily  it  owes 
no  duty  to  the  holder,  except  under  and  by  virtue  of  direc- 
tions from  the  drawer.  Until,  by  reason  of  these  directions, 
it  has  assumed  voluntarily,  or  by  action  of  law  has  involun- 
tarily come  under,  secondary  and  superseding  obligations  to 
the  holder,  the  latest  orders  from  the  drawer  govern  its  right 
to  act  on  his  behalf.^     It  may  often  be  not  only  the  lawful 

1  §  398.  Gibson  v.  Minet,  2  Bing.  7;  1  Car.  &  P.  247  ;  R.  &  M.  68; 
9  Moore,  31;  Dykers  v.  Leather  Manufacturers'  Bank,  11  Paige  (N.  Y.), 
612;  Scott  I'.  Porcher,  3  Meriv.  652;  Lilly  v.  Hayes,  5  Ad.  &  E.  548; 
Walker  v.  Rostron,  9  M.  &  W.  411;  JMalcolm  v.  Scott,  5  Exch.  601;  Wil- 
liams V.  Everett,  14  East,  582 ;  Fruhling  v.  Schroeder,  2  Bing.  N.  C.  77 ; 
Morrell  v.  Wootten,  16  Beav.  197,  which  holds  even  that  the  rule  is  not  af- 

700 


COUNTERMAND.  §  398 

right  of  the  drawer  of  the  check,  as  towards  the  bank,  to 
revoke  the  bank's  authority  to  pay  before  presentment  of  the 
check ;  but  it  may  be  also  his  moral,  as  well  as  his  lawful 
right.  An  instance  of  this  kind  occurred  where  a  dispute 
arose  between  a  creditor  and  an  agent  of  a  foreign  debtor  as 
to  interest.  At  last  the  creditor  agreed  to  accept  the  princi- 
pal and  give  a  receipt  in  full.  No  sooner  however  had  he, 
upon  these  terms,  received  the  agent's  check  for  the  principal, 
than  he  declared  his  intention  to  sue  the  debtor  abroad,  in  the 
debtor's  own  country,  for  the  interest.  The  debtor's  agent  at 
once  stopped  payment  upon  the  check,  and  Lord  Ellenborougli 
upheld  him  in  so  doing,  saying  that  the  delivery  of  the  check 
was  made  upon  a  condition  which  it  at  once  appeared  that  the 
payee  intended  to  elude.  The  delivery  was  conditional,  and 
"all  still  remained  m/eri."  The  stoppage  of  payment  was 
justifiable,  and  rendered  the  draft  "  a  piece  of  waste  paper" 
in  the  payee's  hands.^ 

The  cited  case  of  Gibson  v.  Minet  affords  a  very  strong 
illustration  of  the  drawer's  power  of  revocation.  An  order 
was  given  by  the  customer  to  his  banker  in  the  following 
terms  :  — 

"  Waterford,  July,  1822. 

"  I  request  you  to  hold  over  400L  from  my  private  account 
to  the  disposal  of  J.  Mintern  &  Co.  Wm.  Gibson. 

"  Messrs.  Minet  &  Stride." 

This  order  was  delivered  to  a  partner  in  the  house  of  Min- 
tern &  Co.  on  July  8,  and  to  Messrs.  Minet  &  Stride  on  July 
13.  The  drawer  had  funds  to  his  credit  to  the  amount  called 
for.     Upon  the  receipt  of  it,  one  of  the  bankers  wrote  upon 

fected  by  the  fact  that  the  person  in  whose  favor  the  order  was  drawn  had 
no  knowledge  of  it,  and  no  power  to  take  advantage  of  it  at  any  time  prior 
to  the  revocation.  Brind  v.  Hampshire,  1  M.  &  W.  372;  also  to  the  same 
effect,  Grant  on  Bankers  and  Banking,  109  ;  Story  on  Promissory  Notes, 
§  498 ;  citing  Purchase  v.  Mattison,  6  Duer  (N.  Y.),  587  ;  Lovett  v.  Corn- 
well,  6  Wend.  (N.  Y.)  369 ;  1  Hall  (N.  Y.),  56 ;  Jacks  v.  Darriu,  3  E.  D. 
Smith  (N.  Y.),  557. 

2  Wienholt  v.  Spitta,  3  Camp.  376.  But  see  Watson  v.  Russell,  3  B. 
&S.  34;  31  L.J.  Q.  B.  304. 

701    • 


§  398  REVOCATION    OP   CHECKS. 

the  debit  side  of  Gibson's  account :  "  N.  B.  By  Mr.  Gibson's 
letter  of  the  8th  July,  1822,  400Z.  is  to  be  held  at  the  disposal 
of  Messrs.  J.  Mintern  &  Co."  Mintern  &  Co.  were  customers 
with  the  same  banker.  On  March  19,  1823,  Gibson  notified 
the  bankers  that  he  countermanded  the  order.  Tiie  bankers 
immediately  notified  Mintern  &  Co.,  and  desired  instructions. 
Mintern  &  Co.  replied,  requiring  the  amount  to  be  carried  to 
their  credit,  and  the  bankers  complied,  and  notified  Gibson. 
The  jury  found  that  the  order  to  the  bankers  was  executory, 
and  had  not  been  acted  upon  at  the  time  of  the  countermand, 
and  the  court  held  that  the  countermand  was  therefore  in 
season,  and  good. 

Another  recent  English  case,  also,  well  illustrates  the  opera- 
tion of  the  doctrines  of  this  section.  A  debtor  gave  a  check 
in  payment  of  his  indebtedness.  Before  presentment  of  the 
check,  garnishee  process  was  served  on  him  in  a  suit  against 
the  payee.  The  drawer  at  once  countermanded  his  check, 
and  directed  that  it  should  not  be  paid.  The  court  held  that 
by  this  stopping  payment  on  the  check  the  original  debt  from 
the  drawer  to  the  payee  was  revived,  and  was  held  by  the 
garnishee  process.^ 

Of  course,  so  long  as  the  drawer  retains  the  right  to  coun- 
termand payment  upon  a  check,  he  also  retains  the  right 
himself  to  draw  out  any  and  all  funds  to  his  credit  upon  which 
the  bank  has  no  lien,  or  which  have  not  been  attached  or 
sequestered  by  legal  process.  The  question  in  each  case  alike 
is  merely  of  his  right  to  control  the  deposit.  This  right  he 
possesses  until  the  bank  has  paid  it  out,  or  promised  or  become 
bound  to  pay  it  out,  upon  some  order  emanating  from  him 
and  presented  for  payment  or  acceptance  at  the  bank  counter, 
or  until  the  operation  of  law  intervenes  by  reason  of  some 
process.  It  is  a  matter  of  no  consequence  how  many  checks 
are,  with  the  knowledge  of  the  bank,  outstanding  in  the  hands 
of  his  creditors  at  the  time  of  his  counter  direction  or  demand 
of  payment  of  the  whole  fund  to  himself.  The  bank  is  not, 
and  has  no  right  to  constitute  itself,  the  agent  of  these  parties, 
however  honest  may  be  their  claims  or  hard  their  case.  It  not 
»  Cohen  v.  Hale,  3  Q.  B.  371. 

702 


COUNTERMAND.  §  399 

only  owes  them  no  duty,  but  it  has  not  even  any  legal  power 
to  act  in  their  behalf. 

The  drawer  can  countermand  an  uncertified  check  before  it 
is  paid,  and  take  on  himself  the  consequences.*  But  after  it 
is  paid  to  a  bona  fide  holder  for  value,  neither  drawer  nor  bank 
can  recall." 

But  if  the  check  is  once  certified,  the  drawer's  power  of 
revocation  ceases,  just  as  if  payment  had  been  made,  for  the 
bank  is  now  the  debtor,^  Of  course,  this  would  not  apply 
where  the  drawer  had  a  check  certified  before  delivery,  until 
he  should  issue  the  paper. 

In  Illinois  it  is  no  defence  for  a  bank  that  the  drawer  has 
countermanded  ;^  it  must  pay  a  bona  fide  holder  for  value,  in 
spite  of  the  drawer's  order,  for  it  is  fraud  in  the  drawer  to 
revoke  just  as  much  as  to  withdraw,  and  a  fraudulent  command 
can  be  no  excuse  for  the  bank's  failure  of  duty.  The  trouble 
is,  the  bank  ought  not  to  be  called  on  to  judge  whether  the 
order  is  a  fraud  or  not. 

§  399.  Certification  v.  Revocation.  —  While  the  check  is 
ordinarily  executory,  and  revocable,  and  the  drawer  may 
countermand  its  payment,  when  the  bank  has  certified  the 
check,  and  thereby  comes  under  obligation  to  the  holder  to 
pay  it  on  presentment,  the  power  to  revoke  ceases  as  effec- 
tually as  if  actual  payment  had  been  made.  The  drawer's 
authority  over  the  funds  on  which  it  is  drawn  terminates  pro 
tanto.  The  same  effect  is  produced  when  the  law,  by  proper 
legal  process,  intervenes,  and  attaches  or  sequesters  the  fund.^ 
The  notices  by  which  the  drawer  forbade  the  garnishees  to 
collect  the  check,  and  the  defendant  revoked  their  authority 
to  present  it  for  payment,  having  been  given  after  the  certifi- 
cation of  the  check,  and  after  the  service  of  the  garnishment, 
were  ineffectual  to  change  the  rights  of  the  plaintiff,  or  to 
displace  any  lien  acquired  by  the  legal  process.^ 

*  Albers  v.  Commercial  Bank,  85  Mo.  173  (1884)  ;  Saylor  v.  Bushong, 
100  Pa.  St.  23. 

s  Ibid.;  National  Commercial  Bank  v.  Miller,  77  Ala.  168. 
6  Union  National  Bank  v.  Oceana  County  Bank,  80  Til.  212. 
1  §  399.   National  Commercial  Bank  v.  Miller,  77  Ala.  168. 

703 


§  400  REVOCATION   OP   CHECKS. 

Where  a  bank  had  marked  a  check  "  good,"  but  while  still 
in  the  bank's  possession,  and  before  it  had  delivered  the  certi- 
Deiivery  is  fied  check  to  the  holder,  an  order  was  received  from 
make'ttie '°  the  drawer  revoking  the  check,  it  was  held  that  the 
bank  liable,     j^ank  must  obcv  the  order.     It  had  incurred  no  lia- 

and  revoca-  •' 

tion  before  bilitj,  for  delivery  of  the  check  after  certification 
biudiiig.  was  necessary  to  raise  the  obligations  imported  by 
a  certified  check  in  the  hands  of  a  holder.  And  having  in- 
curred no  liability,  it  was  not  free  to  create  one  by  delivery  in 
violation  of  the  drawer's  orders,  and  then  expect  him  to  bear 
the  consequence.^ 

§  400.  Revocation  by  Death.  —  It  is  perfectly  clear,  that, 
where  a  check  operates  as  an  assignment,  the  death  of  the 
drawer  will  not  revoke  it.  "  Whether  it  be  with  or  without 
consideration,  a  right  once  vested  cannot  be  divested  by  the 
death  of  the  party  from  whom  it  was  acquired."  ^ 

It  is  also  clear,  that  if  a  bank  pays  a  check  after  the  death 
of  the  drawer,  being  in  ignorance  of  that  event,  the  payment 
is  good,  and  the  bank  not  liable,^  upon  the  general  principle, 
that  revocation  of  an  agent's  authority  by  death  of  a  prin- 
cipal takes  effect  as  to  the  agent  only  from  the  time  the  agent 
has  notice  of  it. 

But  if  the  bank  knows  of  the  death  of  the  drawer,  its  right 
to  pay  his  checks  has  vanished  ;  so  say  the  authorities  that  do 
not  regard  a  check  as  an  assignment.^     The  title  to  the  de- 

2  Freund  v.  Importers  &  Traders'  National  Bank,  3  Hun  (N.  Y.), 
689;  see  12  Hun  (N.  Y.),  537. 

1  §  400.  In  substance  taken  from  Lewis  v.  International  Bank,  13 
Mo.  A  pp.  207. 

2  2  Parsons  on  Notes  and  Bills,  82.     See  next  note. 

8  Tate  {'.  Hilbert,  2  Ves.  Jr.  118.  In  this  case  the  check  was  a  gift. 
See  dictum  in  Burke  v.  Bishop,  27  La.  An.  465. 

The  death  of  the  drawer  before  presentment  of  the  check  operates  as 
an  absolute  revocation  of  the  power  of  the  bank  to  pay  upon  his  check. 
At  the  instant  of  his  death  the  title  to  his  balance  vests  in  his  legal  repre- 
sentatives, and  his  own  order  is  no  longer  competent  to  withdraw  any 
part  of  that  which  is  no  longer  his  own  property.  (Tate  v.  Hilbert, 
2  Ves.  Jr.  111.)  It  has  been  laid  down  in  the  text-books,  quite  generally, 
that,  if  the  payment  be  made  by  the  bank  in  ignorance  of  the  death  of 
the  drawer,  the  bank  will  be  protected.     (Grant  on  Bankers  and  Banking, 

704 


DEATH    OF   DRAWER.  §  400 

posit  passes  to  the  representatives,  and  can  be  drawn  only  on 
their  order.  And  it  is  further  said,  that  the  bank's  authority 
as  agent  is  terminated  by  the  drawer's  death. 

This  we  consider  to  be  a  perversion  of  reason,  whatever 
may  be  tlie  view  taken  of  the  question  of  assignment, — 

(1)  It  is  inconsistent  to  hold  that  a  general  deposit  is  a 
debt,  and  that  the  bank  is  not  an  agent  or  trustee  or  bailee  in 
respect  to  it,  and  then,  just  to  bolster  up  this  error,  turn  com- 
pletely about  and  say  the  bank  is  an  agent,  and  must  be 
governed  by  the  rules  of  agency. 

(2)  Even  admitting  the  claim  that  the  rules  of  agency  are 
to  control,  it  may  be  answered  that  an  agency  clearly  intended 
to  be  good  after  death  is  so  held  ;  as  where  goods  are  delivered 
to  B.  to  be  given  to  C.  on  the  death  of  the  donor. 

(3)  The  death  of  the  drawer  of  a  bill  of  exchange  works  no 
revocation:  why  should  a  different  rule  obtain  as  to  checks  ?* 

(4)  The  personal  representatives  take  the  property  of  the 
deceased,  subject  to  all  proper  claims  against  it.  It  is  a  fraud 
in  the  drawer  to  withdraw  his  funds  during  life,  so  as  to  pre- 
vent payment  of  the  check.  Is  it  any  less  a  fraud  for  the 
representative  to  do  the  same,  or  for  the  law  to  do  it  in  the 
name  of  technical  fallacy  ? 

(5)  It  places  the  obligation  of  a  check  outside  the  general 
rules  and  reasons  of  the  law.  The  holder  may  sue  the  drawer 
on  a  check  ;  it  is  a  binding  contract.  Why  should  this  con- 
tract obligation  be  lessened  by  death  more  than  others,  or  the 
right  of  the  holder  to  demand  payment  of  the  bank,  or  of  the 
bank  to  pay  in  precise  accord  with  the  contract  evidenced  by 
the  check,  be  affected  ? 

(6)  Men  who  do  business  alone  are  put  at  great  disad- 
vantage in  comparison  with  partnerships,  by  holding  death  a 

p.  48,  n.  ;  Byles  on  Bills,  Sharswood's  ed.,  p.  24;  Story  on  Promissory 
Notes,  §  498  a,  ed.  1868,  p.  695.)  Doubtless  this  would  be  so  held.  But 
it  must  be  acknowledged  that  the  cited  case  of  Tate  v.  Hilbert,  which  the 
text-books  all  rely  upon  as  their  sole  direct  authority  for  the  statement, 
does  not  touch  upon  the  point,  and  furnishes  no  basis  for  considering  that 
the  rule  has  the  support  of  so  much  as  a  single  adjudicated  cause. 

<  Cutts  V.  Perkins,  12  Mass.  206;  2  Parsons  on  Notes  and  Bills,  287; 
Edwards  on  Bills,  454. 

VOL.  I.  —  45  705 


§  400  A  REVOCATION    OF    CHECKS. 

revocation.  A  firm  check  is  good  though  a  member  die,  for 
the  firm  lives ;  but  a  single  business  man  works  under  the  in- 
convenience of  having  his  paper  held  less  secure  by  the  law. 

(7)  The  only  thing  that  reason  and  common  sense  demand 
in  regard  to  checks  after  the  death  of  the  drawer  is  that  they 
should  be  presented  within  such  a  reasonable  time  thereafter 
as  not  to  embarrass  or  delay  settlement  of  the  estate  ;  and  it 
would  seem  well  that  by  statute  law  provision  should  be  made 
that  in  case  of  death  of  a  depositor  the  bank  should  retain  the 
fund  for  a  certain  time,  say  a  montli,  for  the  payment  of  checks 
outstanding,  allowing  the  representative  to  withdraw  the  fund 
before  such  period  expires  only  on  bond  of  indemnity. 

Some  rule,  at  any  rate,  sustaining  the  post  mortem  rights 
of  check-holders  is  required  by  those  considerations  of  security 
and  good  faith  that  underlie  the  whole  mercantile  law. 

§  400  A.  Revocation  by  Insolvency  of  Drawer.  —  It  has  been 
carelessly  laid  down  also  in  American  text-books,  that  the 
commission  by  the  depositor  of  an  act  of  bankruptcy  revokes 
the  power  of  the  bank  thereafter  to  pay  his  checks.  Readers 
consulting  the  works  which  make  this  statement  will  observe 
that  they  cite  for  it  only  English  authorities.  In  fact,  it  is 
statutory  law  in  England,  and  as  such  is  peculiar  to  that  coun- 
try. It  is  not  law  in  the  United  States.  Indeed,  there  is  no 
possibility  of  saying  precisely  at  what  stage  of  bankruptcy, 
in  our  country,  the  bank  ceases  to  be  justified  in  paying  the 
bankrupt's  checks.  Certainly  it  is  not  when  it  first  learns  that 
he  has  committed  an  act  of  bankruptcy.  Even  the  adjudication 
of  bankruptcy,  made  upon  the  petition  of  the  bankrupt  himself 
or  of  his  creditors,  is  an  act  so  quietly  done  in  the  clerk's  office 
that  the  bank  can  have  no  knowledge  of  it  save  by  accident. 
Whether  it  would  be  obliged  to  take  notice  of  it,  if  it  heard 
it  by  rumor  or  report,  is  doubtful.  Such  authority  is  often 
untrustworthy.  But  the  United  States  marshal  is  directed  to 
take  possession  of  all  the  effects  of  the  bankrupt  at  an  early 
stage  in  the  proceedings.  This  is  the  first  provision  which  the 
act  affords  for  any  authoritative  notice  to  the  bankers  of  the 
cessation  of  the  right  of  the  bankrupt  depositor  to  withdraw 
his  balance.  It  is  succeeded  by  publication  in  the  papers, 
706 


INSOLVENCY   OF   DRAWER.  §  400  A 

which  doubtless  must  also  be  taken  as  notice,  if  none  prior  has 
been  had.  But  it  certainly  seems  that  if,  in  the  interval  be- 
fore such  actual  notice  from  the  marshal  or  constructive  no- 
tice by  publication,  the  bank  had  continued  to  pay  checks  in 
good  faith,  and  in  ignorance,  or  perhaps  even  in  an  honest  dis- 
belief, of  the  pendency  of  bankruptcy  proceedings,  the  bank 
can  have  done  no  wrong,  and  cannot  be  held  to  refund  to  the 
assignees  the  sum  so  paid  away.  If  the  bank  pays  on  the 
bankrupt's  clieck,  when  the  law  does  not  sanction  the  payment 
as  a  discharge  ipro  tanto  of  the  bank's  debt,  the  right  of  ac- 
tion to  recover  the  amount  lies  only  in  favor  of  the  assignees 
in  bankruptcy. 

The  English  bankruptcy  statutes  save  the  foregoing  question 
by  forbidding  payment  only  after  "  notice  of  an  act  of  bank- 
ruptcy." 1  And  this  notice  is  required  to  be  very  certain, 
definite,  and  trustworthy .^ 

In  England  it  has  been  laid  down  that,  in  the  event  of  a 
customer  committing  an  act  of  bankruptcy,  the  bank,  imme- 
diately upon  having  knowledge  thereof,  must  discontinue  the 
payment  of  his  checks.  If  any  check  be  paid  under  such 
circumstances  that  an  individual  debtor  could  not  discliarge 
himself  by  a  payment  to  the  bankrupt,  then  the  bank  will,  like 
such  an  individual  debtor,  be  liable  to  refund  the  amount  to 
the  assignees  in  bankruptcy .^  Nor  can  the  banker  defend,  in 
such  an  action  by  the  assignees,  by  showing  that  the  person  to 
whom  the  check  was  paid  had  had  no  notice  of  the  drawer's 
bankruptcy,  and  might  lawfully  have  received  payment  from 
him.* 

1  §  400  A.    12  &  13  Vict.  c.  106,  §  133. 

2  Evans  v.  Hallam,  6  L.  R.  Q.  B.  713. 

^  Grant  on  Bankers  and  Banking,  pp.  74,  75;  Mathew  v.  Sherwell, 
2  Taunt.  439 ;  1  Rose,  118 ;  Vernon  v.  Hanson,  2  T.  R.  287. 
*  Ibid. 


707 


CHAPTER  XXrX. 

STATUTE   OP   LIMITATIONS. 

§  401.    Analysis.    See  §§  301,  321. 

§  402.  A  check  being  payable  on  demand,  the  statute  does  not  run  until  a 
demand  (or  some  circumstance  rendering  a  demand  useless,  §  322) 
has  given  rise  to  a  right  of  action. 

§  402  a.  New  York,  however,  holds  that  the  demand  must  be  within  a  reason- 
able time  (six  years  at  the  limit),  in  order  to  save  the  statute  from 
running. 

§  402.  The  Statute  of  Limitations.  —  The  same  reasons 
which  are  used  to  prove  that  the  statute  does  not  run  be- 
tween the  bank  and  a  depositor  apply  to  the  case  of  a  check, 
as  to  the  right  of  the  holder  to  sue  the  drawer. 

The  statute  does  not  begin  to  run  until  a  right  of  action 
accrues,  and  demand  is  a  necessary  preliminary  to  action ; 
therefore  the  statute  does  not  run  between  holder  and  drawer 
until  demand. 

And  in  the  United  States  Supreme  Court  it  is  held  that  a 
check  is  not  due  until  demand,  and  therefore  the  Statute  of 
Limitations  does  not  begin  to  run  until  that  time,  as  a  general 
rule ;  ^  but  if  the  check  is  not  drawn  against  funds,  it  is  due 
at  once,  an  action  lies  against  the  drawer  immediately,  without 
presentment,  and  therefore  the  statute  begins  to  run  at  once, 
from  the  time  the  check  is  payable.^ 

(a)  And  in  this  case,  beside  announcing  this  reasonable 
principle,  the  court  held  that  a  bank  check  drawn  in  1865, 
mislaid  by  the  indorsee,  and  not  presented  till  1875,  was 
barred  by  the  six  years'  limitation,  irrespective  of  the  question 
whether  the  drawer  had  funds  or  not  in  the  bank  within  six 

1  §  402.  Merchants'  Bank  v.  State  Bank,  10  Wall.  607.  A  check  is 
not  due  till  demanded.  Cruger  v-  Armstrong,  3  Johns.  Cas.  (N.  Y.)  5 ; 
Rothschild  v.  Corney,  9  Barn.  &  Cr.  389 ;  Story  on  Notes,  §§  678,  679. 

-  Brush  V.  Barrett,  82  N.  Y.  400. 

708 


STATUTE   OE    LIMITATIONS.  §  402 

years  after  date.  The  court  said  that  the  holder  cannot  sus- 
pend the  statute  indefinitely  by  neglecting  to  make  present- 
ment, and  a  demand  after  six  years  will  not  be  good  unless 
the  bank  is  under  an  obligation  to  pay,  notwithstanding  an 
unexplained  delay.  The  rule  requiring  a  demand  is  for  the 
protection  of  the  depositor,  and  cannot  be  used  for  his  an- 
noyance, and  the  holder's  omitting  to  make  a  demand  that 
he  might  make  at  any  time  will  not  keep  the  statute  from 
running.3  It  is  argued  contra,  that  the  delay  in  making 
demand  benefits  the  drawer,  as  he  has  the  money  that  much 
longer.     (§  322.) 

This  would  seem  to  point  to  the  conclusion  that  demand 
must  be  made  within  reasonable  time  in  order  to  be  the  begin- 
ning of  the  statute,  otherwise  it  will  run  from  the  date  of 
delivery,  or  date  of  the  paper,  whichever  is  latest.  Or  perhaps 
the  idea  of  the  court  is,  that  if  no  demand  be  made  within  six 
years,  the  action  is  barred ;  if  a  demand  is  made  within  six 
years,  then  the  right  of  action  against  the  drawer  on  account 
of  nonpayment  would  run  six  years  from  the  demand. 

3  Brush  V.  Barrett,  16  Hua  (N.  Y.),  409. 


709 


CHAPTER    XXX. 

ACCEPTANCE   AND    CERTIFICATION. 

§  403.    Analysis. 

Object,  Nature,  Form,  Authority,  Effect,   Statute  of   Limitations, 
Mistake. 
§  404.  Acceptance  not  required,  nor  can  it  be  demanded  as  a  right. 

§  414.     Objects. 

To  enable  holder  to  use  the  check  as  money,  and  so  render  it  possi- 
ble for  persons  little  acquainted  with  each  other  to  deal  safely  and 
readily. 
§  405.    Form. 

§  406.  Usually  the  word  "good  "  is  written  on  the  check. 

§  406.         Any  mark  sanctioned  by  custom  has  tlie  same  effect  and  force. 
§§  406,  406  A.     Verbal  acceptance  is  good,  if  there  are  funds. 

If  no  funds,  it  is  a  promise  to  pay  tlie  debt  of  anotlier,  and 
must  be  in  writing,  unless  a  consideration  moves  from  the 
party  to  whom  tiie  promise  is  made ;  or  perliaps  if  the 
holder  does  not  know  of  the  lack  of  funds  ;  and  some  go 
so  far  as  to  hold  that  the  Statute  of  Frauds  does  not  apply 
to  any  commercial  securities. 
§  407.  Statutes  in  some  States  require  it  to  be  in  writing. 
§  407  a.     A  promise  to  pay,  communicated  to  the  holder  as  inducement  to  take 

the  check,  is  an  acceptance  by  estoppel. 
§  408  b.      Conditional  acceptance  may  be  made,  as  when  there  are  no  funds  at 
the  time  of  presentment, 
(c)  Acceptance  to  pay  at  a  future  day. 
§  409.        Unreasonable  retention  may  perhaps  be  an  acceptance,  though  the 
weight  of  authority  is,  that  retention  alone  will  not  amount  to  an 
acceptance,  for  the  bank  is  under  no  obligation  to  send  an  answer 
to  the  holder ;  it  is  the  duty  of  the  latter  to  call  on  the  bank  to 
know  its  decision,  allowing  the  bank  twenty-four  hours  to  examine 
its  accounts. 
§  410.        Charging  the  check  to  the  drawer  on  tlie  bank-books,  or  in  a  settle- 
§  513.     ment  with  him,  or  paying  474  the  check  on  a  forged  indorsement, 
is  held  to  be  an  acceptance,  and  the  true  owner  can  sue  the  bank  ; 
but  U.  S.  S.  C.  contra,  as  to  the  effect  of  payment.     §  474  b  and/. 
Mistake  in   putting  the   check   on   the  cancelling  fork  is  not  aa 
acceptance. 
§  411.        Delivery  is  essential  to  complete  the  certification,  and  raise  liability 
of  the  bank. 

710 


ANALYSIS. 


403 


§  412.    Place. 

Acceptance  away  from  bank  does  not  bind  bank.     §  168  d. 
§413.     Authority  to  Certify.     §  155(f. 

Cashier,  president,  and  teller  have  inherent  power. 

Assistant  cashier  or  other  subordinate  has  no  inlierent  power. 

The  check  must  be  regular  in  form,  and  not  post-dated,  or  the  oflicer 

cannot  certify. 
A  national  bank  may  certify. 
Effect  of  Ci:utification. 
§  414.     If  after  Issue  of  the  Check. 

(a,  b)     It  discharges  the  drawer,  both  on  the  check  and  on  the  original  debt ; 
(e,  k,  I)        it  is  payment  as  to  him  and  as  to  indorsers  before  certification. 

(6)    The  drawer  cannot  sue  tlie  bank,  though  it  refuse  to  pay  a  check  that 

has  been  certified  after  issue. 
(a)    The  bank  is  liable  as  on  a  certificate  of  deposit. 

(e)    The  holder  becomes  in  fact  a  depositor  with  the  bank  under  the  limi- 
tation that  his  deposit  must  be  drawn  by  the  certified  check,  instead 
of  by  checks  he  may  draw  at  will, 
(e)    Though  the  check  is  stolen,  a  bona  fide  holder  may  sue  the  bank. 
{j)    But  if  the  liolder  took  with  notice  that  the  certification  was  not  for 

purposes  of  negotiability,  he  is  subject  to  equities. 
(/)    It  is  the  officer's  duty  to   charge   the   amount   immediately   to  the 
drawer,  and  this  transfers  tlie  deposit  to  the  holder. 
§  414.       But  the  bank  is  bound  to  an  innocent  holder  of  a  certified  check, 
tliough  it  had  no  funds,  or  they  have  been  since  withdrawn,   or 
though  the  oflicer  exceeded  his  authority,  or  even  if  a  national  bank 
should  certify  witliout  funds,  it  is  probable  no  one  but  the  United 
States  could  take  advantage  of  that  fact.     (See  Ultra  vires.) 
§414.  (A)  The  certification  warrants  only  the  drawer's  signature  and  the  pos- 
session of  funds,  and  if  tlie  check  was  otherwise  a  forgery,  as  if  the 
amount  is  raised  before  or  after  certification,  the  bank  is  not  bound 
to  pay  the  excess,  and  may  recover  it  as  money  paid  by  mistake, 
so  far  as  the  error  has  not  prejudiced  an  innocent  party.     (See 
Forgery.) 
Whether  evidence  of  a  usage  among  banks  and  merchants  to  consider 
(i)    the  bank  bound  at  all  events,  i.  e.  warranting  the  body  of  the  check 
is  admissible.  (?) 
Louisiana  holds  that  certification  warrants  the  amount  of  a  check  at 
the  time  of  certification,  though  it  has  been  fraudulently  raised 
before  presentment  for  certification. 
§  478.        Forgery.     If  a  bank  teller  acknowledges  the  genuineness  of  a  certifi- 
cation wliich  in  fact  is  forged,  it  is  equivalent  to  an  original  certifica- 
tion, unless  the  mistake  can  be  corrected  without  putting  an  innocent 
party  in  a  worse  position  than  if  the  teller  had  recognized  the  forgery 
when  the  check  was  presented  to  him. 
The  officer  has  no  authority  to  warrant  the  body  of  a  check,  and 

inquirer  has  no  right  to  rely  upon  his  representations. 
But  if  the  bank  has  knowledge,  or  easy  means  of  knowledge,  of  a 
matter  regarding  a  check,  it  must  not,  by  omitting  to  disclose  it, 

711 


§  404  ACCEPTANCE   AND    CERTIFICATION. 

(j)  cause  dam<age  to  one  inquiring  witli  the  evident  purpose  of  acting 
§  482  e.         on  tlie  reply.     It  must  not  omit  sucli  examination  of  its  books  as  is 
usual  in  similar  cases. 
(Both  New  York  cases,  the  latter  a  dictum.) 
If  Certified  before  Issue. 

The  drawer  is  not  discharged  until  the  certification  is  verified,  i.  e. 
§415.  until  certified  anew;  but  of  course  holder  must  present  in  due 

season,  as  in  the  case  of  an  ordinary  check. 
So  an  indorser,  who  has  a  check  certified  before  indorsing  it,  is  liable 

on  it,  as  an  indorser  on  a  note  is  responsible. 

The  bank  is  not  absolutely  liable  on  a  check  certified  in  the  hands  of 

the  drawer  until  it  has  notice  that  the  check  is  in  the  hands  of  some 

one  who  can  demand  payment  of  it  from  the  drawer. 

§§  416,  417.  The  fund  is  subject  to  attachment  by  drawer's  creditors  until  issue  of 

§  415.  the  check  ;  and  in  case  of  bank's  insolvency  before  presentment,  the 

drawer  should  be  held  upon  due  notice. 
§  417.     An  Attachment  of  the  Drawer's  Deposit 

Will  therefore  be  good,  though  the  deposit  is  covered  by  a  certified 
check,  wliicli  the  bank  has  reason  to  believe  is  still  owned  by  the 
drawer  at  the  time  of  service. 
§  418.     The  Statute  of  Limitations 

Runs  against  a  certified  check  only  from  the  time  of  demand  for 
payment. 
§  419.     Mistaken  Certification 

May  be  revoked  if  no  innocent  party  is  damaged  by  reliance  on  the 
bank's  action  ;  i.  e.  if  all  innocent  parties  are  in  the  same  position 
as  if  the  bank  had  refused  to  certify  the  check  when  presented  for 
that  purpose. 

8  404.  Acceptance  of  Check  not  legally  requisite  ;  nor  can 
it  be  claimed  as  a  Right.  —  The  act  bj  which  the  bank  places 
itself  under  obligation  to  pay  to  the  holder  the  sum  called  for 
by  a  check  must  be  the  expressed  promise  or  undertaking  of 
the  bank  signifying  its  intent  to  assume  this  obligation,  or 
some  act  from  which  the  law  will  imperatively  imply  such 
valid  promise  or  undertaking.  The  most  ordinary  form  which 
such  an  act  assumes  is  the  acceptance  by  the  bank  of  the 
check,  or,  as  it  is  perhaps  more  often  called,  the  certifying  of 
the  check.  A  check  is  not  an  instrument  which  in  the  ordi- 
nary course  of  business  calls  for  acceptance.  Tiie  holder  can 
never  claim  acceptance  as  his  legal  right.  He  can  present 
for  payment,  and  only  for  payment.  But,  on  the  other  hand, 
there  is  nothing  in  the  nature  of  a  check  which  intrinsically 
precludes  its  acceptance,  in  like  manner  and  with  like  effect 
as  a  bill  of  exchange  or  draft  may  be  accepted.  The  bank 
712 


VERBAL   CERTIFICATION.  §    406 

may  accept,  if  it  chooses ;  and  it  is  frequently  induced  by  con- 
venience, by  the  exigencies  of  business,  or  by  the  desire  to 
oblige  customers,  voluntarily  to  incur  the  obligation. 

§  405.  Form.  — By  writing  ''good  "  on  check,  or  otherwise 
marking.  Verbal  acceptance ;  if  no  funds,  Statute  of  Frauds 
prevents  verbal  acceptance,  though  tliis  is  the  subject  of  con- 
flict. Statute  law.  Communicated  promise  is  an  acceptance. 
So  charging  the  check  to  the  drawer,  or  unreasonably  detain- 
ing it  (?)  ;  but  not  putting  the  check  on  cancelling  hook  by 
mistake.  Delivery  is  essential  to  complete  certification,  and 
to  create  liability  of  the  bank  upon  it.  Conditional  acceptance. 
Acceptance  to  pay  at  future  day. 

§  406.  Written  and  Verbal  Certification.  —  Ordinarily  the 
acceptance  or  certification  of  a  check  is  performed  and  evi- 
denced by  some  word  or  mark,  usually  the  word  "  good," 
written  upon  the  check  by  the  banker  or  bank  ofhcer.  But 
at  common  law  this  is  not  necessary,  and  in  the  absence  of  a 
controlling  and  exclusive  usage  in  favor  of  such  writing,  a 
verbal  acceptance  may  be  sufficient.^ 

"  Any  language,  verbal  or  written,  employed  by  an  officer 
of  a  banking  institution,  whose  duty  it  is  to  know  the  finan- 
cial standing  and  credit  of  customers  representing  that  a 
check  drawn  upon  it  is  good,  estops  the  bank  from  thereafter 
denying,  as  against  a  bona  fide  holder  of  the  check,  the  want 
of  funds  to  pay  the  same."  ^ 

A  parol  acceptance,  3  or  a  promise  to  accept  a  bill  of  ex- 
change or  draft,  is  valid  under  the  law  of  Illinois,  and  may  be 
implied  as  well  as  express. 

A  telegram  from  the  president  of  a  bank  to  a  depositor, 
stating  that  certain  funds  are  at  the  depositor's  credit,  is  not 
an  acceptance  of  a  check  drawn  by  the  depositor  upon  receipt 
of  the  telegram.* 

1  §  406.  First  National  Bank  v.  Merchants'  National  Bank,  7  W.  Va. 
544 ;  Pope  v.  Bank  of  Albion,  59  Barb.  (N.  Y.)  226,  and  cases  cited  post 
in  this  title. 

^  Pope  V.  Bank  of  Albion,  59  Barb.  (N.  Y.)  226. 

*  Sturges  V.  Fourth  National  Bank,  75  111.  595.  See  Scudder  v.  Union 
National  Bank,  91  U.  S.  406. 

*  Maritime  Bank  v.  Union  Bank,  4  Montreal  L.  R.  (S.  C.)  244. 

713 


§  406  A  ACCEPTANCE   AND   CERTIFICATION. 

5  406  A.  Parol  Acceptance  and  the  Statute  of  Frauds.  —  H') 
Where  a  person  verbally  accepts  or  promises  to  accept  a  bill 
oil  some  new  and  independent  consideration,  moving  from 
the  party  to  whom  the  promise  is  made,  as  that  he  shall  buy 
a  certain  bill  already  drawn,  or  to  be  drawn,  which  he  actually 
does  on  faith  of  the  promise,  the  Statute  of  Frauds  does  not 
apply.  The  promise  is  an  original  one  on  sufficient  considera- 
tion. "  If  A.  says  to  B.,Pay  so  much  money  to  C,  and  I  will 
repay  you,  it  is  an  original  independent  promise ;  and  if  the 
money  is  paid  on  the  faith  of  it,  it  has  always  been  deemed 
an  obligatory  contract,  though  it  be  by  parol,  because  there  is 
an  original  consideration  moving  between  the  parties."  ^ 

(2)  When  the  acceptor  has  funds  of  the  drawer,  the  stat- 
ute cannot  apply,  for  the  promise  is  not  to  pay  the  debt  of 
another,  but  to  pay  the  promisor's  own  debt  to  the  drawer  in 
a  particular  way,  namely,  by  paying  the  drawer's  debt  to  some 
third  person. 2     (See  §  408  A.) 

(3)  If  there  are  no  funds  of  the  drawer  in  the  hands  of  the 
acceptor,  nor  any  consideration  for  his  promise  to  bring  the 
case  under  (1),  —  First,  when  the  payee  or  holder  does  not 
know  the  fact  that  there  are  no  funds,  the  law  of  estoppel 
clearly  applies  ;  the  acceptor  admits  that  he  has  funds  by  the 
very  act  of  acceptance.  It  would  undoubtedly  be  better  if 
parol  acceptance  were  barred  out  entirely.  Negotiable  paper 
ought  to  be  protected  by  all  reasonable  means  of  attaining 
certainty  and  precision,  and  so  far  as  possible  it  should  carry 
its  character  and  condition  on  its  face.  But  as  parol  accept- 
ances are  allowed,  the  established  principles  of  law  should  be 
applied,  and  when  A.  by  such  acceptance  leads  B.  to  rely  upon 
it,  and  refrain  from  taking  such  steps  to  secure  himself  as  he 
otherwise  might,  A.  is  clearly  estopped  to  deny  the  existence 
of  funds,  a  fact  peculiarly  within  his  own  knowledge.  There 
are  cases,  however,  which  hold  a  parol  acceptance  without 

1  §  406  A.  Townsley  v.  Sumrall,  2  Pet.  170. 

2  Putney?'.  Farnham,  27  Wise.  187;  Shields  v.  Middleton,  2  Cranch 
C.  C.  205;  Spadone  v.  Reed,  7  Bush  (Ky.),  455;  Besshears  v.  Rows,  46 
Mo.  501 ;  Pike  v.  Irwin,  1  Sand.  (N.  Y.)  14 ;  Spaulding  ».  Andiews,  48 
Pa.  St.  411. 

714 


VERBAL   CERTIFICATION.  §  407 

funds  void  under  the  Statute  of  Frauds,  without  inquiring 
as  to  the  knowledge  of  the  holder.^  Such  cases  look  to  the 
actual  facts  as  constituting  the  contract,  and  not  to  the  under- 
standing between  the  parties.  Second,  if  the  holder  knew  of 
the  want  of  funds,  and  the  case  does  not  come  under  (1)  or 
(2),  it  may  seem  clearly  within  the  statute  as  a  promise  to 
pay  the  debt  of  another,  and  so  understood  by  both  parties  ;  ^ 
but  some  autiiorities  strongly  defend  the  view  that  commercial 
engagements,  regulated  by  tlie  law  merchant,  are  beyond  the 
Statute  of  Frauds  altogether.^ 

§  407.  The  law  in  England  used  to  allow  parol  accept- 
ance ;  but  the  statutes  1  &  2  Geo.  IV.  c.  78,  §  2,  and  19  & 
20  Vict.  c.  97,  §  7,  require  an  acceptance  in  writing.  Some 
of  the  States  of  the  Union  have  enacted  laws  to  a  similar 
effect. 

In  New  York  a  statute  requires  acceptance  of  a  bill  of  ex- 
change to  be  made  in  writing,  and  the  courts  have  held  that  a 
check  is  so  far  like  a  bill  of  exchange  as  to  fall  within  this 
statute,  and  that  the  verbal  promise  of  the  bank  to  pay  it  is 
of  no  effect.^  And  in  Pennsylvania  acceptance  must  be  in 
writing  where  the  amount  exceeds  twenty  dollars.^"  In  Illi- 
nois the  Statute  of  Frauds  does  not  hinder  the  parol  accept- 
ance of  an  existing  check.^ 

(a)  A  promise  to  pay,  if  communicated  to  the  holder  and 
acted  on  by  him  as  an   inducement  in  taking   the   „ 

■'  _       ^         _       rroinifie 

check,  is  an  acceptance.^     If  not  communicated,  it   communi- 
would  be  no  acceptance.^ 

8  Pike  V.  Irwin,  1  Sand.  (N".  Y.)  14  ;  Manley  v.  Geagan,  105  Mass. 
445;  Quiu  v.  Hanford,  1  Hill  (N.  Y.),  82;  Plummer  i^.  Lyman,  49  Me. 
229;  Wakefield  v.  Greenhood,  29  Cal.  600. 

*  Carville  v.  Crane,  5  Hill  (N.  Y.),  583  ;  Taylor  v.  Drake,  4  Strobh. 
(S.  C.)  431. 

5  Barker  v.  Prentiss,  6  Mass.  430 ;  Cliitty  on  Bills,  p.  4  ;  Spaulding  v. 
Andrews,  48  Pa.  St.  411 ;  Throop  on  Verbal  Agreements,  p.  159 ;  Pillans 
V.  Van  Mierop,  3  Burr.  1674. 

1  §  407.    Risley  v.  Phoenix  Bank,  83  N.  Y.  318. 
i«  Bank  v.  Lindeman,  161  Pa.  199. 

2  Nelson  v.  First  National  Bank,  48  111.  36.  See  Carr  v.  National 
Security  Bank,  107  Mass.  48. 

«  Bank  v.  Pettit,  41  lU.  492. 

715 


§    408  ACCEPTANCE   AND    CERTIFICATION. 

(b)  In  Morrell  v.  Wootten  ^  it  is  laid  down  that,  when  a  de- 
positor directs  his  banker  to  make  a  payment  to  a  third  party, 
if  tlie  banker  consents  to  do  so  and  the  direction  is  made 
known  to  the  third  party,  then  the  banker's  assent  inures  to 
his  benefit.  The  privity  is  complete,  and  the  third  party  may 
compel  payment  by  his  own  suit  brought  directly  against  the 
banker.  But  the  communication  to  the  payee  is  absolutely 
essential.  The  reason  that  such  stress  is  laid  upon  this  point 
is  to  be  discovered  in  the  fact  that  the  order  for  payment  is  to 
be  met  from  a  general  fund.  Where  the  order  is  for  the  pay- 
ment of  a  particular  fund,  the  consent  of  the  beneficiary  is  need- 
less ;  for  this  latter  transaction  constitutes  properly  an  assign- 
ment,^ and  since  it  is  for  his  benefit  his  assent  is  supposed, 

§  408,  It  is  an  inference  from  the  indirect  intimations  and 
language  of  many  of  the  causes  whicli  form  the  authorities  on 
this  point,  that  this  is  one  of  the  matters  in  which  the  analogy 
of  bills  of  exchange  would  be  regarded  as  directly  in  point, 
and  probably  as  conclusive.^  It  is  a  semble  in  the  case  of 
Barnet  v.  Smith,  cited  below,  that  the  cashier's  simple  state- 
ment that  a  check  is  "  good  "  is  an  acceptance  or  certification 
equally  with  the  writing  of  the  word  itself. 

Since  the  foregoing  was  written,  this  subject  has  been  dis- 
cussed by  the  Supreme  Court  of  the  United  States,^  who  seem 
very  reluctantly  to  concede  that  the  rule  has  been  established 
to  the  effect  that  a  verbal  certification  is  legally  sufficient. 
They  say,  "  The  authorities  relied  on  are  mainly  acceptances 
of  drafts  or  bills  of  exchange.  .  .  .  The  highest  courts  in  this 
country  and  in  England  have  regretted  the  decisions  which 
gave  original  sanction  to  this  proposition  "  ;  ^  i.  e.  that  a  draft 

*  16  Beav.  197. 

s  To  this  point  are  cited  Row  v.  Dawson,  1  Ves.  Sen.  331 ;  Ex  parte 
South,  3  Swanst.  392. 

1  §  408.  Barnet  v.  Smith,  10  Foster  (N.  H.),  256 ;  Lemmon  v.  Box, 
20  Tex.  329  (bill  of  exchange)  ;  Wheatley  v.  Strobe,  12  Cal.  92 ;  Fruh- 
ling  V.  Schroeder,  2  Bing.  New  R.  77  ;  Lumley  v.  Palmer,  Strange,  1000  ; 
Harwicke,  74 ;  Robson  v.  Bennett,  2  Taunt.  388  ;  Grant  on  Bankers  and 
Banking,  p.  57;  Lilly  v.  Hays,  5  Ad.  &  El.  548. 

2  Espy  V.  Bank  of  Cincinnati,  18  Wall.  604. 

3  Bovce  V.  Edwards,  4  Pet.  Ill,  at  p.  122. 

7i6 


VERBAL   CERTIFICATION.  §  408 

or  bill  might  be  verbally  accepted.  The  distinction  is  pointed 
out,  that  the  written  certification  is  an  undertaking  to  all  the 
world  of  such  character  and  effect  that  the  check  so  certified 
can  circulate  as  money  ;  whereas,  the  verbal  representation  is 
made  only  for  the  guidance  of  the  payee  or  holder  making  the 
inquiry.* 

(a)  In  the  United  States  Circuit  Court  for  the  First  Cir- 
cuit, Judge  Shepley  has  gone  much  farther  still.  The  check  of 
one  Beal  was  presented  by  the  payees  to  the  bank  on  which  it 
was  drawn,  and  payment  requested.  The  cashier  replied  that 
if  the  check  should  be  presented  through  the  clearing-house 
in  due  course  it  should  be  paid.  The  payees  accordingly 
deposited  it  in  their  bank  ;  but  when  it  came  through  the 
clearing-house  to  the  drawee  bank  on  the  following  morning, 
it  was  dishonored.  At  the  time  when  the  cashier  made  this 
statement  or  promise  to  the  payees,  the  drawer  had  no  funds 
in  the  bank ;  but  the  cashier  did  not  state  this  fact,  nor  had 
the  payees  any  knowledge  of  it,  unless  they  were  bound  to 
take  notice  of  it  or  to  infer  it  from  the  fact  that  the  cashier 
refused  or  was  unwilling  to  have  the  check  paid  over  the 
counter.  Apparently  the  judge  was  of  opinion  that  this  re- 
fusal  or  unwillingness  was  notice  of  the  lack  of   Verbal  ac- 

,_,  ,1.  .  11  ii      J.  j-i         ceptance  not 

funds.  The  pleadmgs  were  in  such  shape  that  tne  good  in  case 
question  of  the  cashier's  authority  could  not  be  \^'^^''^ds.^'^^Sel 
raised.  The  plaintiff  averred  the  promise  of  the  §  ^o^  A. 
ba7ik,  and  the  demurrer  admitted  it.  The  court,  neverthe- 
less, held  that  no  obligation  was  fastened  upon  the  bank. 
The  debt  was  still  the  debt  of  Beal,  and  the  promise  of  the 
bank  was  the  promise  to  pay  the  debt  of  another,  and  there- 
fore void  under  the  Statute  of  Frauds,  since  it  was  not  in 
writing.  At  any  time  until  the  checks  were  in  fact  paid, 
the  payees  could  ignore  them,  and  enforce  the  original  debt 
against  Beal,  which  was  not  extinguished  by  the  check  till 
the  check  itself  was  paid.  The  payees  therefore  parted  with 
no  right,  and  were  put  in  no  worse  position,  by  reason  of  the 
promise. 

On  the  other  hand,  no  consideration  passed  to  the  bank. 

*  Espy  V.  Bank  of  Cincinnati,  18  Wall.  604. 

717 


§  408  ACCEPTANCE    AND    CERTIFICATION. 

There  being  no  funds,  it  could  not  be  compelled  to  pay  at  the 
time,  and  the  postponement  of  presentment  was  no  considera- 
tion ;  had  the  bank  had  funds  and  been  bound  to  pay  at  the 
time  of  the  first  presentment,  it  might  have  been  different, 
for  then  the  engagement  would  have  been  substantially  to 
pay  the  drawee's  own  debt  to  the  drawer.     "It   cannot   be 
perceived  how  any  sound  reason  can  be  given  why  a  verbal 
acceptance  or  promise  to  accept, /or  the  mere  accommodation 
of  the  drawer,  without  funds  or  value  received,  should  not  be 
treated  as  within  the  statute."     The  regret  expressed  by  the 
Supreme  Court  that  verbal  acceptances  have  ever  been  held 
sufficient  is  reiterated ;  and  the  court  says  that  "  the  reasons 
given  for  holding  good  a  parol  accommodation  acceptance  of 
a  bill  of  exchange  do  not  apply  to  the  case  of  a  bank  check. 
The  distinguishing  characteristics  of  checks,  as  contradistin- 
guished from  bills  of  exchange,  are  that  they  are  always  drawn 
upon  a  bank  or  banker,  that  they  are  payable  immediately 
upon  presentment  without  the  allowance  of  any  days  of  grace, 
and  that  they  are  never  presentable  for  acceptance,  but  only 
for  payment.     The  promise  declared  on  does  not  amount  to 
an  acceptance.     If  it  be  treated  either  as  a  promise  to  accept 
or  a  promise  to  pay,  it  cannot  avail  the  plaintiffs.     No  con- 
sideration to  support  the  promise  appears.     The  checks  were 
not  taken  on  the  faith  of   such  promise.     The  holder  gave 
nothing  and  relinquished  no  advantage  for  the  promise."     It 
was  carefully  noted  that  the  plaintiffs  were  not  persons  who 
had  taken  the  checks  bona  fide  for  value,  upon  the  strength 
of  the  promise  of  the  bank.     Much  of  the  reasoning  in  this 
opinion  is  far    from   being  conclusive  or  unanswerable.     In 
this  case  the  holder  did  not  know  there  were  no  funds,  and  it 
seems  just  that  the  principle  of  estoppel  should  be  applied  to 
hold  the  bank.     (See  §  406  A.) 

(&)  The  promise  of  the  banker  must  be  absolute.  If  it  be 
contingent,  or  if  it  be  other  than  a  distinct  promise  of  out- 
Conditionai  right  and  unconditional  payment,  it  does  not  bind 
acceptance,  j^jj^  ^g  ^^  acceptance.  Thus,  a  depositor  ordered 
his  banker  to  hold  a  certain  sum  at  the  disposal  of  A.,  and 
notified  A.  of  his  action.  The  banker  likewise  notified  A.  of 
718 


LIMITED  ACCEPTANCE.  §  408 

the  direction  he  had  received,  and  that  he  had  registered  it. 
He  declined,  however,  for  the  present,  to  accept  bills  for  any 
part  of  the  amount,  since  he  was  already  in  advance  to  his 
customer ;  and  positively  undertook  and  promised  only  that, 
if  remittances  should  come  forward  so  tliat  he  should  be 
enabled  to  comply  with  the  directions,  then  he  would  promptly 
advise  A.  The  court  held  that  no  contract  arose  with  A., 
and  that  he  had  no  remedy  either  in  law  or  in  equity  against 
the  banker.^ 

An  interesting  case  of  conditional  acceptance  arose  in  West 
Virginia.  The  U.  S.  Rev.  Sts.  §  5208,  declare  it  to  be  unlaw- 
ful for  a  national  bank  to  certify  a  check,  unless  the  drawer 
has,  at  the  time  of  presentment  for  certification,  sufficient 
funds  in  the  bank  to  meet  the  check.  A  check  was  presented, 
and  the  cashier  promised  the  holder  that  it  should  be  paid  in 
case  a  draft  deposited  for  collection  by  the  drawer  of  the 
check  should  be  duly  paid.  The  draft  was  duly  paid.  The 
court  held  that  thereupon  the  obligation  of  the  bank  to  pay 
the  check  was  complete  and  binding.  A  statute  prohibiting 
certification  of  checks  when  the  drawer's  funds  are  insufficient 
does  not  invalidate  a  promise  on  the  part  of  the  bank  to  pay  a 
check  at  a  future  day,  when  the  drawer  shall  have  enough 
funds  for  that  purpose  in  its  possession.  In  other  words,  this 
was  not  a  certification  absolute,  which  would  have  been  bad 
for  lack  of  funds,  but  a  certification  contingent,  which  could 
not  come  into  force  until  the  funds  should  be  received  and 
the  law  satisfied.^ 

(c)  If  the  bank  only  accepts  or  certifies  generally,  its  obli- 
gation is  to  pay  at  any  time  when  the  holder  may  make  de- 
mand.    But  if  the  acceptance  is  to  pay  at  a  future    . 

'■  ^     "^  Acceptance 

day  certain,  then  the  transaction,  as  between   the   to  pay  at  a 
bank  and  the  drawer,  is  equivalent  to  a  loan  of  the 
amount  made  by  the  drawer  to  the  bank  for  the  period  inter- 
vening between  the  acceptance  and  the  date  named  for  pay- 
ment.    During  that  interval  the  bank  has  a  right  to  retain 

5  Malcolm  v.  Scott,  5  Exch.  601  ;  3  Mac.  &  G.  29. 
^  First   National    Bank   v.   Merchants'    National   Bank,    7   W.    Va. 
544. 

719 


§  409  ACCEPTANCE    AND    CERTIFICATION. 

from  the  funds  of  the  drawer  in  its  hands  a  sum  sufficient  to 
meet  the  acceptance  when  it  shall  fall  dueJ 

Although  acceptance  to  pay  at  a  future  day  is  valid,^  such 
promise  is  binding  for  a  reasonable  time  only.^ 

A  promise  by  a  national  bank  to  pay  all  checks  that  may 
be  drawn  upon  it  by  a  certain  person,  without  limit  as  to  time 
and  amount,  does  not  amount  to  a  certification  but  is  a  guaranty 
and  is  ultra  vires}^ 

In  Pennsylvania  a  bank  is  not  bound  by  the  verbal  promise 
of  its  president  that  a  check  will  be  paid  if  the  holder  will 
retain  it  a  few  days.^i 

§  409.  Retention.  —  It  occasionally  happens  that  a  check 
is  presented  to  the  bank,  and  is  not  paid  upon  the  spot  by  the 
bank,  but  is  retained  by  it.  If  this  happens  without  any  dis- 
tinct contemporaneous  agreement  between  the  holder  and  the 
bank  as  to  the  conditions  and  purpose  of  the  retention,  it  will 
not  operate  as  an  acceptance  of  the  check  by  the  bank,  unless 
the  retention  is  continued  for  an  unreasonable  length  of  time 
without  explanation  on  the  part  of  the  bank.  If  the  check  is 
sent  to  the  bank  through  the  mail,  it  has  even  been  said  that 
the  bank  may  hold  it  any  length  of  time  without  incuri'ing  the 
liability  of  an  acceptance.  For  the  mere  fact  that  a  check  is 
handed  into  a  bank  creates  of  itself  no  obligation  on  the  part 
of  the  bank  to  notify  the  holder  that  it  will  not  be  paid.  It  is 
his  duty  to  call,  after  a  reasonable  period  has  elapsed,  and 
demand  payment,  or  ask  whether  or  not  it  will  be  paid  ;  and 
after  the  lapse  of  such  time  it  will  be  the  duty  of  the  bank  to 
pay  or  to  answer  him  ;  but  not  before  that  time,  for  the  bank 
always  has  a  reasonable  period  for  examining  its  accounts 
before  it  can  be  required  to  pay,  or  to  answer  whether  or  not 
it  will  pay.     In  the  case  of  Bellasis  v.  Hester  ^  such  period 

^  Bank  of  England  v.  Anderson,  4  Scott,  50. 

*  La  Banque  du  Peuple  v.  La  Banque  d'Exchange,  1  Montreal  L.  R. 
(S.  C.)  231 ;  Exchange  Bank  v.  La  Banque,  3  Montreal  L.  R.  (Q.  B.) 
232. 

9  Seventy  days  is  a  reasonable  time.   Leach  v.  Hill,  106  la.  171  (1898). 

10  Bowen  v.  Needles  National  Bank,  87  Fed.  430  (1898). 
"  Bank  v.  Lindeman,  161  Pa.  199. 

1  §  409.     1  Ld.  Raym.  280. 
720 


RETENTION.  §    409 

was  said  to  be  twenty-four  hours.  In  the  case  of  Overman 
V.  Iloboken  City  Banlv,'-^  a  choclv  drawn  to  the  order  of  the 
plaintiff  was  deposited  in  the  Bank  of  Commerce,  in  New 
York  City,  and  was  by  that  bank  transmitted  to  the  Ocean 
Bank- for  the  purpose  of  being  sent  thence  to  the  defendant 
bank  for  payment.  It  was  received,  by  this  means,  by  the 
defendant  bank,  October  31,  between  twelve  and  one  o'clock, 
noon,  and  by  it  was  retained  till  twelve  M.  on  the  following 
day,  when  it  was  returned  to  the  Ocean  Bank  marked  "  not 
good."  At  ten  o'clock  a.m.  on  the  day  following  the  Ocean 
Bank  sent  it  back  to  the  Bank  of  Commerce,  which  immedi- 
ately notified  the  plaintiffs  of  the  dishonor.  The  court  held 
that  the  mere  retention  of  the  check  by  the  defendants  did 
not  constitute  an  acceptance  by  them,  or  bind  them  to  a  pay- 
ment. The  court  said,  a  banker  may  retain  a  check  twenty- 
four  hours  to  examine  his  accounts  and  see  if  he  will  accept ; 
"  after  the  lapse  of  this  time  the  holder  has  a  right  to  know 
if  the  check  or  bill  is  to  be  honored  or  dishonored,  but  it  is 
his  duty  to  wait  upon  the  drawee  to  ascertain  this."  ^  In  the 
absence  of  usage  or  mode  of  dealing,  or  circumstance  of  con- 
duct amounting  to  estoppel,  the  best  opinion  is  that  mere 
retention  will  not  operate  as  an  acceptance,  whatever  be  the 
length  of  time,  for  the  drawee  is  not  obliged  to  send  an  an- 
swer even  when  the  holder  sends  the  check  to  it  by  mail,  but 
may  safely  wait  in  silence  till  the  holder  makes  some  further 
move.^  In  the  case  of  a  check  sent  by  mail,  however,  it  might 
seem  more  just  and  reasonable  to  hold  that  the  bank  is  the 
agent  of  the  holder  to  return  an  answer  in  reasonable  time ; 

2  2  Vroom  (N.  J.),  5G3. 

8  Overman  v.  Hoboken  City  Bank,  2  Vroom  (N.  J.),  563.  Twenty- 
four  hours  is  deemed  a  reasonable  period  for  the  drawee  of  a  bill  to 
deliberate  and  look  to  the  state  of  his  accounts.  Connelly  v.  McKean, 
61  Pa.  St.  113;  Montgomery  County  Bank  v.  Albany  City  Bank,  8  Barb. 
(N.  Y.)  399  ;  Bellasis  v.  Hester,  1  Ld.  Raym.  280  ;  Case  v.  Burt,  15 
Mich.  82. 

*  In  Jeune  v.  Ward,  2  Stark.  326,  Lord  Ellenborough  held  it  to  be  the 
duty  of  the  drawee  to  return  the  bill,  but  the  Court  of  King's  Bench 
reversed  his  ruling,  though  the  bill  had  been  retained  a  month.     Parsons 
agrees  with  the  text.     2  Pars.  B.  &  N.  284,  and  Chitty  on  Bills,  175. 
VOL.  I. —46  721 


§  410  ACCEPTANCE   AND    CERTIFICATION. 

but  we  must  remember  that  the  bank's  duty  in  regard  to 
checks  is  only  to  pay  them  over  its  counter,  and  it  cannot  be 
burdened  with  correspondence  in  addition  to  this  duty,  unless 
by  its  consent. 

The  New  Jersey  case  above  is  cited  in  Judge  Story's  work 
on  Promissory  Notes,  as  settling  the  law  upon  this  point.  But 
it  should  be  noted  that  the  above  doctrine  is  only  that  of  the 
common  law,  unaffected  by  the  introduction  of  evidence  re- 
lating to  the  understanding  and  usage  of  business  in  any 
special  locality.  In  the  case  of  Overman  v.  Hoboken  City 
Bank,  the  banks  were  situated  in  different  States,  and  cus- 
tom could  probably  not  have  been  shown.  Had  all  the  banks 
been  in  New  York  City,  such  evidence  would  probably  have 
been  offered.  The  matter  is  one  concerning  which  there  is 
usually  a  definite  and  well  understood  usage  in  every  business 
community. 

In  Pennsylvania  it  has  been  said  :  "  If  a  bank  does  not  pay 
or  accept,  it  is  bound  to  refuse.  It  has  no  right  to  receive 
and  keep  the  check  indefinitely,  thereby  leaving  the  holder 
to  suppose  that  it  has  accepted  the  check  and  assumed  its 
payment.^ 

In  Tennessee  it  has  been  held  that  acceptance  of  a  check 
and  a  promise  to  pay  it  in  accordance  with  directions  is  in- 
ferred where  the  drawee  bank  receives  and  retains  it  and 
charges  it  to  the  account  of  the  drawer,  who  has  sufficient 
funds  on  deposit  to  meet  it  and  who  consequently  lifts  such 
check  upon  settlement  with  the  bank.^" 

In  England  it  is  held  that  a  banker  may  retain  a  check 
until  next  day  to  see  if  he  is  in  funds.  He  is  entitled  to  one 
day's  time,  and  such  delay  does  not  make  him  liable  as  for 
acceptance.6  if  funds  come  in  while  holding  the  check,  they 
must  be  applied  to  it. 

§  410.  Putting  on  Cancelling  Fork.  —  Charging  Drawer.  — 
Placing  a  check  on  the  cancelling  fork  by  mistake  does  not 

6  First  Nat'l  Bank  of  Northumberland  v.  McMichael,  106  Pa.  St.  464. 
6a  Pickle  V.  Muse,  88  Tenn.  389  (1890). 

6  Kilsby  V.  WilUams,  5  Barn.  &  Aid.  815;  Boyd  v.  Emmersou,  2  Ad. 
&  E.  184. 

722 


WHO    MAY   CERTIFY.  §    413 

amount  to  acceptance,  nor  prevent  return  of  it  on  discovering 
that  it  is  not  correct  in  form,  or  that  there  are  not  sufficient 
funds. ^  But  deducting  the  amount  of  a  check  from  the 
draw^er's  account  is  an  acceptance.^  So  if  the  amount  of  an 
outstanding  check  is  retained  by  the  drawee  bank  in  a  settle- 
ment with  the  drawer,  it  is  an  implied  acceptance.^  But  if 
the  payment  or  settlement  is  by  mistake,  as  in  case  of  pay- 
ment on  a  forged  indorsement,  the  United  States  Supreme 
Court  denies  that  there  is  any  acceptance.     (§  474,  e,  h.) 

§  411.  Delivery  necessary  to  Complete  Certification.  —  The 
bank's  liability  upon  a  certification  does  not  arise  upon  the 
mere  marking  the  check  "  good,"  but  upon  the  delivery  of 
the  certified  check  to  the  holder,  or  person  who  presents  it. 
If  it  receives  orders  from  the  drawer  revoking  the  check,  after 
it  is  marked  but  before  it  is  delivered,  it  delivers  the  check  at 
its  own  risk  ;  if,  however,  it  had  delivered  before  receiving  the 
order,  it  would  have  been  unnecessary  to  pay  any  attention  to 
said  order,  as  it  would  be  of  no  effect.^  A  bank  cannot  refuse 
to  pay  a  certified  check  because  of  a  countermand  after  the 
certification  is  complete.^ 

§  412.  Acceptance  away  from  the  Bank.  (§  168  d.)  —  An 
acceptance  by  the  cashier  away  from  the  bank  is  not  valid, 
and  will  not  bind  the  bank  nor  exclude  creditors  from  hold- 
ing the  deposit  against  which  the  check  was  drawn  under 
an  attachment  served  after  the  outside  acceptance  was 
made.^ 

§  413.  Authority  to  Certify.  —  Cashier,  president,  and  teller 
have  inherent  power,  assistant  cashier  or  any  sub-officer  not. 
Check  must  not  be  irregular  or  post-dated  ;  but  bank  may  be 
liable  to   innocent    holder  though   the   officer   exceeded   his 

1  §  410.  National  Bank  of  Rockville  v.  Second  National  Bank  of  La- 
fayette, 69  Ind.  479  (1880). 

2  Seventh  National  Bank  v.  Cook,  73  Pa.  St.  483 ;  Pratt  v.  Foote, 
9  N.  Y.  466;  Pickle  v.  Muse,  88  Tenn.  389  (1890). 

3  Saylor  v.  Bushong,  100  Pa.  St.  23. 

1  §  411-  Freuud  v.  Importers  &  Traders'  National  Bank,  3  Hua 
(N.  Y.),  689;  76  N.  Y.  3.52  ;  12  Hun  (N.  Y.),  537. 

2  Nassau  Bank  y.  Broadway  Bank,  54  Barb.  (N.  Y.)  236. 
1  §  412.   Bullard  v.  Randall,  1  Gray  (Mass.),  605. 

723 


§  413  ACCEPTANCE    AND    CERTIFICATION. 

power.     National  bank  may  certify  if  funds  are  sufficient,  or 
accept  conditionally  if  funds  are  not  sufficient. 

The  authority  of  a  subordinate  officer  to  certify  must  be 
shown  by  a  course  of  dealing  or  actual  authorization.^  The 
cashier  has  inherent  authority  to  certify .^  President  also  has 
power  ex  officio  to  certify  ;  but  even  though  empowered  to 
certify  by  a  by-law,  he  cannot  certify  his  own  checks,  for  an 
agent's  power  is  to  be  used  for  the  exclusive  benefit  of  his 
principal.^  The  teller  has  been  held*  to  have  authority  in- 
herent to  certify,  and  it  seems  an  unavoidable  conclusion,  as 
he  is  simply  the  substitute  of  the  cashier  in  regard  to  certain 
duties  within  the  scope  of  which  this  seems  naturally  to  fall, 
it  being  his  duty  to  pay,  and  certification  being  to  all  intents 
and  purposes  payment  of  the  check.  But  an  assistant  cashier 
has  no  inherent  power  to  certify,  and  a  holder  is  put  to  his 
inquiry  concerning  liis  authority.^ 

(a)  But  the  instrument  certified  must  be  a  check  in  the 
usual  commercial  form.     Where  a  check  stated  on  its  face 
that  it  was  intended  to  be  held  as  collateral  secu- 
be^in^proper    rity,  the  cashicr's  certification,  "  Good  when  prop- 
^'""™'  erly  indorsed,"  was  held  to  be  irregular,  and  not 

binding.^ 

(5)  When  a  post-dated  check  is  certified  before  maturity, 
And  not  it  carries  notice  to  all  that  the  certification  was  be- 
dated  subse-    ^^^^^  ^j^g  officer's  authority .^   Where  a  check  drawn 

quent  to  cer-    •'  •' 

tiiicate.  on  tlie  Bank  of  Albion  at  L.,  dated  March  1,  was 

1  §  413.  Pope  V.  Bank  of  Albion,  57  N.  Y.  126  ;  Rev.  59  Barb. 
(N.  Y.)  226. 

2  Merchants'  Bank  v.  State  Bank,  10  Wall.  648.  "  The  power  is  in- 
herent in  the  office."  Pope  v.  Bank  of  Albion,  59  Barb.  (N.  Y.)  226. 
Massachusetts  alone  has  cases  contra,  and  holds  that  a  usage  for  cashier 
to  certify  is  bad,  and  will  not  avail.  Mussey  v.  Eagle  Bank,  9  Met. 
(iSIass.)  313;  Atlantic  Bank  v.  Merchants'  Bank,  10  Gray  (Mass.),  532. 
See  Chapter  XI.,  "  The  Cashier." 

8  Claflin  V.  Farmers  &  Mechanics'  Bank,  25  N.  Y.  296. 
*  Irving  Bank  v.  Wetherald,  36  N.  Y.  335  ;  Farmers  &  Mechanics' 
Bank  v.  Butchers  &  Drovers'  Bank,  16  N.  Y.  133. 

5  Pope  V.  Bank  of  Albion,  57  N.  Y.  127. 

6  Dorsey  v.  Abrams,  85  Pa.  St.  299. 

'  Clarke  National  Bank  v.  Bank  of  Albion,  52  Barb.  (N.  Y.)  592. 
724 


EFFECT   OF   CERTIFICATION.  §    414 

cashed  by  Pope  in  New  York  on  March  2,  the  fact  that  the  check 
could  not  have  been  certified  after  date  and  then  have  reached 
New  York  by  the  time  Pope  took  it,  was  held  to  put  Pope  on 
inquiry,  and  prevent  his  recovery  as  a  bona  fide  holder.^ 

A  bank  is  not  relieved  from  paying  an  innocent  holder  by 
the  fact  that  the  cashier  transgressed  his  instructions  to  certify 
only  in  case  of  sufficient  funds.  The  authority  of  the  assist- 
ant teller  to  certify  may  be  shown  by  a  course  of  dealing 
between  him  and  the  bank  and  its  customers.^ 

{c)  In  Merchants'  Bank  v.  State  Bank  the  court  declares 
that  a  certified  check  is  not  within  the  prohibition  of  the  Na- 
tional Currency  Act  of  1864,  §  23,  forbidding  banks     „  .     .     , 

•^  ,»  •         1  National 

to  issue  post-notes  or"  other  notes  to  circulate  as  bank  may 
money,  other  than  ordinary  bank-bills.  The  act  ^*^'''^- 
of  March  3,  1869,  does  not  prevent  national  banks  from  cer- 
tifying orally  if  funds  are  sufficient,  nor  from  accepting  con- 
ditionally to  pay  when  the  funds  are  sufficient.^*^  That  statute 
prohibits  national  banks  from  certifying  when  the  funds  are 
insufficient. 

§  414.  Effect  of  Certification  after  Issue.  — After  the  certifi- 
cation is  complete,  the  bank  is  bound  as  a  direct  and  original 
promisor  to  the  payee  ;  it  and  he  are  parties  to  a  contract 
upon  which  he  has  his  right  of  action  directly  against  the 
bank,  without  any  regard  whatsoever  to  its  relations  with 
the  depositor  or  the  state  of  the  drawer's  account  either  at 
the  time  of,  or  at  any  time  after,  the  acceptance.^ 

The  practice  of  certifying  checks  has  not  escaped  severe 
criticism ;  but  it  has  been  so  thoroughly  established,  both 
among  business  men  and  by  the  courts,  that  its  legality  can 
no  longer  be  questioned.     The  Supreme  Court  of  the  United 

8  Pope  V.  Bank  of  Albion,  57  N.  Y.  126  ;  Rev.  59  Barb.  (N.  Y.)  226. 

!»  Hill  V.  Xational  Trust  Co.,  108  Pa.  St.  1. 

10  First  National  Bank  v.  Merchants'  National  Bank,  7  W.  Va.  544. 

1  §  414.  Keene  v.  Beard,  8  C.  B.  n.  s.  372  ;  BuUardw.  Randall,  1  Gray 
(Mass.),  605;  Morse  v.  Massachusetts  National  Bank,  1  Holmes  C.  C 
200;  Cooke  v.  State  National  Bank  of  Boston,  52  N.  Y.  96,  affirming 
same  case,  50  Barb.  (N.  Y.)  339;  1  Lans.  (N.  Y.)  494;  and  all  the 
cases  cited  on  this  general  topic,  below.  People  v.  St.  Nicholas  Bank, 
77  Hun  (N.  Y.),  159. 

725 


§  414  ACCEPTANCE   AND    CERTIFICATION. 

States,  per  Swayne,  J.,  speak  of  the  custom  in  the  following 
decisive  language :  "  All  the  authorities,  both  English  and 
American,  hold  that  a  check  may  be  accepted,  though  accept- 
ance is  not  usual.  By  the  law  merchant  of  this  country,  the 
certificate  of  the  bank  that  a  check  is  good  is  equivalent  to 
acceptance.  It  implies  that  the  check  is  drawn  upon  suffi- 
cient funds  in  the  hands  of  the  drawee,  that  they  have  been 
set  apart  for  its  satisfaction,  and  that  they  shall  be  so  applied 
whenever  the  check  is  presented  for  payment.  It  is  an  under- 
taking that  the  check  is  good  then,  and  shall  continue  good, 
and  this  agreement  is  as  binding  on  the  hank  as  its  notes  of 
circulation,  a  certificate  of  deposit  payable  to  the  order  of  the 
dejjositor,  or  any  other  obligation  it  can  assume.  The  object 
of  certifying  a  check,  as  regards  both  parties,  is  to 

ObiGcts. 

enable  the  holder  to  use  it  as  money.  The  trans- 
feree takes  it  with  the  same  readiness  and  sense  of  security 
that  he  would  take  the  notes  of  the  bank.  It  is  available  also 
to  him  for  all  the  purposes  of  money.  Thus  it  continues 
to  perform  its  important  functions  until  in  the  course  of 
business  it  goes  back  to  the  bank  for  redemption,  and  is 
extinguished  by  payment.  It  cannot  be  doubted  that  the  cer- 
tifying bank  intended  these  consequences,  and  it  is  liable  ac- 
cordingly. To  hold  otherwise  would  render  these  important 
securities  only  a  snare  and  a  delusion.  A  bank  incurs  no 
greater  risk  in  certifying  a  check  than  in  giving  a  certificate 
of  deposit.  In  well-regulated  banks  the  practice  is  at  once  to 
charge  the  check  to  the  account  of  the  drawer,  to  credit  it 
in  a  certified  check  account,  and,  when  the  check  is  paid,  to 
debit  that  account  with  the  amount.  Nothing  can  be  simpler 
or  safer  than  this  process. 

"  The  practice  of  certifying  checks  has  grown  out  of  the 
business  needs  of  the  country.  They  enable  the  holder  to 
keep  or  convey  the  amount  specified  with  safety.  They  ena- 
ble persons  not  well  acquainted  to  deal  promptly  with  each 
other,  and  they  avoid  the  delay  and  risks  of  receiving,  count- 
ing, and  passing  from  hand  to  hand  large  sums  of  money.  It 
is  computed  by  a  competent  authority,  that  the  average  daily 
amount  of  such  checks  in  use  in  the  city  of  New  York, 
726 


EFFECT   OF    CERTIFICATION.  §    414 

throughout  the  year,  is  not  less  than  one  hundred  millions 
of  dollars.  We  could  hardly  inflict  a  severer  blow  upon  the 
commerce  and  business  of  the  country  than  by  throwing  a 
doubt  upon  their  validity."  ^ 

(a)  It  has  been  said  that  the  effect  of  a  legal  acceptance 
by  the  bank  is  to  place  the  holder  of  the  check  in  the  position 
of  a  depositor  ;  that  in  fact  and  in  law  he  himself  g^n^  ^^^^ 
becomes  thereby  a  depositor  of  the  bank.  It  was  ^^"^  '^"'^«''- 
not  of  course  intended  by  this  remark  to  signify  that  he  stands 
precisely  on  the  footing  of  one  who  has  opened  an  ordinary 
deposit  account  with  the  bank.  For  example,  he  cannot  draw 
checks  against  the  amount  standing  to  his  credit.  But,  like 
an  ordinary  depositor,  he  is  a  simple  contract  creditor  of  tl?e 
bank,  which  is  bound  to  pay  on  demand  to  him  or  to  his  order 
the  amount  of  the  debt.^  However  certain  it  may  be  consid- 
ered that  in  his  character  simply  as  a  check-holder  he  has  no 
right  to  sue  the  bank  for  the  amount  of  his  check,  at  least 
there  is  no  doubt  of  his  right  of  action  after  acceptance.  The 
acceptance  is  in  itself  a  new  and  perfect  contract  between 
himself  and  the  bank,  superseding  the  previous  peculiar  rights 
of  all  parties.  It  has  been  said  that  its  technical  operation  is 
to  transfer  to  the  holder  the  di-awer's  right  of  action  against 
the  bank.*  It  is  an  inference  from  the  language  used  in  this 
case,  that  the  transaction  effects  a  literal  trarisferring,  in  the 
sense  of  depriving  the  former  possessor  of  his  rights ;  that  is 
to  say  that  the  right  of  action  given  to  the  holder  is  not  co- 
existent with  another  right  of  action  still  remaining  in  the 
drawer,  but  is  identical  with  it,  and  is  by  the  act  of  the  bank 
passed  over  from  the  one  to  the  other. 

2  Merchants'  Bank  v.  State  Rank,  10  Wall.  604,  at  p.  647.  See  Hel- 
wege  V.  Hibernia  National  Bank,  28  La.  An.  520.  See  also  statement  of 
Marine  National  Bank  v.  City  National  Bank,  59  N.  Y.  71 ;  §  478,  Forgery 
of  Certified  Check. 

3  Girard  Bank  v.  Bank  of  Penn  Township,  39  Pa.  St.  92  ;  Seventh 
National  Bank  v.  Cook,  73  id.  483. 

*  Commercial  Bank  of  Albany  v.  Hughes,  17  Wend.  (N.  Y.)  94.  The 
same  is  implied  also  in  the  decision  rendered  in  Dykers  v.  Leather 
Manufacturers'  Bank,  11  Paige  (N.  Y.),  612.  People  v.  St.  Nicholas 
Bank,  77  Hun  (N.  Y.),  159. 

727 


§  414  ACCEPTANCE    AND    CERTIFICATION. 

(6)  The  drawer  can  no  longer  sue,  though  the  bank  should 

finally  refuse  to  pay  the  oheck.     For  he  has  originally  only  a 

right  to  demand  that  the  check  shall  be  duly  paid  on 

Drawer  .         ,.         „ 

cannot  sue  presentment,  and  his  action  lies  for  the  damage  re- 
sulting to  him  or  to  his  credit  from  not  having  his 
debt  duly  discharged  in  the  manner  he  has  led  his  creditor  to 
suppose  would  be  sufficient.'^  But  if  the  holder  waives  his 
right  to  immediate  payment,  by  expressly  asking  for  or  even 
by  accepting  the  offer  of  a  certification  by  the  bank,  it  follows 
that  since  his  act  acquits  the  debt  due  him  from  the  drawer, 
the  drawer  can  thereafter  have  no  cause  or  basis  whatsoever 
on  which  to  sue.  The  matter  is  voluntarily  taken  out  of  his 
liands  by  the  other  parties,  who  make  their  arrangements  to 
suit  their  own  convenience.  Even  if  the  drawer  has  suggested 
or  requested  the  arrangement,  the  assent  of  the  payee  and 
holder  must  be  regarded  as  at  his  own  sole  risk.  He  is  not 
Drawer  dis-  obliged  to  take  the  bank's  promise  in  place  of  the 
frmi^nabiiity  drawer's  indebtedness.  The  promise  of  the  bank 
to  holder.  ^^  |.|^q  drawer's  account,  accepted  as  satisfactory 
by  the  creditor,  discharges  the  debtor,  and  at  the  same  time 
deprives  him  of  all  further  concern  or  possible  right  of  action 
in  the  premises.^" 

(c)  In  Illinois^  and  Tennessee  are  to  be  found  cases  in 
apparent  conflict  with  the  above,  as  to  the  discharge  of  the 
drawer.  But  in  every  case  the  fact  was  that  the  certification 
was  obtained  by  the  drawer  before  he  delivered  it,  and,  as  will 
be  shown  in  the  next  section,  this  distinguishes  the  matter 
from  the  cases  above  and  below,  in  which  the  certification  was 
subsequent  to  issue.'^'^     The  language  of  the  judges  is  much 

^  The  court  in  Massachusetts  expressly  speak  of  the  act  of  certification 
as  "discharging  them  [the  banks]  as  debtor  to  the  drawer."  Bullard  v. 
Randall,  1  Gray  (Mass.),  605. 

^"  Continental  National  Bank  v.  Cornhauser,  37  111.  App.  475;  Born 
V.  Bank,  123  Ind.  78. 

6  Bickford  v.  First  National  Bank  of  Chicago,  42  111.  238  ;  Rounds  v. 
Smith,  id.  245  ;  Brown  v.  Leckie,  43  id.  497. 

®"  Since  the  text  was  written  the  distinction  stated  therein  has  been 
clearly  recognized  in  the  Illinois  case  of  Continental  National  Bank  r. 
Cornhauser,  37  111.  App.  475. 

728 


EFFECT    OF   CERTIFICATION.  §    414 

broader  than  their  facts  require  or  warrant,  as  is  often  the 
case,  and,  so  far  as  they  apply  to  the  question  of  subsequent 
certification,  the  following  arguments  of  Mr.  Morse  in  his 
second  edition  seem  a  complete  refutation,  and  indeed  it  is 
not  at  all  probable  that  tlie  judges  of  Illinois  or  Tennessee 
would  hold  the  drawer  liable  after  a  post-issue  certification, 
except  by  special  agreement. 

(d)  It  is  said  by  the  judges  that  a  certified  check  does  not 
differ  from  an  ordinary  check,  except  that  the  bank  guarantees 
what  otherwise  would  be  only  assumed ;  viz.  that  the  check  is 
drawn  against  sufficient  funds,  and  will  be  honored  whenever 
payment  shall  be  demanded.  If  payment  be  not  in  fact  made 
upon  it,  then  the  drawer  is  said  to  be  still  liable.  The  analogy 
of  bills  of  exchange  is  relied  upon,  concerning  which  the  rule 
is,  that,  if  an  accepted  bill  be  not  paid  by  the  acceptor,  it  fur- 
nishes cause  of  action  against  the  drawer.  The  fallacy  of  this 
argument  seems  perfectly  obvious ;  the  imperfection  of  the 
analogy  is  patent.  The  undertaking  of  the  drawer  of  the  bill 
is  that  it  shall  be  accepted  and  paid  according  to  its  tenor. 
The  undertaking  of  the  holder  of  the  check  is  that  it  shall  be 
paid  if  duly  presented  for  payment.  If  the  bill  be  accepted 
only,  and  not  paid,  the  undertaking  of  the  drawer  is  not  ful- 
filled, and  he  is  liable  accordingly.  But  if  the  holder  of  the 
check  presents  it,  and,  instead  of  demanding  that  payment 
which  alone  the  drawer  authorizes  him  to  demand,  and  which 
alone  the  drawer  engages  shall  be  made,  prefers  or  consents  to 
accept  the  certification  by  the  bank,  then  the  liolder  is  clearly 
absolved  from  further  liability.  It  should  be  further  noted,  that 
the  fact  of  acceptance  is  evidence  that  payment  would  have 
been  made,  or  ought  to  have  been  made,  had  it  been  demanded 
at  that  time  ;  for  the  bank  has  no  right  to  certify  a  check 
unless  all  those  circumstances  exist  which  would  make  it  the 
duty  of  the  bank  at  that  same  moment  to  pay  the  check  upon 
demand.  It  is,  therefore,  the  holder's  own  fault  if  he  takes 
an  acceptance,  when  he  might  have  a  payment.  Even  in  the 
possible  case  of  a  payment  being  demanded  and  refused,  and 
certification  being  accepted  in  lieu  thereof  by  the  holder,  it 
would  seem,  upon  principle,  that   the  drawer  should  be  ac- 

729 


§  414  ACCEPTANCE    AND    CERTIFICATION. 

quitted ;  for  the  holder,  by  accepting  and  entering  into  an 
arrangement  not  contemplated  by  the  drawer,  may  be  fairly 
held  to  have  discharged  the  drawer.  Take,  for  instance,  the 
case  of  a  bank,  hard  pushed  for  funds,  persuading  a  check- 
holder  to  accept  a  certification  in  lieu  of  payment.  The  certi- 
fied check,  being  substantially  as  good  as  money, probably  will 
be  held  or  will  circulate  for  a  few  days  before  it  is  returned 
for  payment.  When  it  is  returned  for  payment,  the  bank  has 
failed.  What  justice  would  there  be  in  holding  the  drawer  to 
make  good  the  amount,  when,  had  payment  been  demanded 
and  insisted  upon,  it  would  either  have  been  made,  or  he 
would  have  been  entitled  to  receive  notice  of  the  dishonor 
of  his  check,  and  so  enabled  to  use  any  means  in  his  power 
to  protect  himself  ?  Obviously  this  argument  would  be  much 
weakened,  though  not  destroyed,  if  it  were  understood  between 
the  drawer  and  payee  that  certification  might  be  accepted  in 
lieu  of  payment,  or  if  the  usage  of  business  should  bind  the 
drawer  of  a  check  to  anticipate  a  request  for  certification  as 
being  as  probable  as  a  request  for  payment.  The  usage  of 
business  surely  does  not  bind  the  drawer  to  any  such  antici- 
pation. Even  if  it  did,  it  would  not  unquestionably  follow  that 
the  payee,  having  exercised  his  option  to  take  the  promise  of 
the  bank  instead  of  money,  should  not  be  thereby  concluded 
as  against  the  drawer.  But,  in  the  absence  of  such  an 
express  or  implied  understanding,  the  argument  seems  to 
be  plain  against  the  doctrine  asserted  by  the  court  of 
Illinois. 

(e)  Our  view  has  the  authority  of  the  New  York  Court  of 
Appeals,  which  says  that,  so  far  as  the  drawer  of  the  check  is 
concerned,  certification  is  "  precisely  as  if  the  bank 
had  paid  the  money  upon  that  check,  instead  of 
making  a  certificate  of  its  being  good  "  ;  also,  further,  that 
"the  law  will  not  permit  a  check  when  due  to  be  thus  pre- 
sented, and  the  money  to  be  left  with  the  bank  for  the  accom- 
modation of  the  holder,  without  discharging  the  drawer."' 

"The  bank  virtually  says,  That  check  is  good ;  we  have  the 
money  of  the  drawer  here  ready  to  pay  it.     We  will  pay  it 

7  First  National  Bank  of  Jersey  City  u.  Leach,  52  N.  Y.  350. 

730 


EFFECT    OF    CERTIFICATION.  §    414 

now  if  you  will  receive  it.  The  holder  says,  No,  I  will 
not  take  the  money ;  you  may  certify  the  check  and  retain 
the  money  for  me  until  this  check  is  presented.  Drawer  is 
The  law  will  not  permit  a  check,  when  due,  to  be  <i'sciiarged. 
thus  presented,  and  the  money  to  be  left  with  the  bank  for 
the  accommodation  of  the  holder  without  discharging  the 
drawer.  The  money  being  due  and  the  check  presented,  it 
is  his  own  fault  if  the  holder  declines  to  receive  the  pay,  and 
for  his  own  convenience  has  the  money  appropriated  to  that 
check  subject  to  its  future  presentment  at  any  time  within 
the  Statute  of  Limitations."  ^ 

"  Ordinarily,  where  the  payee  or  holder  of  a  check  which 
is  payable  immediately,  instead  of  demanding  payment,  pro- 
cures the  check  to  be  certified,  the  check  is,  as  between  the 
drawer  and  holder,  regarded  as  paid,  and  the  holder  must 
look  to  the  bank  whose  obligation  it  has  accepted  in  lieu  of 
the  money;  because,  by  procuring  the  certification,  he  has 
caused  an  amount  of  the  drawer's  fund,  or  credit,  equal  to  that 
for  which  the  check  was  drawn,  to  be  set  apart  for  the  pay- 
ment of  that  check  and  withdrawn  from  the  control  of  the 
drawer,  and  his  funds  are  as  effectually  diminished  as  if 
the  money  had  been  paid  ;  while  the  bank  has  given  a  nego- 
tiable obligation  to  the  holder  of  the  check  which  is    ^ 

Equal  to  cer- 

equivalent  to  a  certificate  of  deposit.  If  the  holder  titicate  of 
of  the  certified  check  should  lose  it,  be  would  still 
have  his  remedy  upon  it  against  the  bank,  but  could  not  have 
recourse  against  the  drawer  whose  funds  had  been  locked  up, 
or  transferred  to  the  credit  of  another  party.  And  even  the 
subsequent  payment  of  the  check  by  the  bank  upon  a  forged 
indorsement  would  not  relieve  it  of  its  liability  upon  the  con- 
tract it  had  made  with  the  true  owner,  nor  restore  to  the 
drawer  the  right  to  draw  upon  the  bank  for  the  funds  which 
had  been  appropriated  to  the  payment  of  the  check  and  were 
consequently  no  longer  his."^ 

Where   a   certified   check  is  stolen,  and  notice    certified 
is  given  of  its  loss,   or    the  check  is   advertised,  ^iieck  stolen. 

8  First  National  Bank  v.  Leach,  52  N.  Y.  353. 
«  Thomson  v.  Bank,  82  N.  Y.  6. 

731 


R  414  ACCEPTANCE   AND    CERTIFICATION. 

still   a    bona   fide   holder   can    recover    upon    it    from    the 
bank.  10 

(/)  Chief  Justice  Oakley  said  :  "  When  the  business  of  the 
bank  is  properly  conducted,  it  is  the  duty  of  the  officer  cer- 
tifying the  check  to  cause  it  to  be  immediately  charged  as 
paid  to  the  account  of  the  drawer ;  and  when  this  is  done, 
the  sum  thus  charged  will  remain  as  a  deposit  in  the  bank  to 
the  credit  of  the  check,  and  be  forever  withdrawn  from  the 
control  of  the  maker,  except  as  a  holder  of  the  check.  Such 
a  deposit  stands  upon  exactly  the  same  grounds  as  any 
other,""  except  of  course  the  check-holder  cannot  draw 
against  it  in  parts.  A  certified  check  has  a  distinctive  char- 
acter, as  a  species  of  commercial  paper,  the  certification 
constituting  a  new  contract  between  the  holder  and  the  cer- 
tifying bank ;  the  funds  of  the  drawer  are,  in  legal  contem- 
plation, withdrawn  from  his  credit,  and  appropriated  to  the 
payment  of  the  check,  and  the  bank  becomes  the  debtor  of 
the  holder,  as  for  money  had  and  received. ^^  As  to  the  drawer 
nd  indorsers,  if  there  are  any,  the  certification  is  a  payment 
of  the  check,  and  they  are  no  longer  liable  upon  it.^^ 

(^)  A  California  case  is,  by  analogy,  authority  to  the  same 
effect  ;  wherein  it  was  held  that  the  payee,  having  presented 
the  check  for  payment,  which  was  offered,  but  having  then 
decided  to  leave  the  money  in  the  bank  for  his  own  con- 
venience a  few  hours  longer,  the  drawer  was  discharged, 
though  upon  the  second  demand  for  payment,  made  by  the 
payee  on  the  same  day,  payment  was  refused  by  reason  of 
the  failure  of  the  bank.^^ 

By  the  acceptance  or  certification  of  the  check,  a  new  and 
specific  engagement  is  entered  into  by  the  bank  with  the 
Check  be-  holder  and  his  legal  transferees.  This  engage- 
''romiseto  ^^^ut  is  simply  and  unconditionally  to  pay  to  him 
P''y-  or  them  the  sum  named  in  the  check  on  deraand.^^ 

13  Nolan  V.  Bank,  67  Barb.  (N.  Y.)  24. 
11  Willetts  V.  Phoenix  Bank,  2  Duer  (N.  Y.),  121. 
1'^  National  Commercial  Bank  v.  Miller,  77  Ala.  168. 
13  Simpson  v.  Pacific  Mutual  Life  Ins.  Co.,  44  Cal.  139. 
"  Girard  Bank  v.  Bank  of  Penu  Township,  39  Pa.  St.  92 ;  Farmers  & 
732 


EFFECT   OF   CERTIFICATION,  §   414 

The  check  ceases  in  fact  to  be  a  check,  and  becomes  a  prom- 
ise to  pay.  Accordingly,  the  rules  which  govern  a  check  no 
longer  govern  this  instrument. 

"  There  is  no  difference  between  the  liability  created  by  a 
certified  check  and  hy  a  note  of  the  bank  payable  on  demand. 
Each  is  intended  to  circulate  as  money.  The  object  is  to 
enable  the  holder  to  use  the  check  as  money.  By  certifying, 
the  bank  meant  to  give  the  check  a  currency  and  value  that 
would  not  otherwise  belong  to  it,  and  this  additional  value 
can  only  be  given  by  holding  the  certificate  to  be  an  un- 
conditional promise  of  payment."  ^^ 

(7i)  Certification  admits  the  genuineness  of  the  drawer's 
signature,  and  the  fact  that  there  are  sufficient  funds.^*^  The 
rule  has  been  laid  down  in  New  York  and  Pennsyl-  whatcertifi- 
vania,  that  by  the  act  of  certification  the  bank  un-  *=^^'°"  '''^'"'''• 
dertakes  for  only  two  facts ;  viz.,  the  genuineness  of  the 
drawer's  signature,  and  the  sufficiency  of  his  account  to  meet 
this  demand;  that  it  vouches  for  nothing  further,  either  in 
the  body  of  the  check  or  indorsed  upon  it.i'  The  Supreme 
Court  of  the  United  States  has  adopted  the  same  principle  in 
the  case  of  a  check  only  verbally  declared  to  be  good,  in  re- 
sponse to  the  payee's  inquiry  put  to  the  teller ;  but  at  the  same 
time  admitted  that  there  might  be  some  doubt  as  to  extending 
the  rule  to  cover  a  case  where  the  bank  had  certified  the 
check  in  writing,  and  so  sent  it  forth  upon  the  market  to 
circulate  virtually  like  money  or  a  certificate  of  deposit.!^ 

Mechanics'  Bank  v.  Butchers  &  Drovers'  Bank,  4  Duer  (N.  Y.),  219; 
16  N.  Y.  12.5;  Meads  v.  Merchants'  Bank  of  Albany,  25  N.  Y.  143;  Shars- 
wood's  note  to  Byles  on  Bills,  p.  21  (Sharswood's  ed.);  Barnes  v.  Ontario 
Bank,  19  N.  Y.  152;  Bickford  v.  First  National  Bank  of  Chicago,  42 
111.  238. 

15  In  substance,  Bickford  v.  First  National  Bank,  42  111.  243. 

16  Merchants'  Bank  v.  State  Bank,  10  Wall.  604;  Espy  v.  Bank,  18 
Wall.  601;  Phoenix  Hank  v.  Bank  of  America,  1  N.  Y.  Leg.  Obs.  20; 
Marine  National  Bank  ;;.  National  City  Bank,  59  N.  Y.  77;  Rapp  v. 
National  Bank,  136  Pa.  426. 

"  Marine  National  Bank  v.  National  City  Bank,  59  N.  Y.  67,  stated 
post:  Rapp  v.  National  Bank,  136  Pa.  426. 
18  Espy  V.  Bank  of  Cincinnati,  18  Wall.  604. 

733 


§  414  ACCEPTANCE   AND    CERTIFICATION. 

(0  No  evidence  of  usage  among  banks  and  merchants 
Evidence  of  to  regard  certification  as  an  obligation  to  pay  al- 
usage.  though  the  body  of  the  instrument  is  forged,  will 

be  admitted. 1^  But  in  Louisiana  a  bank  was  not  allowed 
to  recover  money  paid  upon  a  check  raised  before  certifi- 
cation.2*^ 

ij)  But  the  ordinary  rules  limiting  the  warrant  of  a  cer- 
tification to  signature  and  funds  only  apply  when  the  bank  has 
Bank  must  uo  kuowlcdge  of  the  history  of  the  instrument,  and 
dainagfby  of  the  facts  Connected  with  the  drawing,  delivery, 
dlsciose^the  indorsement,  &c.  When  a  certified  check  is  pre- 
facts  in  its       scutcd  for  information,  if  the  bank  possesses  spe- 

possession  to        ,  ^     ^  '  ^  r' 

an  inquirer,  cial  knowledge  it  is  Under  the  same  obligation  to 
disclose  it  as  a  natural  person,  when  omission  would  cause 
injury  to  the  applicant,  who  evidently  intends  to  act  on  the 
reply  of  the  bank/''^ 

The  F.  Bank  certified  a  draft  payable  there.  T.,  a  holder 
for  value,  paid  the  draft  to  the  F.  in  settlement  of  a  balance, 
but  the  F.  refused  it,  saying  that  the  C.  Bank,  which  had 
presented  the  draft  for  certification,  was  then  and  had  been 
for  several  days  owing  the  F.,  and  was  insolvent.  Held,  that 
the  F.  was  bound  to  receive  the  certified  draft.^  But  in 
the  Court  of  Appeals  it  was  held  that  T.  was  not  a  holder 
without  notice.  The  facts  were,  that  by  custom  of  the  banks 
of  Rochester  negotiable  paper  held  by  a  bank  payable  at 
another  is  certified,  and  returned  as  an  item  of  credit  in  its 
exchange  account,  and  not  as  a  negotiable  instrument.  On 
December  19,  the  C.  Bank  received  from  the  F.  Bank  a  cer- 
tified draft  for  $800,  which  by  custom  the  C.  was  entitled 
to  have  credited  in  its  exchange  settlement  with  the  plain- 
tiff on  the  following  morning.  The  same  day  C.  transferred 
said  draft  to   the  defendant  in   settlement  of   its  exchange 

'9  Security  Bank  y.  National  Bank,  67  IST.  Y.  458. 

20  Louisiana  National  Bank  v.  Citizens'  Bank,  28  La.  An.  189. 

21  Clews  V.  Bank  of  New  York  National  Banking  Association,  89 
N.  Y.  418. 

22  Flour  City  National   Bank  v.   Traders'  National  Baak,   35  Hun 
(N.  Y.),  241;  105  N.  Y.  550  (June,  1887). 
734 


EFFECT   OF    CERTIFICATION.  §    414 

account  with  the  latter.  December  20,  there  was  a  balance 
due,  after  deducting  the  S800  draft,  in  favor  of  the  plaintiff 
against  the  C,  which  was  then  insolvent.  In  settling  the 
account  between  plaintiff  and  defendant,  defendant  claimed 
credit  for  the  draft.  It  appeared  that  defendant  at  time  of 
receiving  draft  knew  there  was  an  exchange  account  between 
the  plaintiff  and  the  C.  Bank,  and  had  notice  that  the  certifica- 
tion was  not  for  purposes  of  negotiation,  but  only  as  a  voucher, 
and  so  was  not  a  holder  for  value  without  notice  ;  for  the 
defendant  did  have  notice  that  the  draft  had  been  perverted 
from  the  purposes  for  which  it  was  certified.  Held,  that 
such  receipt  of  the  draft  by  defendant  did  not  entitle  it  to 
the  rights  of  negotiable  paper,  and  that  under  the  circum- 
stances defendant  could  not  set  off  such  draft  against  plain- 
tiff's exchange  account, 

(^)  Acceptance  of  certification  of  a  check  instead  of  pay- 
ment  releases  the   drawer,  and  renders  the  collecting  bank 
responsible   to   the  owner  for  the    amount.     The    drawer  dis- 
law  presumes   damages  to  the    owner;    and   this   charged. 
whether  or  not   the   bank  on  which   the  check  was   drawn 
has  the  funds  to  pay  it  when  presented.^ 

(?)  It  is  clear,  in  any  way  we  look  at  the  question,  that 
the  drawer  is  discharged  by  certification  after  issue.  Suppose 
the  bank  becomes  insolvent,  it  is  clearly  unjust  to  hold  the 
drawer  when  tlie  payee  could  have  had  the  money  and  chose 
to  leave  it  and  take  the  certification  ;  and  besides,  the  ordi- 
nary rule  of  delay  in  presentment  for  payment  would  dis- 
charge the  drawer.  If,  on  the  other  hand,  the  bank  is 
solvent,  wliere  is  the  use  of  two  actions,  one  by  the  holder 
against  the  drawer,  and  another  by  the  drawer  against  the 
bank,  when  a  single  action  against  the  bank  by  the  holder 
will  accomplish  full  justice  ? 

It  will  not  do  to  say  that  a  check  is  a  bill  of  exchange,  and 
therefore  the  holder  can  sue  the  drawer  if  it  is  dishonored 
after  acceptance.  The  same  argument  would  prove  that  a 
check  could  be  presented  a  day  later  by  collecting  through 

28  Essex  County  National  Bank  v.  Bank  of  Montreal,  7  Biss.  193  (111. 
C.  C.  1876)  ;  Continental  National  Bank  v.  Cornhauser,  37  111.  App.  475. 

735 


§  415  ACCEPTANCE   AND    CERTIFICATION. 

a  banker  than  by  direct  collection,  and  that  the  drawer  of  a 
check  is  absolutely  discharged  by  laches.  Such  reasoning  would 
convince  us  of  almost  anything;  for  example,  as  a  man  is  an 
animal,  he  must  have  four  legs,  since  other  animals  have. 

(m)  The  certification  of  a  check  will  not  give  the  holder  a 
preference  over  other  creditors  upon  insolvency  of  the  bank.'^* 

§  415.  Certification  before  Issue  does  not  at  once  discharge 
the  Drawer.!  —  Until  the  certified  check  is  issued,  the  fund 
cannot  be  withdrawn  from  the  reach  of  a  garnishee  or  at- 
tachment against  the  depositor.^  If  it  were  otherwise,  a 
depositor  could  cut  off  completely  all  rights  of  attachment 
by  making  out  checks  to  cover  his  deposit  and  retaining 
them  in  his  possession.  It  is  clear  that  the  control  and 
ownership  of  the  deposit  are  still  in  the  drawer  until  the 
check  is  issued,  and  that  an  attachment  against  it  before 
the  check  comes  into  the  hands  of  a  bona  fide  holder  will 
secure  the  funds.  Of  course,  then,  when  a  holder  receives  a 
check  from  the  drawer  certified  before  delivery,  the  drawer's 
liability  to  the  holder  cannot  cease  until  the  bank  has  been 
properly  notified  of  the  issue  of  the  check. 

It  will  doubtless  be  held,  whenever  the  question  arises,  that 
a  check  certified  before  delivery  from  the  drawer  is  taken 
on  the  faith  of  the  drawer  until  notice  to  the  bank,  or  its 
acknowledgment  of  the  correctness  of  the  acceptance  and 
its  continued  liability  upon  it. 

These  distinctions,  we  think,  will  disclose  the  real  force  of 
the  Illinois  cases.  In  them  the  certification  was  before  de- 
livery, and  upon  the  facts  the  decision  was  perfectly  just 
and  proper,  although  the  language  of  the  judges  was  broader 
than  the  truth,  and  the  judgment  was  filigreed  with  false 
ornament. 

Suppose  again  that  the  drawer  has  his  check  certified,  and 

2*  People  r.  St.  Nicholas  Bank,  77  Hun  (N.  Y.),  159. 
^  §  415.    First  National  Bank  v.  Leach,  52  N.  Y.  350;  Essex  National 
Bank  v.  Bank  of  INIontreal,  7  Biss.  193  ;  Daniel  on  Neg.  Inst.  §  1601. 

2  Gibson  v.  National  Park  Bank,  98  N.  Y.  87;  Born  v.  Bank,  123  Ind. 
78 ;  Continental  National  Bank  v.  Cornhauser,  37  111.  App.  475  ;  Oyster 
and  Fish  Co.  v.  Bank,  51  Ohio  St.  106. 
736 


BEFORE  ISSUE.  §    415 

afterward  issues  it  to  H.,  but  before  the  issue,  or  before  II. 
can  with  reasonable  diligence  present  the  check  for  payment, 
the  bank  fails ;  ^  it  is  probable  that  in  such  case  the  drawer 
would  not  be  held  to  be  released  by  any  court.  The  case 
differs  from  those  in  which  the  drawer  is  held  discharged, 
in  the  essential  point,  that  the  holder  could  have  received 
the  money,  but  chose  to  leave  it  in  the  bank,  making  the 

3  A  decision  by  Judge  Walker,  in  the  latter  part  of  1887,  in  the  case  of 
the  First  National  Bank  v.  Born,  presents  the  point  made  in  the  text. 
On  Saturday,  Born  drew  a  check  on  Ritzinger's  Bank  in  favor  of  the 
First  National  Bank,  and  had  it  certified.  Afterward  at  three  o'clock 
(close  of  banking  hours)  he  delivered  tlie  check  to  the  First  National 
Bank,  in  payment  of  a  collection  held  by  it  against  him.  On  Monday 
the  payee  presented  the  check  to  Ritzinger's  Bank,  and  demanded  pay- 
ment. Payment  was  refused,  Ritzinger's  Bank  having  closed  its  doors 
on  the  preceding  Saturday,  and  never  opened  them  after  that  day.  Born 
was  duly  notified.  After  thorough  consideration,  the  court  held  that  the 
drawer  was  not  discharged. 

In  every  case  where  that  effect  followed  certification,  it  was  clear  upon 
the  facts  that  any  other  rule  would  have  enabled  the  holder  by  his  own 
sole  act  to  enlarge  the  drawer's  liability.  In  every  such  case  the  holder 
could  have  obtained  the  money,  but  by  his  own  wish  and  act,  and  with- 
out the  consent  or  agreement  of  the  drawer,  chose  to  have  the  check 
certified.  But  when  the  drawer  himself  secures  the  certification,  the 
case  is  different. 

The  holder  of  a  check  ought  to  have  time  to  get  to  the  bank,  and  an 
opportunity  to  receive  his  money  before  he  can  be  said  to  have  done  an 
act  to  discharge  the  party  giving  him  the  order.  "  Besides,  it  is  not  true 
that  the  drawer  of  the  check  so  certified  has  put  the  money  beyond  his 
control  or  recovery  by  legal  means  "  (this  was  the  argument  of  counsel). 
"  It  is  only  when  the  holder  is  not  the  drawer  that  such  is  the  case.  The 
money  is  thus  appropriated,  not  to  pay  any  particular  person,  but  to  pay 
a  particular  check.  So  the  drawer  can  get  it  certified  and  carry  it  as  long 
as  he  wants  to,  and  return  it  to  the  bank,  present  it  like  any  other  bolder, 
and  receive  his  money,  or  sue  to  recover  it." 

Checks  certified  before  delivery  do  not  lose,  as  to  the  drawer,  any  of 
the  characteristics  of  uncertified  checks.  "  Nor  do  they  impose  any 
greater  diligence  upon  the  holder,  who  has  the  same  time  in  which  to 
present  them  as  if  they  were  uncertified.  The  only  effect  of  the  certifi- 
cation is  to  give  the  check  additional  currency  by  carrying  with  it  the 
evidence  that  it  was  drawn  in  good  faith  on  funds  sufficient  to  meet  its 
payment,  and  lending  to  it  the  credit  of  the  bank  in  addition  to  the  credit 
of  the  drawer." 

VOL.  I.  — 47  737 


§  416  ACCEPTANCE   AND   CERTIFICATION. 

transaction  equivalent  to  payment  and  subsequent  deposit. 
Here  the  holder  never  had  the  opportunity  of  receiving  the 
cash ;  he  took  the  paper  just  as  he  would  take  the  note  of 
a  third  person ;  if  properly  presented  and  the  maker  was  in- 
solvent, the  indorse r  would  have  to  make  the  amount  good ; 
but  if  properly  presented  and  the  maker  said  he  could  have 
the  money  and  the  holder  said  no,  he  would  leave  it  with 
the  maker,  then  surely,  whether  the  paper  be  note,  check, 
bill,  or  what  not,  the  indorser  or  drawer  would  have  nothing 
to  do  with  the  matter  thereafter.  And  the  case  also  differs 
from  that  of  payment  in  bank  bills,  for  here  the  paper  carries 
on  its  face  proof  as  to  who  is  liable,  if  any  one  is,  while  an 
equal  certainty  cannot  be  attained  in  the  case  of  bank  bills 
without  embarrassing  commerce. 

The  drawer  who  has  a  check  certified  before  delivery  stands 
Indorsee  of  i^  the  Same  position  as  an  indorser  of  a  certified 
check^hoids  check,  and  it  is  settled  that  such  indorser  can  be 
indorser.       \-yQ\([  ^y  the  indorsee.* 

In  Tennessee  we  have  a  decision,  in  1872,  that  the  drawer 
who  has  a  check  certified  before  delivery  is  liable  to  the 
holder,  as  well  as  the  bank.  (§  416.)  And  though  the  lan- 
guage is  sweeping,  it  should  be  limited,  both  in  this  and  in 
the  Illinois  cases,  to  the  facts  present  to  the  mind  of  the 
judge. 

§  416.  Presentment  to  hold  Drawer.  —  To  render  the  drawer 
liable  on  a  check  that  has  been  certified  (before  issue),  the 
holder  must  present  it  within  the  business  hours  of  the  day 
following  its  receipt.  "  We  have  been  referred  to  no  au- 
thority, nor  are  we  aware  of  any,  in  which  it  is  held  that 
the  fact  of  certification  of  a  check  either  discharges  the 
drawer  absolutely  from  liability  to  the  holder,  or  changes 
tlie  law  of  demand  and  notice  which  governs  the  relation 
between  the  holder  and  drawer.  ...  It  is  no  doubt  true 
that  the  credit  of  the  check  may  rest  mainly  on  the  fact 
that  the  bank  is  primarily  liable,  but  it  is  made  stronger  by 
the  fact  that  the  drawer  stands  as  surety  for  the  bank.  .  .  . 
It  is  still  a  check,  and  because  of  its  certification  and  thereby 
*  Mutual  Bank  r.  Rotge,  28  La.  An.  933. 

738 


STATUTE   OF   LIMITATIONS.  §   418 

of  the  bank's  promise  to  pay  it,  its  approximation  to  money 
and  its  negotiability  in  market  are  increased."  ^ 

A  check  was  presented  four  years  after  certification,  and 
payment   refused.     The  court   held  the  bank  bound  to  pay 
without  regard  to  the  drawer's  account,  and  that    ^yr^^eT 
the  drawer  was  discharged  from  liability  both  on   discharged 

"-  •        o  doublv. 

the  check  and  on  the  original  consideration.-^ 

§  417.  Attachment  of  Deposit  that  is  covered  by  Certified 
Check.  —  A  railroad  company  obtained  from  a  bank  a  certi- 
fied check  for  the  amount  of  its  deposit,  payable  to  the  order 
of  its  treasurer,  and,  while  it  was  outstanding,  a  creditor  of 
the  company  in  a  suit  against  the  company  served  a  warrant 
of  attachment  upon  the  bank.  The  company's  treasurer 
afterwards  deposited  the  check  to  his  individual  account, 
and  drew  against  it  from  time  to  time  to  pay  the  debts 
of  the  company.  The  bank  had  reason  to  believe  that 
the  check  was  owned  by  the  company,  and  that  the  money 
was  used  to  pay  its  debts,  as  was  really  the  case.  It  was 
therefore  held  that  the  bank  was  liable  for  allowing  the 
funds  belonging  to  the  company  to  escape  from  the  grip  of 
the  attachment.^ 

§  418.  The  Statute  of  Limitations.  —  The  Statute  of  Limi- 
tations only  begins  to  run  against  the  liability  of  the  bank  at 
the  time  when  demand  for  payment  is  made.^  The  rule  is 
thus  laid  down  in  the  case  cited,  but  it  is  probable  that  if  any 
tribunal  inclined  to  hold,  in  the  case  of  any  ordinary  deposit 
account,  that  the  statute  began  to  run  in  favor  of  the  bank 
from  the  date  of  the  last  transaction  between  it  and  the  de- 
positor, analogy  would  lead  the  same  bench  to  declare  that 
the  statute  would  begin  to  run  against  the  holder  of  a  cer- 
tified or  accepted  check  from  the  date  of  the  bank's  promise 
upon  it.     This  may   be  directly   inferred  also  from  the  lan- 

1  §416.  Andrews  v.  German  National  Bank,  9  Heisk.  (Tenn.)  211 
(1872);  Schoolfield  v.  Moon,  9  Heisk.  (Tenn.)  171.     But  see  below. 

2  French  v.  Irwin,  4  Baxter  (Tenn.),  401  (1874). 

1  §  417.  Gibson  v.  National  Park  Bank,  98  N.  Y.  87.  See  contra, 
Bills  V.  National  Park  Bank,  47  N.  Y.  Superior  Court,  302. 

1  §  418.    Girard  Bank  v.  Bank  of  Penu  Township,  39  Pa.  St.  92. 

739 


§  418  ACCEPTANCE    AND    CERTIFICATION. 

"•uaGTC  of  the  court  in  tlie  case  of  the  Fanners  and  Mechanics' 
Bank  v.  Butchers  and  Drovers'  Banlv,  cited  below.  The 
check  itself  is,  in  its  new  form,  strictly  "  evidence  of  a  deposit 
to  the  credit  of  the  liolder."  '■^  All  the  rules  about  present- 
ment for  payment  at  once  fall  to  the  ground.  The  holder 
need  no  longer  regard  the  condition  of  the  drawer's  account 
or  balance  with  the  bank.  The  bank  is  bound  to  withhold 
enough  from  the  depositor's  funds  to  meet  the  demand  of  the 
holder  whenever  it  may  be  made.  No  lapse  of  time  before 
making  the  demand,  unless  it  should  be  held  that  the  Statute 
of  Limitations  had  run,  is  laches  upon  the  part  of  the  holder, 
or  infringes  his  rights  against  the  bank  on  the  bank's  duty 
towards  him.  If  in  the  interval,  no  matter  how  long  it  be, 
the  bank  has  allowed  the  drawer  by  his  checks  or  otherwise 
to  reduce  his  balance,  or  even  wholly  to  withdraw  it,  yet  the 
bank  remains  primarily  liable  on  its  original  contract.  It 
must  make  up  any  deficit  from  its  own  funds.  Even  if  at  the 
time  of  acceptance  there  were  not  funds  of  the  drawer  suffi- 
cient to  meet  the  check,  the  bank  must  still  keep  its  promise. 
Delay  of  two  months  and  withdrawal  of  the  drawer's  funds 
in  the  interval,^  and  again  delay  of  one  year,*  were  held  not 
to  impair  at  all  the  liability  of  the  bank.  Far  the  strongest 
case  that  has  arisen  is  that  of  the  Girard  Bank  v.  Bank  of 
Penn  Township,"  where  the  check  was  certified  Oct.  7,  1852  ; 
the  drawer's  funds  were  not  drawn  out  until  Oct.  10,  1854; 
and  the  check  was  not  presented  for  payment  till  Sept.  3, 1859. 
But  the  period  of  the  Statute  of  Limitations  had  not  elapsed 
since  the  certification,  even  if  it  could  have  begun  to  run  at 
all  prior  to  the  demand,  and  the  court  did  not  hesitate  to  hold 
the  bank  liable. 

This  doctrine  seems  simple  enough.  Yet  the  number  of 
cases  in  which  it  has  been  questioned  by  counsel,  and  reiter- 
ated by  the  court,  intimates  a  lurking  belief  in  the  existence 

'^  Farmers  &  Mechanics'  Bank  v.  Butchers  &  Drovers'  Bank,  4  Duer 
(N.  Y.),  219;  16  N.  Y.  125. 

3  Willetts  V.  The  Phoenix  Bank,  2  Duer  (X.  Y.),  121. 

*  Farmers  &  Mechanics'  Bank  *'.  Butchers  &  Drovers'  Bank,  4  Duer 
(X.  Y),  219;  16  N.  Y.  125. 

5  39  Pa.  St.  92. 
740 


STATUTE   OF   LIMITATIONS.  §    418 

of  some  theory  which  runs  counter  to  it,  and  which  is  suffi- 
ciently sound  to  expect  judicial  support.  This  is  doubtless 
to  be  sought  in  the  form  or  phraseology  by  which  it  is  cus- 
tomary for  the  bank  to  accept  or  certify  the  check.  This  is 
not  ordinarily  done  by  writing  any  distinct  words  indicative 
in  terms  of  a  promise  or  undertaking  to  pay,  but  simply  by 
writing  on  the  check,  in  the  handwriting  of  the  officer  com- 
petent to  enter  into  the  contract  on  behalf  of  the  bank,  the 
word  "  Good."     Sometimes  the  officer  adds  to  this 

Form. 

his  own  initials.  Sometimes  he  writes  his  own 
name  or  initials  without  anything  more.  Other  methods 
may  be  in  use  in  various  places.  In  England,  until  a  statute 
was  lately  passed  requiring  words  importing  a  distinct  prom- 
ise to  be  written  and  signed,  a  simple  mark,  not  being  a  word 
at  all,  or  otherwise  intrinsically  intelligible,  was  often  placed 
upon  the  checks.^  They  are  called  in  the  English  cases 
"  marked  checks."  It  seemed  therefore  not  wholly  inapt  to 
argue  that  these  words,  initials,  or  marks,  at  the  very  most, 
purported  only  to  be  memoranda  or  notes  showing  the  pre- 
sentment of  the  check,  and  the  fact  that  at  the  time  of  pre- 
sentment no  obstacle  stood  in  the  way  of  payment  by  the 
bank.  In  other  words,  they  signified  that  at  that  time  the 
drawer's  balance  was  good  for  the  amount  of  the  check.  They 
conveyed  information,  but  not  a  promise.  More  meaning,  it 
was  considered,  could  not  be  introduced  into  them  ;  they  cer- 
tainly did  not  state  a  promise,  and  it  was  too  much  to  let 
unintelligible  letters  or  words  create  a  binding  obligation  to 
pay  large  sums  of  money,  for  which  no  consideration  from  the 
promisee  had  ever  been  received  by  the  promisor.  Neither 
could  they  be  wrenched  into  promising  that  the  bank  would 
continue  to  keep  the  drawer's  balance  good  for  this  amount, 
for  the  sole  benefit  of  this  holder,  for  any  indefinite  period 
that  he  might  choose  to  keep  the  check  out.  To  these  argu- 
ments the  only  answer  was  that  the  words,  initials,  usage  must 
or  marks  were  to  be  construed  by  the  light  of  the   s°^'^^°- 

^  Grant  on  Bankers  and  Banking,  p.  56  et  seq.,  and  cases  cited;  espe- 
cially Robson  V.  Bennett,  2  Taunt.  388;  Stevens  v.  Hill,  5  Esp.  247. 
For  the  present  law  in  England,  see  Dufaur  v.  Oxenden,  1  M.  &  Rob.  90; 
Corlett  V.  Conway,  5  M.  &  W.  655. 

741 


§  419  ACCEPTANCE   AND    CERTIFICATION. 

well-known  usage  of  business  ;  and  being  thus  construed  there 
could  be  no  question  that  they  were  designed,  and  were  always 
clearly  understood  by  all  parties  concerned,  to  be  a  perfected 
contract  on  the  part  of  the  bank.  It  was  not  pretended  that 
they  were  written  without  any  object  whatsoever,  that  they 
meant  absolutely  nothing.  Yet  among  them  all  the  word 
"  Good  "  was  the  only  word  or  mark  which  could  possibly  have 
any  independent  meaning;  and  of  that  the  meaning  was 
doubtful.  Since,  therefore,  extrinsic  facts  and  banking  usage 
must  be  introduced  to  explain  them,  why  not  let  it  really  and 
thoroughly  explain  them,  and  not  merely  go  through  a  false 
pretence  of  doing  so  ?  They  were  a  brief  symbol,  well  under- 
stood by  all  the  business  world  to  signify,  and  ordinarily 
accepted  as  identical  with,  an  elaborate  promise.  The  argu- 
ment in  favor  of  the  banks  was  only  plausible ;  the  reply  was 
incontrovertible."  "  The  bank,  instead  of  being  prejudiced,  is 
benefited  by  the  delay  of  its  owner  in  calling  for  its  payment, 
and  can  with  no  more  propriety  impute  laches  to  the  unknown 
holder  of  the  check  than  to  a  known  holder  of  an  ordinary 
deposit.  .  .  .  There  is  in  reality,  in  good  sense,  no  distinction 
in  the  nature  of  the  liability  created  between  a  certified  check 
and  the  note  of  the  bank  payable  on  demand.  Each  is  in- 
tended to  circulate  as  money,  each  is  an  absolute  promise  to 
pay  a  specific  sum  upon  demand,  and  laches  in  making  the 
demand  is  no  more  imputable  in  the  one  case  than  in  the 
other."  8 

§  419.  Certification  by  Mistake.  —  If  the  check  has  COme 
to  a  bona  fide  holder  since  the  certification,  or  the  holder 
would  be  prejudiced  by  the  bank's  recovery  on  account  of  its 
mistake,  the  bank  is  estopped  from  such  recovery  ;  but  a  mis- 
taken certification  can  be  corrected  before  loss  to  an  innocent 
party  has  occurred  in  consequence  of  it.^  If  the  bank  cer- 
tifies the  check  by  mistake,  under  the  erroneous  impression 

7  Willetts  V.  Phoenix  Bank,  2  Duer  (N.  Y.),  121. 

8  Ibid.  132. 

1  §  419.  Bank  v.  Baxter,  31  Vt.  101 ;  Second  National  Bank  v.  West 
National  Bank,  51  Md.  128;  Bowen  v.  Needles  National  Bank,  87  Fed. 
430  (1898). 

742 


CERTIFICATION   BY   MISTAKE.  §   419 

that  it  has  sufficient  funds  of  the  drawer  to  apply  upon  it, 
and  if  the  discovery  is  made  with  reasonable  promptitude  and 
immediately  notified  to  the  holder;  if  the  check  itself  still 
remains  in  the  hands  of  the  party  who  presented  it  for  cer- 
tification, and  if  his  position  is  precisely  the  same  after  the 
revocation  that  it  would  have  been  had  the  bank  originally 
refused  acceptance ;  if  he  has  not  lost  his  opportunity  to 
charge  indorsers;  if  he  has  parted  with  no  collateral  security, 
has  released  no  sureties,  has  not  had  his  power  of  collection 
from  the  drawer  of  the  check  diminished  by  any  intermediate 
occurrence,  —  then  it  seems  that  it  is  not  too  late  for  the  bank 
still  to  undo  its  mistake.^  If  the  mistake  plus  its  revocation 
would  prejudice  an  innocent  party,  there  can  be  no  recovery, 
but  if  the  circumstances  are  such  that  all  innocent  parties  are 
in  the  same  position  as  if  the  bank  had  refused  to  certify  at 
first,  then  it  may  be  revoked. 

2  Irving  Bank  v.  Wetherald,  36  N.  Y.  335.  See  also  Watervliet  Bank 
V.  White,  1  Den.  (N.  Y.)  608;  Brooklyn  Trust  Co.  v.  Toler,  65  Hun  (N.  Y.), 
187. 


M^ 


743 


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